UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 27, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-35368
(Exact Name of Registrant as Specified in Its Charter)
CAPRI HOLDINGS LTD
British Virgin Islands
(State or other jurisdiction of incorporation or organization)
N/A
(I.R.S. Employer Identification No.)
33 Kingsway
London, United Kingdom
WC2B 6UF
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: 44 207 632 8600
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Ordinary Shares, no par value
Trading Symbol(s)
CPRI
Name of Each Exchange on which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
☒ Yes ☐ No
☐ Yes ☒ No
☒ Yes ☐ No
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth
company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
☐ Yes
☐
☐
☐
☐
☒
☒ No
The aggregate market value of the registrant’s voting and non-voting ordinary shares held by non-affiliates of the registrant was $2,831,225,962 as of
September 25, 2020, the last business day of the registrant’s most recently completed second fiscal quarter based on the closing price of the ordinary shares
on the New York Stock Exchange.
As of May 19, 2021, Capri Holdings Limited had 151,327,019 ordinary shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the Registrant’s definitive Proxy
Statement, which will be filed in June 2021, for the 2021 Annual Meeting of the Shareholders.
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Item 5
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 6
Item 7
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
PART III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11
Item 12
Item 13
Item 14
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
Item 15
Exhibits and Financial Statement Schedules
PART IV
Page
6
17
33
33
33
33
34
36
38
58
60
60
60
61
62
62
62
62
62
63
2 NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including documents incorporated herein by reference, contains statements which
are, or may be deemed to be, “forward-looking statements.” Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and projections of the management of Capri Holdings Limited (the
“Company”) about future events. All statements other than statements of historical facts included in this Annual Report on
Form 10-K, including documents incorporated herein by reference, may be forward-looking statements. Without limitation, any
statements preceded or followed by or that include the words “plans”, “believes”, “expects”, “intends”, “will”, “should”,
“could”, “would”, “may”, “anticipates”, “might” or similar words or phrases, are forward-looking statements. These forward-
looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and
unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which
could cause actual results to differ materially from those projected or implied in any forward-looking statements. These risks,
uncertainties and other factors include the impact of the COVID-19 pandemic, levels of cash flow and future availability of
credit, compliance with restrictive covenants under the Company’s credit agreement, the Company’s ability to integrate
successfully and to achieve anticipated benefits of any acquisition and to successfully execute our growth strategies; the risk of
disruptions to the Company’s businesses; risks associated with operating in international markets and our global sourcing
activities; the risk of cybersecurity threats and privacy of data security breaches; the negative effects of events on the market
price of the Company’s ordinary shares and its operating results; significant transaction costs; unknown liabilities; the risk of
litigation and/or regulatory actions related to the Company’s businesses; fluctuations in demand for the Company’s products;
levels of indebtedness (including the indebtedness incurred in connection with acquisitions); the timing and scope of future
share buybacks, which may be made in open market or privately negotiated transactions, and are subject to market conditions,
applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors, and
which share repurchases may be suspended or discontinued at any time, the level of other investing activities and uses of cash;
changes in consumer traffic and retail trends; loss of market share and industry competition; fluctuations in the capital markets;
fluctuations in interest and exchange rates; the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes;
political or economic instability in principal markets; adverse outcomes in litigation; and general, local and global economic,
political, business and market conditions, as well as those risks set forth in the Company’s filings with the U.S. Securities and
Exchange Commission (the “SEC”), including in this Annual Report on Form 10-K, particularly under “Item 1A. Risk Factors”
and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Company
disclaims any obligation to update or revise any forward-looking statements contained herein other than in accordance with
legal and regulatory obligations.
SUMMARY OF RISKS AFFECTING OUR BUSINESS
Our business is subject to numerous risks. The following summary highlights some of the risks you should consider with
respect to our business and prospects. This summary is not complete and the risks summarized below are not the only risks we
face. You should review and consider carefully the risks and uncertainties described in more detail in this “Risk Factors”
section of this Annual Report on Form 10-K which includes a more complete discussion of the risks summarized below as well
as a discussion of other risks related to our business and an investment in our ordinary shares. Risks are listed in the categories
where they primarily apply, but other categories may also apply.
Risks Related to Our Business
•
•
•
•
•
•
•
•
•
the COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations;
our retail stores are heavily dependent on the ability and desire of consumers to travel and shop and a decline in
consumer traffic could have a negative effect on our comparable store sales and store profitability resulting in
impairment charges, which could have a material adverse effect on our business, results of operations and financial
condition;
the long-term growth of our business depends on the successful execution of our strategic initiatives;
if we are unable to effectively execute our e-commerce business and provide a reliable digital experience for our
customers, our reputation and operating results may be harmed;
a substantial portion of our revenue is derived from a small number of large wholesale customers, and the loss of or
decline in business from any of these wholesale customers could substantially reduce our total revenue;
acquisitions may not achieve intended benefits and may not be successfully integrated;
the markets in which we operate are highly competitive, both within North America and internationally, and increased
competition based on a number of factors could cause our profitability and/or gross margins to decline;
we may not be able to respond to changing fashion and retail trends in a timely manner, which could have a material
adverse effect on our brands, business, results of operations and financial condition;
we face risks associated with operating globally and our strategy to continue to expand internationally;
3 •
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our business is subject to risks associated with importing products, and the imposition of additional duties, tariffs or
trade restrictions could have a material adverse effect on our business, results of operations and financial condition;
if we cannot successfully negotiate rent deferrals or abatements, lease modifications or lease terminations, our
substantial operating lease obligations could have a material adverse effect on our business and our landlords may
attempt to hold us in breach of our lease obligations and take other actions, including terminating our leases and/or
accelerating our future rent;
we are dependent on a limited number of distribution facilities. If one or more of our distribution facilities experiences
operational difficulties or becomes inoperable, it could have a material adverse effect on our business, results of
operations and financial condition;
the departure of members of our executive management and other key employees or our failure to attract and retain
qualified personnel could have a material adverse effect on our business;
fluctuations in our tax obligations and changes in tax laws, treaties and regulations may have a material adverse impact
on our future effective tax rates and results of operations;
our business is exposed to foreign currency exchange rate fluctuations;
our current and future licensing and joint venture arrangements may not be successful and may make us susceptible to
the actions of third parties over whom we have limited control;
increases in the cost of raw materials could increase our production costs and cause our operating results and financial
condition to suffer;
we primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods
and our business is subject to risks inherent in global sourcing activities, including disruptions or delays in
manufacturing or shipments;
if we fail to comply with labor laws or collective bargaining agreements, or if our independent manufacturing
contractors fail to use acceptable, ethical business practices, our business and reputation could suffer;
we may be unable to protect our trademarks, copyrights and other intellectual property rights, and others may allege
that we infringe upon their intellectual property rights;
we self-insure certain risks and may be impacted by unfavorable claims experience;
we are subject to various proceedings, lawsuits, disputes, and claims in the ordinary course of business which could
have an adverse impact on our business, financial condition, and results of operations;
our business is susceptible to the risks associated with climate change and other environmental impacts which could
negatively affect our business and operations;
increased scrutiny from investors and others regarding our corporate social responsibility initiatives, including
environmental, social and other matters of significance relating to sustainability, could result in additional costs or
risks and adversely impact our reputation;
the accessories, footwear and apparel industries are heavily influenced by general macroeconomic cycles that affect
consumer spending and a prolonged period of depressed consumer spending could have a material adverse effect on
our business, results of operations and financial condition; and
our industry is subject to significant pricing pressure caused by many factors which may cause our profitability and
gross margins in the future to be materially lower than our expectations.
Risks Related to Privacy and Data Security
•
•
privacy breaches and other cyber security risks related to our business could negatively affect our reputation,
credibility and business; and
a material delay or disruption in our information technology systems or e-commerce websites or our failure or inability
to upgrade our information technology systems precisely and efficiently could have a material adverse effect on our
business, results of operations and financial condition.
Risks Related to Our Debt
•
•
we have incurred a substantial amount of indebtedness, which could adversely affect our financial condition and
restrict our ability to incur additional indebtedness or engage in additional transactions; and
we may be unable to meet financial covenants in our indebtedness agreements which could result in an event of default
and restrictive covenants in such agreements may restrict our ability to pursue our business strategies.
4 Risks Related to Our Ordinary Shares
•
•
•
•
•
•
•
our share price may periodically fluctuate based on the accuracy of our earnings guidance or other forward-looking
statements regarding our financial performance;
failure to maintain adequate financial and management processes and controls could lead to errors in our financial
reporting, which could harm our business and cause a decline in the price of our ordinary shares;
provisions in our organizational documents may delay or prevent our acquisition by a third party;
rights of shareholders under British Virgin Islands law differ from those under United States law, and, accordingly, our
shareholders may have fewer protections;
the laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders
will have limited or no recourse if they are dissatisfied with the conduct of our affairs;
it may be difficult to enforce judgments against us or our executive officers and directors in jurisdictions outside the
United States; and
British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving
shareholders of one avenue to protect their interests.
5 PART I
Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Capri”, “we”, “us”, “our”,
its consolidated
“the Company”, “our Company” and “our business” refer
subsidiaries. References to our stores, retail stores and retail segment include all of our full-price retail stores (including
concessions), our e-commerce websites and outlet stores. The Company utilizes a 52 to 53 week fiscal year and the term "Fiscal
Year" or “Fiscal refers to that 52-week or 53-week period. The fiscal years ending on March 27, 2021, March 28, 2020 and
March 30, 2019 (“Fiscal 2021”, “Fiscal 2020” and “Fiscal 2019”, respectively) contain 52 weeks. The Company’s Fiscal
2022 is a 53-week period ending April 2, 2022. Some differences in the numbers in the tables and text throughout this annual
report may exist due to rounding.
to Capri Holdings Limited and
Item 1. Business
Our Company
Capri Holdings Limited (“Capri”) is a global fashion luxury group, consisting of iconic brands that are industry leaders
in design, style and craftsmanship, led by a world-class management team and renowned designers. Our brands cover the full
spectrum of fashion luxury categories, including women’s and men’s accessories, footwear and ready-to-wear, as well as
wearable technology, watches, jewelry, eyewear and a full line of fragrance products. Our goal is to continue to extend the
global reach of our brands while ensuring that they maintain their independence and exclusive DNA.
Our Brands
Versace
Our Versace brand has long been recognized as one of the world’s leading international fashion design houses and is
synonymous with Italian glamour and style. Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style
and unparalleled craftsmanship. Over the past several decades, the House of Versace has grown globally from its roots in haute
couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear,
watches, jewelry, fragrance and home furnishings businesses. Versace’s design team is led by Donatella Versace, who has been
the brand’s artistic director for over 20 years. Versace distributes its products through a worldwide distribution network, which
includes boutiques located in the world’s most glamorous cities, its e-commerce site, as well as through the most prestigious
department and specialty stores worldwide.
Jimmy Choo
Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a
leading global luxury accessories brand, whose core product offering is women’s luxury shoes, complemented by accessories,
including handbags, small leather goods, scarves and belts, as well as a growing men’s luxury shoes and accessory business. In
addition, certain categories, such as fragrances and eyewear, are produced under licensing agreements. Jimmy Choo’s design
team is led by Sandra Choi, who has been the Creative Director for the brand since its inception in 1996. Jimmy Choo products
are unique, instinctively seductive and chic. The brand offers classic and timeless luxury products, as well as innovative
products that are intended to set and lead fashion trends. Jimmy Choo is represented through its global store network, its e-
commerce sites, as well as through the most prestigious department and specialty stores worldwide.
Michael Kors
Our Michael Kors brand was launched 40 years ago by Michael Kors, whose vision has taken the Company from its
beginnings as an American luxury sportswear house to a global accessories, footwear and apparel company with a global
distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites,
leading department stores, specialty stores and select licensing partners. Michael Kors is a highly recognized luxury fashion
brand in the Americas and Europe with growing brand awareness in other international markets. Michael Kors features
distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude.
Michael Kors offers three primary collections: the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible
luxury line and the Michael Kors Mens line. The Michael Kors Collection establishes the aesthetic authority of the entire brand
and is carried by many of our retail stores, our e-commerce sites, as well as in the finest luxury department stores in the world.
MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and apparel, and addresses the
significant demand opportunity in accessible luxury goods. We have also been developing our men’s business in recognition of
6 the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s market.
Taken together, our Michael Kors collections target a broad customer base while retaining our premium luxury image.
Our Segments
We operate in three reportable segments as follows:
•
•
Versace — accounted for approximately 18% of our total revenue in Fiscal 2021 and includes worldwide sales of
Versace products through 210 retail stores (including concessions) and e-commerce sites, through 868 wholesale doors
(including multi-brand stores), as well as through product and geographic licensing arrangements.
Jimmy Choo — accounted for approximately 10% of our total revenue in Fiscal 2021 and includes worldwide sales of
Jimmy Choo products through 227 retail stores (including concessions) and e-commerce sites, through 450 wholesale
doors (including multi-brand stores), as well as through product and geographic licensing arrangements.
• Michael Kors — accounted for approximately 72% of our total revenue in Fiscal 2021 and includes worldwide sales of
Michael Kors products through 820 retail stores (including concessions) and e-commerce sites, through 2,852
wholesale doors, as well as through product and geographic licensing arrangements.
In addition to these reportable segments, we have certain corporate costs that are not directly attributable to our brands
and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate occupancy, shared
service and information systems expenses, including Enterprise Resource Planning (“ERP”) system implementation costs. In
addition, certain other costs are not allocated to segments, including restructuring and other charges (including transition costs
related to our recent acquisitions), impairment costs and COVID-19 related charges. The segment structure is consistent with
how our chief operating decision maker plans and allocates resources, manages the business and assesses performance. All
intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance. For
additional financial information regarding our segments and corporate unallocated expenses, see Segment Information note in
the accompanying consolidated financial statements.
Industry
We operate in the global personal luxury goods industry. Through 2019, the personal luxury goods market grew at a 5%
rate over the past 20 years, with more recent growth driven by stronger Chinese demand from both international and local
consumers and demographic and socioeconomic shifts resulting in younger consumers purchasing more luxury goods. Then, in
2020, due to the impact of the COVID-19 crisis, the personal luxury goods market declined 23%. According to Bain studies*,
the personal luxury goods market is predicted to increase at a 10% compound annual growth rate between 2020 and 2025, and
will return to 2019 levels by the end of 2021 or in 2022. Future growth will be driven by e-commerce, Chinese consumers and
younger generations. By 2025, Bain studies estimate over 30% of personal luxury goods sales will occur online, Chinese
consumers will represent nearly half of total global personal luxury goods sales, and Gen Z and Gen Y combined will make up
at least two-thirds of the market. As the personal luxury goods market continues to evolve, Capri is committed to creating
engaging luxury experiences globally. In our view, increased customer engagement and tailoring merchandise to customer
shopping and communication preferences are key to growing market share. We believe that our innovative and luxurious
product offerings and customer engagement initiatives across all three brands position us to capitalize on the continued growth
of the global personal luxury goods industry.
* Comprised of: Bain – Altagamma Luxury Goods Worldwide Market Study, Spring 2021, May 17th 2021 update and
Bain – Altagamma Luxury Goods Worldwide Market Study, Spring 2021 (Together, the “Bain studies”). These studies
were prepared by the Bain & Company and Altagamma and can be obtained free of charge or at a nominal cost by
contacting Bain & Company’s media contacts at aliza.medina@bain.com or dan.pinkney@bain.com. While we believe
that each of these studies and publications is reliable, we have not independently verified market and industry data
from third-party sources.
Geographic Information
We generate revenue globally through our three reportable segments, as described above. We sell our Versace, Jimmy
Choo and Michael Kors products through retail and wholesale channels of distribution in three principal geographic markets:
the Americas (U.S., Canada and Latin America), EMEA (Europe, Middle East and Africa) and Asia (including Australia). We
also have wholesale arrangements pursuant to which we sell products to our geographic licensees. In addition, we have
licensing agreements through which we license to third parties the use of our Versace, Jimmy Choo and Michael Kors brand
names and trademarks, certain production rights and sales and/or distribution rights with respect to our brands.
7 The following table details our revenue by segment and geographic location (in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
Versace revenue - the Americas
$
201 $
186 $
Versace revenue - EMEA
Versace revenue - Asia
Total Versace
Jimmy Choo revenue - the Americas
Jimmy Choo revenue - EMEA
Jimmy Choo revenue - Asia
Total Jimmy Choo
Michael Kors revenue - the Americas
Michael Kors revenue - EMEA
Michael Kors revenue - Asia
Total Michael Kors
Total revenue - the Americas
Total revenue - EMEA
Total revenue - Asia
Total revenue
Competitive Strengths
276
241
718
102
146
170
418
1,869
607
448
2,924
2,172
1,029
859
420
237
843
107
282
166
555
2,822
821
510
4,153
3,115
1,523
913
$
4,060 $
5,551 $
22
66
49
137
96
321
173
590
3,064
892
555
4,511
3,182
1,279
777
5,238
We believe that the following strengths differentiate us from our competitors:
Global Fashion Luxury Group Led by a World-Class Management Team and Renowned Designers. We are a
global fashion luxury group, consisting of three iconic brands defined by fashion luxury products with a reputation for world-
class design and innovation. The design leadership of our founder-designers Donatella Versace, Sandra Choi and Michael Kors
is a unique advantage that we possess. Our founder-led design teams are supported by our senior management team with
extensive experience across a broad range of disciplines in the retail industry, including design, sales, marketing, public
relations, merchandising, real estate, supply chain and finance. With an average of 26 years of experience in the retail industry,
including at a number of public companies, and an average of 16 years experience with our brands, our senior management
team has strong creative and operational experience and a successful track record.
For over 20 years, Donatella Versace has been the artistic director, molding Versace’s iconic style. A true visionary with
an intuition for how to blend fashion, design and culture, Donatella continues to honor the rich and storied Versace heritage
founded in 1978, while constantly evolving and adapting the luxury house to ensure the brand’s continued relevance.
Donatella’s most recent collections for Versace are a testament to her unique design vision and are equal parts bold and refined,
evoking both a rock and roll spirit as well as runway glamour. Versace designs have been worn by the world’s most famous
celebrities and most sought-after super models.
Jimmy Choo’s design team is led by Sandra Choi, who has been the Creative Director for the Jimmy Choo brand since
its inception in 1996. Jimmy Choo products are unique, instinctively seductive and chic. The Jimmy Choo brand offers classic
and timeless luxury products, as well as innovative products that are intended to set and lead fashion trends. Jimmy Choo’s
products have a strong red carpet presence and are often worn by global celebrities.
8
The Michael Kors brand was launched 40 years ago by Michael Kors, a world-renowned designer, who is responsible for
conceptualizing and directing the design of our Michael Kors brand products. We believe that the Michael Kors brand name has
become synonymous with luxurious fashion that is timeless and elegant, expressed through the brand’s sophisticated
accessories and ready-to-wear collections. Each of our Michael Kors brand collections exemplifies the jet-set lifestyle and
features high quality designs, materials and craftsmanship. Michael Kors has received a number of awards, which recognize the
contribution he and his team have made to the fashion industry and our Company. Some of the most widely recognized global
trendsetters and celebrities wear our Michael Kors brand collections.
Expertise in the Accessories and Footwear Product Categories. We have strong group expertise in accessories and
footwear. The strength of our Michael Kors luxury collection and our accessible luxury MICHAEL Michael Kors line have
allowed us to expand our brand awareness and position Michael Kors as one of the leading global luxury brands in the
accessories product categories. Capitalizing on the success of our accessories product category, we continue to further develop
the accessories businesses for Jimmy Choo and Versace, bringing our accessories expertise, including our product category
knowledge, our merchandising best practices and our substantial group buying power to these brands. Our goal is to increase
Versace’s women’s and men’s accessories and footwear penetration from less than 35% of revenues in Fiscal 2021 to 60% of
Versace’s revenues over time, and to increase Jimmy Choo's women's accessories penetration from approximately 20% of
revenues in Fiscal 2021 to 50% of Jimmy Choo’s revenues over time.
Exceptional Retail Store Footprint. Versace operates in three primary retail formats: boutiques, outlet and e-
commerce. We operated 210 Versace retail stores as of March 27, 2021, in some of the most fashionable cities and the most
sought-after shopping destinations around the world. Versace’s products are distributed worldwide through a global network of
highly specialized stores, which average approximately 1,700 square feet. In addition, we operate Versace e-commerce sites in
the U.S., Europe and China (covering 85 countries worldwide).
We operated 227 Jimmy Choo retail stores as of March 27, 2021, in some of the most premier locations worldwide.
During Fiscal 2021, we designed a refresh to our existing retail store format and will begin to roll out this new concept in Fiscal
2022 to both new stores and existing stores. Jimmy Choo retail stores, comprised of full-price stores and outlets, average
approximately 1,400 square feet. In addition, we operate Jimmy Choo e-commerce sites in the U.S., certain parts of Europe,
Japan and have a localized site in China.
We operated 820 Michael Kors stores as of March 27, 2021 with four primary retail store formats: collection stores,
lifestyle stores, outlet stores and e-commerce sites. Michael Kors collection stores are located in some of the world’s most
prestigious shopping areas and average approximately 2,900 square feet in size. The Michael Kors lifestyle stores are located in
some of the world’s most frequented metropolitan shopping locations and leading regional shopping centers, and average
approximately 2,700 square feet in size. We also extend our reach to additional consumer groups through our outlet stores,
which average approximately 4,400 square feet in size. In addition, we also operate Michael Kors e-commerce sites in the U.S.,
Canada, certain parts of Europe, China, Japan and South Korea.
World-class Omni and CRM capabilities. We have omni-channel capabilities from best-in-class digital platforms to
state-of-the-art distribution facilities globally, which we leverage across businesses. As part of our plan to continue to
implement omni-channel capabilities throughout our businesses, we have begun leveraging our world class distribution centers,
including in Venlo, Netherlands and Teterboro, New Jersey, to serve multiple brands.
Strong Relationships with Premier Department Stores. We partner with leading wholesale customers, such as
Macy's, Saks Fifth Avenue, Bloomingdale’s and Holt Renfrew in North America, as well as Harrods, Harvey Nichols,
Printemps, Selfridges and Galeries Lafayette in Europe. These relationships enable us to access large numbers of our key
consumers in a targeted manner. Our “shop-in-shops” have specially trained staff, as well as customized fixtures, wall casings,
decorative items, flooring and provide department store consumers with a more personalized shopping experience than
traditional retail department store configurations. We have engaged with our wholesale customers on various initiatives and
have continued to enter into innovative supply chain partnerships designed to increase the speed at which our luxury fashion
products reach the ultimate consumer. We plan to increase Versace’s and Jimmy Choo’s presence in certain luxury department
stores, and for Michael Kors, we have continued to strategically reduce shipments with the intent to drive more full-price sell
through in the wholesale channel.
9 Business Strategy
Our goal is to continue to create long-term shareholder value by increasing our revenue and profits and strengthening our
global brands. We also believe that sound environmental and social policies are both ethically correct and fiscally responsible.
To that end, we are committed to improving the way we work in order to better the world in which we live. We plan to achieve
our business strategy by focusing on the following strategic initiatives:
Leverage group expertise and capabilities. We will continue to leverage our group expertise in accessories and
footwear to fuel growth across our portfolio of brands, implementing the best practices from our Michael Kors core accessories
business to our Versace and Jimmy Choo brands. We will also continue to prioritize the development of our e-commerce
platforms and omni-channel capabilities for our brands, leveraging our broad expertise and capabilities in this area. With the
addition of Versace, we see a number of opportunities to create long-term operational synergies as we combine our global
competencies and footprint. These synergies will be primarily focused on opportunities in our supply chain, information
systems, back office support and manufacturing.
Continue to increase our presence in Asia. We plan to continue to diversify our group’s global footprint with an
emphasis on the Asia market, where we believe each of our three brands continue to have the potential to significantly grow
market share in the region.
Integrate Versace and continue to build on the brand’s luxury image. We plan to grow the Versace business to $2
billion in revenues over time. There are five strategic initiatives that we will focus on to achieve this goal. First, we plan to
build on Versace’s luxury runway momentum and capitalize on our iconic brand codes. Second, we will enhance Versace’s
powerful and storied marketing. Third, we plan to increase Versace’s global footprint from 210 stores to 300 retail stores.
Fourth, we will accelerate Versace’s e-commerce development to create a full omni-channel experience. Finally, we plan to
leverage our group’s expertise to expand Versace’s women’s and men’s accessories and footwear businesses from less than
35% of revenues to a target of 60% of the brand's revenues over time, while maintaining Versace’s authoritative presence in
women’s and men’s ready-to-wear.
Continue to execute on our strategies to grow the Jimmy Choo brand. We plan to continue to implement our growth
strategies for Jimmy Choo, with a goal of reaching $1 billion in revenues over time. To achieve this goal, we plan to expand
Jimmy Choo’s distribution by accelerating e-commerce and omni-channel developments and increasing our global retail
footprint to 300 retail stores in the most fashionable shopping destinations around the world. We also have a significant
opportunity to increase women’s accessories to approximately 50% of Jimmy Choo’s revenue by expanding the breadth of new
collections. At the same time, we plan to continue to grow footwear sales, in part by expanding our fashion active and casual
offerings.
Continue to leverage the strength of our Michael Kors brand, which remains the foundation for our fashion
luxury group. Our goal is to position Michael Kors to become a stronger and more profitable brand. Our focus on product
innovation has greatly improved newness across all product categories for our Michael Kors brand. In accessories, we continue
to introduce new product groups, as well as unique design, style and craftsmanship. In footwear, we plan to grow our fashion
active product offerings and continue fashion innovation. In women’s apparel, our KORS style head-to-toe dressing remains
our key focus, along with our strategic dress and outerwear categories. We will continue to increase product offerings within
menswear, including our new men's footwear collection. We also plan to continue to focus on brand engagement, capitalizing
on Michael Kors’ leading red carpet and social media presence. Our strategy to enhance customer experience by expanding our
omni-channel capabilities also remains a key priority.
Execute on our corporate social responsibility strategy. Our corporate social responsibility strategy is divided into
three areas: (i) Our World: focused on actions across our operations and supply chain, meant to significantly reduce our
environmental impact; (ii) Our Community: fostering a supportive, healthy, diverse and inclusive workplace for all of our
employees; and (iii) Our Philanthropy: connecting the talents, energy and success of each of our brands to those in need around
the world. We have set targets to be 100% carbon neutral in our direct operations and to source 100% of energy for our owned
and operated facilities from renewable sources by 2025. Building on our net zero carbon emissions commitment, and in an
effort to deliver on the goals of the Paris Agreement, we will also set emissions reduction targets across our operations and
supply chain with the Science Based Targets initiative by the end of calendar 2022. We have additionally committed to, and
have already been working towards, a number of important initiatives, including:
•
•
All plastic in packaging to be recyclable, compostable, recycled or reusable by 2025
100% of point-of-sale packaging materials to be recyclable or sustainably sourced by 2025
10 •
•
•
•
•
Partnering with key suppliers to reduce water use
Traceability of our supply chain
Sourcing at least 95% of our leather from certified tanneries by 2025
Furthering diversity and inclusion within the organization, including through our Global D&I Council
Supply chain empowerment programs focused on human rights and fair wages to be implemented in line with the
United Nations Framework for Corporate Action on Workplace Women’s Health and Empowerment by 2025
Collections and Products
Our total revenue by major product category is as follows (in millions):
March 27,
2021
% of
Total
Fiscal Years Ended
% of
Total
March 28,
2020
March 30,
2019
$
2,158
53.2% $
796
720
185
155
46
19.6%
17.7%
4.6%
3.8%
1.1%
2,933
1,100
1,069
222
201
26
52.8% $
19.8%
19.3%
4.0%
3.6%
0.5%
3,139
1,023
698
218
156
4
$
4,060
$
5,551
$
5,238
% of
Total
59.9%
19.5%
13.3%
4.2%
3.0%
0.1%
Accessories
Footwear
Apparel
Licensed product
Licensing revenue
Other
Total revenue
Versace
Versace is one of the leading international fashion design houses and a symbol of Italian luxury worldwide, which has
developed its expertise in haute couture to include ready-to-wear, accessories, footwear and home furnishings. Generally,
Versace’s haute couture retails up to $100,000, ready-to-wear retails from $270 to $9,500, accessories retail from $85 to $3,500
and footwear retails from $300 to $2,500.
Certain product categories, such as Versace Jeans Couture, eyewear, fragrances, jewelry, watches, and home furnishings,
are produced under product licensing agreements. Swinger SA is the exclusive licensee for Versace Jeans Couture, Luxottica is
the exclusive licensee for Versace eyewear, Euroitalia is the exclusive licensee for Versace fragrances, Samra International is
the exclusive licensee for Versace jewelry, Vertime is the exclusive licensee for Versace watches and Poltrona Frau is the
exclusive licensee for Versace home furnishings. Generally, Versace Jeans Couture retail from $50 to $2,000, Versace eyewear
retails from $200 to $500, Versace fragrances retail from $70 to $400, Versace jewelry retails from $500 to $7,500, Versace
watches retail from $500 to $3,500 and Versace home furnishings, which includes a variety of products, generally retails from
$700 to $52,000.
Jimmy Choo
Jimmy Choo is a leading global luxury accessories brand and offers a distinctive, glamorous and fashion-forward product
range, whose core product offerings are women’s luxury shoes, complemented by accessories, including handbags, small
leather goods, scarves and belts, as well as a men’s luxury shoes and accessories business. Generally, Jimmy Choo women’s
and men's luxury shoes retail from $400 to $5,500 and accessories retail from $200 to $4,500.
Certain product categories, such as Jimmy Choo fragrances and eyewear, are produced under product licensing
agreements. Interparfums SA is the exclusive licensee for Jimmy Choo fragrances and Safilo SpA is the exclusive licensee for
Jimmy Choo eyewear. Generally, Jimmy Choo eyewear retails from $200 to $550 and Jimmy Choo fragrances retail from $80
to $220.
11
Michael Kors
Michael Kors has three primary collections that offer accessories, footwear and apparel: Michael Kors Collection,
MICHAEL Michael Kors and Michael Kors Mens. The three primary collections and licensed products are offered through our
own Michael Kors retail stores and e-commerce businesses, in department stores around the world and by our exclusive
licensees to wholesale customers in addition to select retailers. The Michael Kors Collection is a sophisticated designer
collection for women based on a philosophy of essential luxury and pragmatic glamour and includes accessories, primarily
handbags and small leather goods, ready-to-wear and footwear. Generally, the Michael Kors Collection women’s handbags and
small leather goods retail from $300 to $6,000, footwear retails from $300 to $1,500 and ready-to-wear retails from $400 to
$7,500. MICHAEL Michael Kors is the accessible luxury collection and offers women’s accessories, primarily handbags and
small leather goods, as well as footwear and apparel and is carried in all of the Michael Kors lifestyle stores and leading
department stores around the world. MICHAEL Michael Kors offers handbags designed to meet the fashion and functional
requirements of our broad and diverse consumer base. Generally, MICHAEL Michael Kors handbags retail from $200 to $750,
small leather goods retail from $50 to $250, footwear retails from $50 to $300 and apparel retails from $75 to $700. Michael
Kors Mens is an innovative collection of men’s ready-to-wear, accessories, and footwear with a modern American style.
Michael Kors Mens apparel generally retails from $50 to $1,000, men’s accessories generally retail from $50 to $800 and
men’s footwear generally retails from $150 to $400.
Certain product categories, including watches, jewelry, eyewear and fragrance, are produced under product licensing
agreements. Fossil is our exclusive licensee for Michael Kors watches and jewelry, including our Michael Kors ACCESS
smartwatches and our fine jewelry line. Luxottica is our exclusive licensee for Michael Kors distinctive eyewear inspired by our
collections. Estée Lauder is Michael Kors exclusive women’s and men’s fragrance licensee. Generally, Michael Kors fashion
watches retail from $150 to $600, Michael Kors ACCESS smartwatches retail from $300 to $500, Michael Kors jewelry retails
from $50 to $500, Michael Kors eyewear retails from $100 to $400 and Michael Kors fragrance and related products generally
retail from $50 to $150.
Advertising and Marketing
Our marketing and advertising programs are designed to build brand awareness for each of our luxury houses as well as
highlight our product offerings. We use a 360-degree marketing strategy for each of our brands to deliver a consistent message
across each brand's advertising communications, social media, celebrity dressing, special events and direct marketing activities
at a national, regional and local level. Our campaigns are increasingly being executed through digital and social media
platforms to drive further engagement with younger consumers.
Our brands introduce their new collections annually with fashion shows and other fashion events. These fashion events,
in addition to celebrity red carpet dressing moments, generate extensive domestic and international media and social media
coverage. The Versace and Michael Kors semi-annual runway shows and Jimmy Choo celebrity placements generate extensive
media coverage. Jimmy Choo is also the leading brand in editorial coverage for women’s luxury shoes globally.
We believe our renowned brand founders, as well as our high-profile brand ambassadors and well-known social media
influencers across our marketing programs helps expand brand awareness and drive cultural relevance.
In Fiscal 2021, we recognized approximately $137 million in advertising and marketing expenses globally. We engage in
a wide range of integrated marketing programs across various marketing channels, including but not limited to email marketing,
print advertising, outdoor advertising, digital marketing, social media, public relations outreach, visual merchandising and
partnership marketing, in an effort to engage our existing and potential customer base and ultimately stimulate sales in a
consumer-preferred shopping venue.
Our growing e-commerce businesses provide us with an opportunity to increase the size of our customer database and to
communicate with our consumers to increase online and physical store sales, as well as to continue to build global brand
awareness for our brands. We are continuously improving the functionalities and features on our e-commerce sites to create
innovative ways to keep our brands at the forefront of consumers’ minds by offering a broad selection of products, including
accessories, apparel, and footwear. Since e-commerce growth is critical to our overall growth strategy, we plan to accelerate
Versace’s and Jimmy Choo’s e-commerce and omni-channel development, while continuing to work with select e-commerce
partners.
12 Manufacturing and Sourcing
We generally contract for the purchase of finished goods principally with independent third-party manufacturing
contractors, whereby the manufacturing contractor is generally responsible for the entire manufacturing process, including the
purchase of piece goods and trim for our Jimmy Choo and Michael Kors brands. For the Versace brand, some of the piece
goods and trim are separately purchased by Versace and provided to the manufacturers, and some are sourced directly by the
manufacturers, as further described below.
Versace has a centrally managed production model for the majority of its products, and buys raw materials and
components for these products. All raw materials arrive in a central warehouse in Novara, Italy and are distributed to
independent third-party manufacturing contractors after the quality control process is complete. The vast majority of Versace’s
production is located in Italy. The remaining production occurs elsewhere in EMEA and a small portion is produced in Asia.
Jimmy Choo products are manufactured by independent third-party manufacturing contractors and our recently acquired
Italian atelier and shoe manufacturer Alberto Gozzi S.r.L ("Gozzi"). Most of Jimmy Choo’s products are produced by
specialists in Italy, supported by other factories across Europe, with a small portion produced in Asia. Jimmy Choo has a
product development facility in Florence. Jimmy Choo typically purchases finished goods and does not purchase raw materials,
except for product development purposes.
Michael Kors contracts for the purchase of finished goods principally with independent third-party manufacturing
contractors that are generally responsible for the entire manufacturing process, including the purchase of piece goods and trim.
Product manufacturing for the Michael Kors brand is allocated among third-party agents based on their capabilities, the
availability of production capacity, pricing and delivery. Michael Kors also has relationships with various agents who source
finished goods with numerous manufacturing contractors on its behalf. This multi-supplier strategy provides specialist skills,
scalability, flexibility and speed to market, as well as diversifies risk. In Fiscal 2021 and Fiscal 2020, one third-party agent
sourced approximately 26% of Michael Kors finished goods purchases, based on unit volume. Michael Kors’ largest
manufacturing contractor, who produces its products in Asia and who Michael Kors has worked with for approximately 20
years, accounted for the production of approximately 18% of its finished products, based on dollar volume in Fiscal 2021.
Nearly all of our Michael Kors products were produced in Asia in Fiscal 2021.
The manufacturing contractors and agents for our brands operate under the close supervision of our global manufacturing
divisions and buying agents located in North America, Europe and Asia. All products are produced according to our
specifications. Production staff monitors manufacturing at supplier facilities in order to correct problems prior to shipment of
the final product. Quality assurance is focused on as early as possible in the production process, allowing merchandise to be
received at the distribution facilities and shipped to customers with minimal interruption. See “Import Restrictions and Other
Governmental Regulations” and Item 1A. —“Risk Factors” — “We primarily use foreign manufacturing contractors and
independent third-party agents to source our finished goods, which poses legal, regulatory, political and economic risks to our
business operations.”
Our future manufacturing and sourcing strategy includes purchasing luxury manufacturing facilities in Italy to support all
of our brands, pursuing manufacturing synergies across brands and securing capacity and improving our expertise in
development and delivery. While the fashion design process will remain independently managed by each of our brands, we
believe that creating a manufacturing center of excellence, which would combine all functions that support our design teams,
from leather and hardware purchases to investment in machinery and systems, will create synergies and efficiencies for our
global fashion luxury group.
Distribution
Versace owns a central warehouse in Novara, Italy, managed by a third party, which acts as a global hub for Versace’s
primary operations. Versace also has a leased warehouse near Novara operated by the same third party, which serves as a
distribution point for e-commerce operations and reverse logistics. From these warehouses, products are shipped to regional
warehouses that are operated by third parties. The main regional warehouses are located in New Jersey, Hong Kong, Beijing
and Tokyo, and support the Versace retail and e-commerce businesses. The e-commerce distribution for the other regions is
conducted through third party providers in Columbus, Ohio and Beijing, China. Versace’s wholesale business is mainly
serviced from three central warehouses located in Italy, the United States and Japan.
Jimmy Choo's primary distribution facility is our Company-owned and operated distribution facility in the Netherlands.
From there, products are shipped to regional warehouses in the United Kingdom, the United States, Canada, China, Hong Kong,
South Korea, Japan and United Arab Emirates, largely supporting the Jimmy Choo retail and e-commerce businesses.
13 Shipments to wholesale customers globally are made from the Netherlands and the United States, with some further local
fulfillment. All of the distribution facilities utilized by Jimmy Choo are operated by third parties and are shared with other
unaffiliated businesses with the exception of our distribution facility in the Netherlands. This flexible method reinforces the
speed and efficiency of the supply chain and allows the business to deliver Jimmy Choo product and collections to market
rapidly and in line with the industry’s fashion calendar.
Michael Kors primary distribution facility in the United States is a leased facility in Whittier, California, which is
directly operated and services our Michael Kors retail stores, e-commerce site and wholesale operations in the United States.
We also engage in omni-channel order fulfillment by filling online orders through our Michael Kors retail stores and through
our click-and-collect service offerings. Our primary Michael Kors distribution facility in Europe is our Company-owned and
operated distribution facility in the Netherlands, which supports our European operations for our Michael Kors brand, including
our European e-commerce sites. We also have a regional Michael Kors distribution center in Canada, which is leased, as well as
regional Michael Kors distribution centers in New Jersey, China, Hong Kong, Japan, South Korea and Taiwan, which are
operated by third-parties.
Intellectual Property
We own VERSACE, JIMMY CHOO and MICHAEL KORS trademarks, as well as other material trademarks,
copyrights, design and patent rights related to the production, marketing and distribution of our products, both in the United
States and in other countries in which our products are principally sold. We also have applications pending for a variety of
related trademarks, copyrights, designs and patents in various countries throughout the world. As the worldwide usage of our
material trademarks, copyrights, designs and patents continue to expand, we continue to strategically apply to register them in
key countries where they are used. We expect that our material intellectual property will remain in full force and effect for as
long as we continue to use and renew them.
We aggressively police our intellectual property and pursue infringers both domestically and internationally. In addition,
we pursue counterfeiters in the United States, Europe, the Middle East, Asia and elsewhere in the world in both online and
offline channels, working with our network of customs authorities, law enforcement, legal representatives and brand specialists
around the world as well as involvement with industry associations and anti-counterfeiting organizations.
Information Systems
Each of our three brands currently operates using their legacy systems for finance and accounting, supply chain,
inventory control, point-of-sale transactions, store replenishment and other functions. Our long-term strategy includes
consolidating certain systems across our brands over time to create operational efficiencies, as well as to achieve a common
platform across the Company. During Fiscal 2020, we embarked on a multi-year ERP implementation, to conform the majority
of our processes onto one global system that would support finance and accounting, procurement, inventory control and store
replenishment. The implementation of the ERP required a significant investment in human and financial resources. As a result
of COVID-19 and our need to significantly reduce our capital expenditures in order to protect our liquidity and cash flows, we
temporarily suspended our ERP project. The project has resumed as of the fourth quarter of Fiscal 2021. See Item 1A. “Risk
Factors” — “A material delay or disruption in our information technology systems or e-commerce websites or our failure or
inability to upgrade our information technology systems precisely and efficiently could have a material adverse effect on our
business, results of operations and financial condition.”
Human Capital Management
At Capri Holdings, we strive to create workplaces where our employees and the workers across our supply chain thrive.
Through our benefits packages, learning and development programs, focus on diversity and inclusion, wellness programs and
supply chain empowerment initiatives, we continue to make significant investments in our Capri community.
Employee Profile. At the end of Fiscal 2021, 2020 and 2019, we had approximately 13,800, 17,000 and 17,800 total
employees, respectively. As of March 27, 2021, we had approximately 9,300 full-time employees and approximately 4,500
part-time employees. Approximately 10,400 of our employees were engaged in retail selling and administrative positions and
our remaining employees were engaged in other aspects of our business as of March 27, 2021. As of March 27, 2021, we have
approximately 2,400 employees covered by collective bargaining agreements in certain European countries. We consider our
relations with both our union and non-union employees to be good.
14 Benefits and Compensation. We maintain comprehensive benefits and compensation packages to attract, retain and
recognize our employees. Our health and welfare benefit program is designed to provide a wide range of benefits to meet the
health care, financial and work/life needs of eligible employees. Benefits include, among others, medical, dental and vision
plans, life insurance, short and long-term disability coverage, retirement plans (with matching contributions where applicable),
paid parental leave, gender reassignment coverage and fertility support benefits in the United States, and a corporate wellness
program. We also offer employees paid time off, including to volunteer with select charitable organization, to get the
COVID-19 vaccine and to quarantine in accordance with government or health organization recommended quarantine
guidelines (in addition to any COVID-19 mandated paid sick leave at the federal, state, or local level). Employees are also
entitled to discounts on our merchandise.
Learning and Development. We honor our employees through our dedication to development. A majority of our
executives have participated in an executive leadership development program offered in partnership with the Center for
Creative Leadership, and more than 800 of our people managers have participated in leadership development programs. These
programs are aimed at equipping our leaders with strategies to effectively navigate and drive change, and to build and
strengthen cross-functional relationships. All full-time employees also participate in a formal performance review process
annually, and receive annual trainings on important topics including compliance, ethics and integrity, respect in the workplace
and information security as a part of our efforts to maintain a safe, positive and inclusive work environment. In Fiscal 2021, we
also implemented diversity and inclusion trainings focused on unconscious bias, microaggressions and workplace diversity,
sensitivity and inclusion.
Diversity and Inclusion. Diversity and inclusion are embedded in our DNA. We foster an inclusive environment where
employees and customers of diverse backgrounds are respected, valued and celebrated. We are proud of our commitment to
diversity, equality and inclusion, and will continue to advance these principles through meaningful short and long term actions
across the globe. We recently appointed a Head of Diversity and Inclusion and established a Global Diversity and Inclusion
Council, comprised of leaders across our brands focused on bringing Capri’s diversity and inclusion strategy to life. Our
commitment to diversity and inclusion is supported by three pillars:
Capri Culture - Our commitment to diversity extends beyond representation. We are building an inclusive space where
all employees have the opportunity to realize their full potential and excel, while contributing to our success in a meaningful
way.
Capri Talent - Differences in ideas and experiences allow our Company to thrive. We are attracting, advancing and
advocating for a workforce that reflects the diversity of the world around us.
Capri Community - Through diversity and inclusion comes understanding and strength. Our responsibility to promote
equality is not just to those who work with us, but to our industry, the customers we serve and the communities around us.
In Fiscal 2021, we formed The Capri Holdings Foundation for the Advancement of Diversity in Fashion. The Company
has pledged $20 million to further the foundation’s mission of supporting diversity, inclusion and equality throughout the
fashion industry.
Health and Safety. Everyone working on behalf of our Company is entitled to work in a safe environment. Capri’s
global safe workplace program, which includes employee traveler and emergency response alerts, raises awareness and
provides safety resources tailored for workers in different work environments – from our distribution centers to our retail stores.
In addition, as we continue to navigate the COVID-19 pandemic, we continue to prioritize the safety of our employees and our
customers and to do our part to help stop the spread within our communities. We enhanced health and safety protocols at our
retail stores, distribution centers and corporate offices, adhered to social distancing measures and provided contact-free
shopping opportunities when safe to do so.
Supply Chain Empowerment. Our community extends beyond our direct employees and our corporate social
responsibility program drives us toward greater engagement with our suppliers. We are dedicated to conducting our operations
throughout the world on principles of ethical business practice and recognition of the dignity of workers. Through our Code of
Conduct for Business Partners and Factory Social Compliance Program, we partner with our suppliers on important human
rights, health and safety, environmental and compliance issues.
15 Competition
We face intense competition in the product lines and markets in which we operate from both existing and new
competitors. Our products compete with other branded products within their product category. In varying degrees, depending
on the product category involved, we compete on the basis of style, price, customer service, quality, brand prestige and
recognition, among others. In our wholesale business, we compete with numerous manufacturers, importers and distributors of
products like ours for the limited space available for product display. Moreover, the general availability of manufacturing
contractors allows new entrants easy access to the markets in which we compete, which may increase the number of our
competitors and adversely affect our competitive position and our business. We believe, however, that we have significant
competitive advantages because of the recognition of our brands and the acceptance of our brands by consumers. See Item 1A.
“Risk Factors” — “The markets in which we operate are highly competitive, both within North America and internationally,
and increased competition based on a number of factors could cause our profitability and/or gross margins to decline.”
Seasonality
We experience certain effects of seasonality with respect to our business. We generally experience greater sales during
our third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during our first fiscal quarter.
Import Restrictions and Other Governmental Regulations
Virtually all of our imported products are subject to duties which may impact the costs of such products. In addition,
countries to which we ship our products may impose safeguard quotas to limit the quantity of products that may be imported.
We rely on free trade agreements and other supply chain initiatives in order to maximize efficiencies and cost savings relating
to product importation. For example, we have historically received benefits from duty-free imports on certain products from
certain countries pursuant to the U.S. Generalized System of Preferences ("GSP") program. The GSP program expired on
December 31, 2020. If the GSP program is not renewed or otherwise made retroactive, we would experience significant
additional duties and our gross margin could be negatively impacted. Additionally, we are subject to government regulations
relating to importation activities, including related to U.S. Customs and Border Protection ("CBP"0) withhold release orders.
The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements and/or if CBP
detains shipments of our goods pursuant to a withhold release order could have a material adverse effect on our business, results
of operations and financial condition. If additional tariffs or trade restrictions are implemented by the U.S. or other countries,
the cost of our products could increase which could adversely affect our results of operations and financial condition.
Additionally, we are subject to government regulations relating to product labeling, testing and safety. We maintain a global
customs and product compliance organization to help manage our import and related regulatory activity.
Corporate Social Responsibility
As a global fashion luxury group, we recognize the impact that our operations can have on the environment and the
social well-being of others. We have developed a corporate social responsibility strategy in order to drive positive change
within our organization and our world. Our Corporate Social Responsibility strategy outlines our global strategy to achieve
significant, measurable goals across a range of important environmental and social sustainability issues, including material
sourcing, greenhouse gas emissions, water use, waste reduction, diversity and inclusion and philanthropic giving. See “Business
Strategy” — “Execute on our corporate social responsibility strategy.”
Our Company’s corporate social responsibility strategy is divided into three areas:
•
•
•
Our World – focused on actions across our operations and supply chain, meant to significantly reduce our
environmental impact.
Our Community – fostering a supportive, healthy, diverse and inclusive workplace for all of our employees.
Our Philanthropy – connecting the talents, energy and success of each of our brands to those in need around the
world.
A copy of our Corporate Social Responsibility report is available on our website at www.capriholdings.com/csr.
16 Available Information
Our investor website can be accessed at www.capriholdings.com. Our Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed with or furnished to the SEC pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934, as amended, are available free of charge on our website under the caption “Financials”
and then “SEC Filings” promptly after we electronically file such materials with, or furnish such materials to, the SEC. No
information contained on our website is intended to be included as part of, or incorporated by reference into, this Annual Report
on Form 10-K. Information relating to corporate governance at our Company, including our Corporate Governance Guidelines,
our Code of Business Conduct and Ethics for all directors, officers, and employees, and information concerning our directors,
Committees of the Board, including Committee charters, and transactions in Company securities by directors and executive
officers, is available at our website under the captions “Governance” and “Financials” and then “SEC Filings.” Paper copies of
these filings and corporate governance documents are available to shareholders free of charge by written request to Investor
Relations, Capri Holdings Limited, 33 Kingsway, London, United Kingdom, WC2B 6UF. Documents filed with the SEC are
also available on the SEC’s website at www.sec.gov.
Item 1A. Risk Factors
You should carefully read this entire report, including, without limitation, the following risk factors and the section of
this annual report entitled “Note Regarding Forward-Looking Statements.” Any of the following factors could materially
adversely affect our business, results of operations and financial condition. Additional risks and uncertainties not currently
known to us or that we currently view as immaterial may also materially adversely affect our business, results of operations and
financial condition. Risks are listed in the categories where they primarily apply, but other categories may also apply.
Risk Relating to Our Business
The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations.
The COVID-19 pandemic has caused significant disruption to the global economy, consumer spending and behavior,
tourism and to financial markets. While the overall COVID-19 situation appears to be improving, we have not recovered to pre-
COVID performance levels and our business and operating results may be negatively impacted if the virus worsens or mutates,
if vaccination efforts are unsuccessful and/or if regions or countries take further actions to contain the virus (including
additional extended lock-downs and travel restrictions), among others. The full extent of the impact of COVID-19 on our
business and operating results will depend largely on future events outside of our control, including the duration and severity of
the pandemic and the success of vaccination efforts, new information concerning the virus or variants of the virus, and actions
different states, regions or countries may take to contain the virus (including extended lock-downs and travel restrictions),
among others.
As a result of the COVID-19 pandemic, and in response to government orders and proactive decisions we have made to
protect the health and safety of our employees, consumers and communities, at various points during the course of the
pandemic we temporarily closed almost all of our retail stores globally and furloughed all of our retail store employees in North
America and many of our retail personnel elsewhere for an extended time. We may face longer term store closure requirements
and other operational restrictions with respect to some or all of our retail stores in the future, and government restrictions and
health and safety measures (including social distancing protocols) may prevent us from opening or limit our ability to fully
operate in the ordinary course, which could materially impact our financial results. We have also closed many of our corporate
offices globally and have implemented a work-from-home policy for many of our corporate employees, which may also
negatively affect productivity in, or otherwise result in disruptions to, parts of our business.
As a result of store closures and reduced consumer traffic caused by COVID-19, many of our wholesale customers have
experienced, and may continue to experience, liquidity constraints or other financial difficulties, causing a reduction in the
amount of merchandise purchased from us and our product licensing partners, an increase in order cancellations and/or the need
to extend payment terms. Any or all of these measures could substantially reduce our revenue and have a material adverse effect
on our profitability. In addition, these actions could lead to larger outstanding accounts receivable balances, delays in collection
of accounts receivable, increased expenses associated with collection efforts, increases in credit losses and reduced cash flows.
Furthermore, our supply chain may also be significantly negatively affected if the factories that produce our product, the
distribution centers that manage and ship our inventory, or the operations of our third-party logistics and other service providers
17 are disrupted, closed or experience worker shortages, which may result in disruptions and delays in product shipments and
potentially higher costs.
In light of our retail store closures in response to government orders, mandates, guidelines and recommendations limiting
business operations due to the COVID-19 pandemic, as well as decisions by many of the retail centers in which we operate to
close shopping centers, we took certain actions and may continue to take certain actions with respect to our lease obligations,
including discontinuing rent payments, negotiating with landlords for rent abatement or other rent relief and terminating certain
leases, which may subject us to legal, reputational and financial risks. We may also take further actions with respect to our lease
obligations in the future, which may not be successful.
In addition, we expect that traffic to our retail stores (and department stores and other third-party retailers that sell our
products) as they reopen will be adversely affected by the COVID-19 pandemic. We further expect that consumer spending will
be negatively affected by macroeconomic conditions resulting from the COVID-19 pandemic, including a continued high
unemployment rate and an economic recession, which may impact our physical retail stores, our e-commerce business and
third-party wholesale accounts. Any significant disruption in consumer traffic, consumer behavior and/or consumer spending at
our retail stores, on our e-commerce sites and/or at third-party wholesale accounts following the pandemic would result in a
decrease in sales and profits and otherwise materially impact our business and financial performance.
COVID-19 may also have a material adverse effect on our liquidity and cash flows. If our business does not generate
sufficient cash flows from operating activities, and sufficient funds are not otherwise available to us from borrowings under our
credit facility or other sources, we may not be able to cover our expenses, fund our other liquidity and working capital needs, or
execute on our strategic initiatives which could significantly harm our business. Our insurance costs may also increase
substantially in the future as a result of the COVID-19 pandemic.
Our retail stores are heavily dependent on the ability and desire of consumers to travel and shop and a decline in consumer
traffic could have a negative effect on our comparable store sales and store profitability resulting in impairment charges,
which could have a material adverse effect on our business, results of operations and financial condition.
Reduced travel resulting from economic conditions, fuel shortages, increased fuel prices, travel restrictions, travel
concerns and other circumstances, including adverse weather conditions, disease pandemics (including COVID-19), epidemics
and other health-related concerns, war, terrorist attacks or the perceived threat of war or terrorist attacks could have a material
adverse effect on us, particularly if such events impact our customers’ desire to travel to our retail stores. For example, social
distancing measures and other restrictions imposed by governments as a result of the COVID-19 pandemic, which have had and
may continue to affect our customers’ ability and desire to travel to our stores, which in turn has had and may continue to have
a material adverse impact on our store revenue.
In addition, other factors that could impact the success of our retail stores include: (i) the location of the mall or the
location of a particular store within the mall; (ii) the other tenants occupying space at the mall; (iii) vacancies within the mall
(including retailers that may not reopen post-COVID-19); (iv) stores and malls having to re-close due to personnel or customer
illness or further government restrictions; (v) increased competition in areas where the malls are located; (vi) the amount of
advertising and promotional dollars spent on attracting consumers to the malls; and (vii) a shift toward online shopping which
may be exacerbated in light of COVID-19 even when stores reopen. A decline in consumer traffic could have a negative effect
on our comparable store sales and/or average sales per square foot and store profitability. If our retail stores underperform due
to declining consumer traffic or otherwise and our expected future cash flows of the related underlying retail store asset do not
exceed such asset’s carrying value, we may incur store impairment charges. A decline in future comparable store sales and/or
store profitability or failure to meet market expectations or the occurrence of impairment charges relating to our retail store fleet
could have a material adverse effect on our business, results of operations and financial condition.
The long-term growth of our business depends on the successful execution of our strategic initiatives.
As part of our long-term strategy, we intend to grow our market share and revenue through the following initiatives:
•
•
•
•
•
trendsetting and innovative product offerings;
increased brand engagement;
optimizing customer experience;
investing in technology; and
expanding our global presence.
18 We also intend to support the growth of Versace and Jimmy Choo sales through retail store openings and further
developing each brand’s e-commerce and omni-channel presence, as well as expanding into the luxury accessories market. We
cannot guarantee that we will be able to successfully execute on these strategic initiatives.
If we are unable to execute on our strategic initiatives, including for reasons due to the challenges we face as a result of
the COVID-19 pandemic, our business, results of operations and financial condition could be materially adversely affected.
If we are unable to effectively execute our e-commerce business and provide a reliable digital experience for our customers,
our reputation and operating results may be harmed.
While e-commerce still comprises a small portion of our net revenues, it has been our fastest growing business over the
last several years, particularly in light of COVID-19 and retail store closures. The success of our e-commerce business depends,
in part, on third parties and factors over which we have limited control, including changing consumer preferences and buying
trends relating to e-commerce usage, both domestically and abroad, and promotional or other advertising initiatives employed
by our wholesale customers or other third parties on their e-commerce sites. Any failure on our part, or on the part of our third-
party digital partners, to provide attractive, reliable, secure and user-friendly e-commerce platforms could negatively impact our
consumers’ shopping experience, resulting in reduced website traffic, diminished loyalty to our brands and lost sales. In
addition, if due to COVID-19 or otherwise there is a shift in consumer behavior such that customers utilize e-commerce over
traditional brick-and-mortar stores, sales from our retail stores and wholesale channels of distribution may decline.
The success of our business also depends on our ability to continue to develop and maintain a reliable digital experience
for our customers. We strive to give our customers a seamless omni-channel experience both in stores and through digital
technologies, such as computers, mobile phones, tablets, and other devices. We also use social media to interact with our
customers and enhance their shopping experience. Our inability to develop and continuously improve our digital brand
engagement could negatively affect our ability to compete with other brands, which could adversely impact our business,
results of operations and financial condition.
In addition, we must keep up to date with competitive technology trends, including the use of new or improved
technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among
others, which may increase our costs and which may not succeed in increasing sales or attracting consumers. For example, it is
possible that consumers may not sign up for our loyalty program at anticipated rates if they do not find the features and benefits
compelling, and that we may not realize the benefits that we anticipate from these programs. Our failure to successfully respond
to these risks and uncertainties might adversely affect the sales in our e-commerce business, as well as damage our reputation
and brands.
Additionally, the success of our e-commerce business and the satisfaction of our consumers depend on their timely
receipt of our products. The efficient flow of our products requires that our company-operated and third-party operated
distribution facilities have adequate capacity to support the current level of e-commerce operations and any anticipated
increased levels that may follow from the growth of our e-commerce business. If we encounter difficulties with our distribution
facilities or in our relationships with the third parties who operate the facilities, or if any such facilities were to shut down or be
limited in capacity for any reason, including as a result of fire, other natural disaster, labor disruption, or pandemic (including as
a consequence of public health directives, quarantine policies or social distancing measures resulting from the COVID-19
pandemic), we could face shortages of inventory, and we could experience disruption or delay, or incur significantly higher
costs and longer lead times for distributing our products to our consumers which could result in customer dissatisfaction. Any
of these issues could have an adverse effect on our business and harm our reputation.
A substantial portion of our revenue is derived from a small number of large wholesale customers, and the loss of or decline
in business from any of these wholesale customers could substantially reduce our total revenue.
A small number of our wholesale customers account for a significant portion of our sales. Revenue from our five largest
wholesale customers represented 12% of our total revenue for Fiscal 2021 and 17% of our total revenue for Fiscal 2020. We do
not have written agreements with any of our wholesale customers and purchases generally occur on an order-by-order basis. As
a result of store closures and reduced consumer traffic caused by COVID-19, many of our wholesale customers have
experienced, and may continue to experience, liquidity constraints or other financial difficulties, causing a reduction in the
amount of merchandise purchased from us and our product licensing partners, an increase in order cancellations and/or the need
to extend payment terms. Any or all of these measures could substantially reduce our revenue and have a material adverse effect
on our profitability. In addition, these actions could lead to larger outstanding accounts receivable balances, delays in collection
of accounts receivable, increased expenses associated with collection efforts, increase in excess inventory, increases in credit
losses and reduced cash flows.
19 The retail industry has experienced a great deal of consolidation and other ownership changes over the past several years
and a number of wholesale accounts were forced to file bankruptcy or undergo restructurings due to the impact of COVID-19
on their business. We expect that the risk of consolidation, bankruptcy, restructurings or reorganizations by department stores
and other retailers will continue to exist for the foreseeable future. This could result in store closings by our wholesale
customers, which would decrease the number of stores carrying our products, while the remaining stores may purchase a
smaller amount of our products and/or may reduce the retail floor space designated for our brands. In addition, such
consolidation, bankruptcy or other changes with respect to our wholesale customers could decrease our opportunities in the
market, increase our reliance on a smaller number of large wholesale customers and decrease our negotiating strength with our
wholesale customers, which could have a material adverse effect on our business, results of operations and financial condition.
Additionally, certain of our wholesale customers, particularly those located in the U.S., have become highly promotional
and have aggressively marked down their merchandise. We expect that such markdowns may continue to be exacerbated
because of the impact of COVID-19. Such promotional activity could negatively impact our business.
Acquisitions may not achieve intended benefits and may not be successfully integrated.
Our acquisitions of Versace and Jimmy Choo or any other entity that we may acquire may not perform as well as initially
expected, which could have a material adverse effect on our results of operations and financial condition. In addition, we are
required to test goodwill, brand and any other intangible assets acquired as a result of acquisitions for impairment. For Fiscal
2021 and Fiscal 2020, the carrying value of goodwill and brand intangible value for Jimmy Choo exceeded its respective related
fair value, requiring us to record impairment charges for the difference of $163 million and $351 million, respectively.
In addition, we may not be able to successfully integrate acquired businesses into our own business, or achieve any
expected cost savings or synergies from such integration or we may determine to limit the integration of our brands. In addition
to the overarching and continued challenges resulting from the COVID-19 pandemic, the potential difficulties that we may face
that could cause the results of our acquisitions to not be in line with our expectations include, among others:
•
•
•
•
•
•
•
•
•
•
•
•
failure to implement our business plan for the combined business or to achieve anticipated revenue or profitability
targets;
delays or difficulties in completing the integration of acquired companies or assets;
higher than expected costs, lower than expected cost savings and/or a need to allocate resources to manage
unexpected operating difficulties;
unanticipated issues in integrating logistics, information and other systems;
unanticipated changes in applicable laws and regulations;
retaining key customers, suppliers and employees;
operating risks inherent in the acquired business and our business;
diversion of the attention and resources of management and resource constraints;
retaining and obtaining required regulatory approvals, licenses and permits;
unanticipated changes in the combined business due to potential divestitures or other requirements imposed by
antitrust regulators;
assumption of liabilities not identified in due diligence or other unanticipated issues, expenses and liabilities; and
the impact on our internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002.
Additionally, Jimmy Choo outsources its information technology, accounting and other back office activities to a third-
party service provider. There are risks of relying on a third-party provider to perform these services, which may include
experiencing operational challenges and incurring increased expenses, which may result in a material adverse effect on our
business, results of operations and financial condition.
The markets in which we operate are highly competitive, both within North America and internationally, and increased
competition based on a number of factors could cause our profitability and/or gross margins to decline.
Our brands face intense competition from other accessories, footwear and apparel producers and retailers, including,
primarily European and American international luxury brands. In addition, we face competition through third party distribution
channels that sell our merchandise, such as e-commerce, department stores and specialty stores. Competition is based on a
number of factors, including, without limitation, the following:
•
anticipating and responding to changing consumer demands in a timely manner;
20 •
•
•
•
•
•
•
•
•
•
•
establishing and maintaining favorable brand name recognition;
determining and maintaining product quality;
maintaining key employees;
maintaining and growing market share;
developing quality and differentiated products that appeal to consumers;
establishing and maintaining acceptable relationships with retail customers;
pricing products appropriately;
providing appropriate service and support to retailers;
optimizing retail and supply chain capabilities;
determining size and location of retail and department store selling space; and
protecting intellectual property.
In addition, some of our competitors may be significantly larger and more diversified than us and may have significantly
greater financial, technological, manufacturing, sales, marketing and distribution resources than we do. Their capabilities in
these areas may enable them to better withstand periodic downturns in the accessories, footwear and apparel industries
(including those related to COVID-19), compete more effectively on the basis of price and production and more quickly
develop new products. The general availability of manufacturing contractors and agents also allows new entrants easy access to
the markets in which we compete, which may increase the number of our competitors and adversely affect our competitive
position and our business. Any increased competition, or our failure to adequately address any of these competitive factors,
could result in reduced revenues, which could adversely affect our business, results of operations and financial condition.
Competition, along with other factors such as consolidation, changes in consumer spending patterns and a highly
promotional retail selling environment (including the impacts of COVID-19), could also result in significant pricing pressure.
These factors may cause us to reduce our sales prices to our wholesale customers and retail consumers, which could cause our
gross margins to decline if we are unable to appropriately manage inventory levels and/or otherwise offset price reductions with
comparable reductions in our operating costs. If our sales prices decline and we fail to sufficiently reduce our product costs or
operating expenses, our profitability may decline, which could have a material adverse effect on our business, results of
operations and financial condition.
We may not be able to respond to changing fashion and retail trends in a timely manner, which could have a material
adverse effect on our brands, business, results of operations and financial condition.
The accessories, footwear and apparel industries have historically been subject to rapidly changing fashion trends and
consumer preferences. We believe that our success is largely dependent on the images of our brands and ability to anticipate
and respond promptly to changing consumer demands and fashion trends in the design, styling, production, merchandising and
pricing of products. If we do not correctly gauge consumer needs and fashion trends and respond appropriately, consumers may
not purchase our products and our brand names and the images of our brands may be impaired. Even if we react appropriately
to changes in fashion trends and consumer preferences, consumers may consider our brands to be outdated or associate our
brands with styles that are no longer popular or trend-setting. Any of these outcomes could have a material adverse effect on
our brands, business, results of operations and financial condition.
We face risks associated with operating globally and our strategy to continue to expand internationally.
We operate on a global basis, with approximately 50% of our total revenue from operations outside of the U.S. during
Fiscal 2021. As a result, we are subject to the risks of doing business internationally, including:
•
•
•
•
•
•
•
political or civil unrest, including protests and other civil disruption;
unforeseen public health crises, such as pandemic and epidemic diseases, including the COVID-19 pandemic and
any variants thereof;
economic instability and unsettled regional and global conflicts, which may negatively affect consumer spending
by foreign tourists and local consumers in the various regions where we operate;
laws, regulations and policies of foreign governments;
potential negative consequences from changes in taxation policies;
natural disasters or other extreme weather events, including those attributed to climate change; and
acts of terrorism, military actions or other conditions over which we have no control.
21 In addition, the United Kingdom (“U.K.”) formally left the European Union (“EU”) on January 31, 2020 (“Brexit”). The
consequences of Brexit could result in increased regulatory and legal complexities and cause disruption and create uncertainty
surrounding our business, including affecting our relationship with our existing and future customers, suppliers and employees
and resulting in increased costs from new or elevated customs duties or financial implications from operational challenges,
trade or tax policies. Brexit has also contributed to volatility and uncertainty in global stock markets and currency exchange
rates, and could adversely impact investor confidence and consumer spending, including on discretionary items and retail
products such as ours.
Finally, if our international expansion plans are unsuccessful, it could have a material adverse effect on our business,
results of operations and financial condition. We sell our products at varying retail price points based on geographic location
that yield different gross profit margins and we achieve different operating profit margins, depending on geographic region, due
to a variety of factors including product mix, store size, occupancy costs, labor costs and retail pricing. Changes in any one or
more of these factors could result in lower revenues, increased costs, and negatively impact our business, results of operations
and financial condition. There are also some countries where we do not yet have significant operating experience, and in most
of these countries we face established competitors with significantly more operating experience in those locations. Furthermore,
consumer demand and behavior, as well as tastes and purchasing trends may differ in these countries and, as a result, sales of
our product may not be successful, or the gross margins on those sales may not be in line with those we currently anticipate.
There can be no assurance that any or all of these events will not have a material adverse effect on our business, results of
operations and financial condition.
Our business is subject to risks associated with importing products, and the imposition of additional duties, tariffs or trade
restrictions could have a material adverse effect on our business, results of operations and financial condition.
There are risks inherent to importing our products. Virtually all of our imported products are subject to duties which may
impact the cost of such products. In addition, countries to which we ship our products may impose safeguard quotas to limit the
quantity of products that may be imported. We rely on free trade agreements and other supply chain initiatives in order to
maximize efficiencies relating to product importation. For example, we have historically received benefits from duty-free
imports on certain products from certain countries pursuant to the U.S. Generalized System of Preferences ("GSP") program.
The GSP program expired on December 31, 2020. If the GSP program is not renewed or otherwise made retroactive, we could
experience significant additional duties and our gross margin could be negatively impacted. Additionally, we are subject to
government regulations relating to importation activities, including related to U.S. Customs and Border Protection ("CBP")
withhold release orders. The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade
agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order could have a material adverse
effect on our business, results of operations and financial condition. If additional tariffs or trade restrictions are implemented by
the U.S. or other countries, the cost of our products could increase which could adversely affect our business.
If we cannot successfully negotiate rent deferrals or abatements, lease modifications or lease terminations, our substantial
operating lease obligations could have a material adverse effect on our business and our landlords may attempt to hold us in
breach of our lease obligations and take other actions, including terminating our leases and/or accelerating our future rent.
We do not own any of our retail store facilities, but instead lease all of our stores under operating leases. Our leases
generally have terms of up to 10 years, generally require a fixed annual base rent and some require the payment of additional
percentage rent if store sales exceed a negotiated amount. Certain of our European stores also require initial investments in the
form of key money to secure prime locations, which may be paid to landlords or existing lessees. Generally, our leases are “net”
leases, which require us to pay all of the costs of insurance, taxes, maintenance and utilities. We generally cannot cancel these
leases or withhold payments at our option, and payments under these operating leases account for a significant portion of our
operating costs. For example, as of March 27, 2021, we were party to operating leases associated with our retail stores that we
operate directly throughout the globe, as well as other global corporate facilities, requiring future minimum lease payments
aggregating to $1.8 billion through Fiscal 2026 and approximately $493 million thereafter through Fiscal 2044.
In light of our retail store closures in response to government orders, mandates, guidelines and recommendations limiting
business operations due to the COVID-19 pandemic, as well as decisions by many of the retail centers in which we operate to
close shopping centers, we temporarily closed all of our retail stores in North America and Europe. On April 1, 2020, we
suspended rent payments under the leases for these stores. In many instances, we were able to negotiate with counterparties
under our leases to defer or abate the applicable rent during the store closure period, to modify the terms (including rent) of our
leases going forward when stores reopen, or in certain instances to terminate the leases and permanently close retail stores.
However, in instances where we were unable to negotiate with landlords, the landlords could allege that we are in default under
22 the lease and attempt to terminate our lease and/or accelerate our future rents. Although we believe that strong legal grounds
exist to support our claim that we are not obligated to pay rent during periods of closure as a result of the COVID-19 pandemic,
there can be no assurance whether or not, and to what degree, such arguments will be successful, and any dispute under these
leases may result in litigation with the landlord, which could be costly and have an uncertain outcome.
In addition, as certain of our retail stores in Europe, Canada and parts of Asia remain closed and as other locations
reopen, we expect to require additional negotiations with our landlords to further defer or abate rent, to modify the terms of our
leases (including rent and expiration date) and in certain instances to terminate a lease or permanently close a store. There can
be no assurance that we will be able to successfully negotiate rent deferrals or abatements, lease modifications or lease
terminations on favorable terms or at all. Our substantial operating lease obligations could have a material adverse effect on our
business, results of operations and financial condition.
We are dependent on a limited number of distribution facilities. If one or more of our distribution facilities experience
operational difficulties or becomes inoperable, it could have a material adverse effect on our business, results of operations
and financial condition.
We operate a limited number of distribution facilities. Our ability to meet the needs of our own retail stores and e-
commerce sites, as well as our wholesale customers, depends on the proper and uninterrupted operation of these distribution
facilities. If any of these distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason
(including as a result of a government mandate or order due to COVID-19), we could suffer a substantial loss of inventory and/
or disruptions of deliveries to our retail and wholesale customers. In addition, we could incur significantly higher costs and
longer lead times associated with the distribution of our products during the time it takes to reopen or replace the damaged
facility. Any of the foregoing factors could result in decreased sales and have a material adverse effect on our business, results
of operations and financial condition.
In addition, we have been moving into new and larger facilities as needed to further support our efforts to operate with
increased efficiency and flexibility. There are risks inherent in operating in new distribution environments and implementing
new warehouse management systems, including technological and operational difficulties that may arise with such transitions.
We may experience shipping delays should there be any disruptions in our new warehouse management systems or warehouses
themselves.
The departure of members of our executive management and other key employees or our failure to attract and retain
qualified personnel could have a material adverse effect on our business.
We depend on the services and management experience of executive officers, who have substantial experience and
expertise in our business. We also depend on other key employees involved in our design and marketing operations, including
our creative officers for each of our brands, Ms. Donatella Versace, Ms. Sandra Choi and Mr. Michael Kors. Competition for
qualified personnel in the fashion industry is intense, and competitors may use aggressive tactics to recruit our executive
officers and key employees. Our ability to attract and retain employees is influenced by our ability to offer competitive
compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities,
non-competition and non-solicitation agreements and macro unemployment rates. Although we have entered into employment
agreements with our executive officers and other key employees, we may not be able to retain the services of such individuals
in the future. The loss of services of one or more of these individuals or any negative public perception with respect to, or
relating to, the loss of one or more of these individuals, could have a material adverse effect on our business, results of
operations and financial condition. In addition, our operational efficiency initiatives as well as acquisitions and related
integration activity may intensify this risk.
We must also attract, develop, motivate and retain a sufficient number of qualified retail and distribution center
personnel. Historically, competition for talent has been intense and the turnover rate in the retail industry is generally high.
There can be no assurance that we will be able to attract or retain a sufficient number of qualified employees in future periods to
execute on our business objectives. Additionally, our ability to meet our labor needs while also controlling costs is subject to
external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and overtime regulations. If we
are unable to attract, develop, motivate and retain talented employees with the necessary skills and experience, or if changes to
our organizational structure, operating results, or business model, including as a result of COVID-19, adversely affect morale,
hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.
23 Fluctuations in our tax obligations and changes in tax laws, treaties and regulations may have a material adverse impact on
our future effective tax rates and results of operations.
Our subsidiaries are subject to taxation in the U.S. and various foreign jurisdictions, with the applicable tax rates varying
by jurisdiction. As a result, our overall effective tax rate is affected by the proportion of earnings from the various tax
jurisdictions. We record tax expense based on our estimates of taxable income and required reserves for uncertain tax positions
in multiple tax jurisdictions. At any time, there are multiple tax years that are subject to examinations by various taxing
authorities. The ultimate resolution of these audits and negotiations with taxing authorities may result in a settlement amount
that differs from our original estimate. Any proposed or future changes in tax laws, treaties and regulations or interpretations
where we operate could have a material adverse effect on our effective tax rates, results of operations and financial condition.
We and our subsidiaries are also engaged in a number of intercompany transactions. Although we believe that these
transactions reflect arm’s-length terms and that proper transfer pricing documentation is in place, the transfer prices and
conditions may be scrutinized by local tax authorities, which could result in additional tax liabilities. On October 5, 2015, the
Organization for Economic Co-operation and Development, an international association of thirty four countries, including the
U.S. and U.K., released the final reports from its Base Erosion and Profit Shifting (BEPS) Action Plans. The BEPS
recommendations covered a number of issues, including country-by-country reporting, permanent establishment rules, transfer
pricing rules and tax treaties. Future tax reform resulting from this development may result in changes to long-standing tax
principles, which could adversely affect our effective tax rate and/or result in higher cash tax liabilities.
Our business is exposed to foreign currency exchange rate fluctuations.
Our results of operations for our international subsidiaries are exposed to foreign exchange rate fluctuations as the
financial results of the applicable subsidiaries are translated from the local currency into U.S. Dollars during financial statement
consolidation. If the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated
transactions could impact our consolidated results of operations. In addition, we have intercompany notes amongst certain of
our non-U.S. subsidiaries, which may be denominated in a currency other than the local currency of a particular reporting
entity. As a result of using a currency other than the functional currency of the related subsidiary, results of these operations
may be adversely affected during times of significant fluctuation between the functional currency of that subsidiary and the
denomination currency of the note. We continuously monitor our foreign currency exposure and hedge a portion of our foreign
subsidiaries’ foreign currency-denominated inventory purchases to minimize the impact of changes in foreign currency
exchange rates. However, we cannot fully anticipate all of our foreign currency exposures and cannot ensure that these hedges
will fully offset the impact of foreign currency exchange rate fluctuations. We also use fixed-to-fixed cross currency swap
agreements to hedge our net investments in foreign operations against future volatility in the exchange rates between the U.S.
Dollars and these foreign currencies. As a result, we are exposed to the risk that counterparties to derivative contracts will fail to
meet their contractual obligations.
As a result of operating retail stores and concessions in various countries outside of the U.S., we are also exposed to
market risk from fluctuations in foreign currency exchange rates, particularly the Euro, the British Pound, the Chinese
Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, among others. A substantial weakening of foreign
currencies against the U.S. Dollar could require us to raise our retail prices or reduce our profit margins in various locations
outside of the U.S. In addition, our sales and profitability could be negatively impacted if consumers in those markets were
unwilling to purchase our products at increased prices.
Our current and future licensing and joint venture arrangements may not be successful and may make us susceptible to the
actions of third parties over whom we have limited control.
We have entered into a select number of product licensing agreements with companies that produce and sell, under our
trademarks, products requiring specialized expertise. We have also entered into a number of select licensing agreements
pursuant to which we have granted third parties certain rights to distribute and sell our products in certain geographical areas
and have a number of joint ventures. In the future, we may enter into additional licensing and/or joint venture arrangements.
Although we take steps to carefully select our partners, such arrangements may not be successful. Our partners may fail to
fulfill their obligations under these agreements or have interests that differ from or conflict with our own, such as the timing of
new store openings, the pricing of our products and the offering of competitive products. In addition, the risks applicable to the
business of our partners may be different than the risks applicable to our business, including risks associated with each such
partner’s ability to:
•
•
obtain capital;
exercise operational and financial control over its business;
24 •
•
•
•
manage its labor relations;
maintain relationships with suppliers;
manage its credit and bankruptcy risks which may be exacerbated by the impact of COVID-19; and
maintain customer relationships.
Any of the foregoing risks, or the inability of any of our partners to successfully market our products or otherwise
conduct its business, may result in loss of revenue and competitive harm to our operations in regions or product categories
where we have entered into such licensing arrangements.
We rely on our partners to preserve the value of our brands. Although we attempt to protect our brands through, among
other things, approval rights over store location and design, product design, production quality, packaging, merchandising,
distribution, advertising and promotion of our stores and products, we may not be able to control the use by our partners of our
brand. The misuse of our brand by a licensing or joint venture partner could have a material adverse effect on our business,
results of operations and financial condition.
Increases in the cost of raw materials could increase our production costs and cause our operating results and financial
condition to suffer.
Our business is subject to volatility of costs related to certain raw materials used in the manufacturing of our products.
The costs of raw materials used in our products are affected by, among other things, weather, consumer demand, speculation on
the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries and
other factors that are generally unpredictable and beyond our control. We are not always successful in our efforts to protect our
business from the volatility of the market price of raw materials and our business can be materially affected by dramatic
movements in prices of raw materials. The ultimate effect of this change on our earnings cannot be quantified, as the effect of
movements in raw materials prices on industry selling prices are uncertain, but any significant increase in these prices could
have a material adverse effect on our business, results of operations and financial condition. In addition, our costs may be
impacted by sanction tariffs and customs trade orders which could also impact sourcing and availability of raw materials used
by our suppliers in the manufacturing of certain of our products. Manufacturing labor costs are also subject to volatility based
on local and global economic conditions. Increases in commodity prices, tariffs, sanctions, customs trade orders and/or
manufacturing labor costs could increase our production costs and negatively impact our revenues, results of operations and
financial condition.
We primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods and
our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or
shipments.
Our products are primarily produced by, and purchased or procured from, independent manufacturing contractors located
mainly in Asia and Europe. A manufacturing contractor’s failure to ship products to us in a timely manner or to meet the
required quality standards could cause us to miss the delivery date requirements of our customers for those items. The failure to
make timely deliveries may cause customers to cancel orders, refuse to accept deliveries or demand reduced prices, any of
which could have a material adverse effect on us.
We do not have written agreements with any of our third-party manufacturing contractors. As a result, any single
manufacturing contractor could unilaterally terminate its relationship with us at any time. For example, in Fiscal 2021, Michael
Kors’ largest manufacturing contractor, who produces its products in Asia and who Michael Kors has worked with for over ten
years, accounted for the production of 18% of our finished products, based on dollar volume. Our inability to promptly replace
manufacturing contractors that terminate their relationships with us or cease to provide high quality products in a timely and
cost-efficient manner could have a material adverse effect on our business, results of operations and financial condition, and
impact the cost and availability of our goods.
Michael Kors uses third-party agents to source finished goods with numerous manufacturing contractors on its behalf.
Any single agent could unilaterally terminate its relationship with Michael Kors at any time. In Fiscal 2021, Michael Kors’
largest third-party agent, whose primary place of business is Hong Kong and who Michael Kors has worked with for over 10
years, sourced approximately 26% of its purchases of finished goods, based on unit volume. Our inability to promptly replace
agents that terminate their relationships with us or cease to provide high quality service in a timely and cost-efficient manner
could have a material adverse effect on our business, results of operations and financial condition.
25 In addition, as a company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities,
including, but not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
disease pandemics, epidemics and health-related concerns, including related to COVID-19 or variants thereof;
political or labor instability, labor shortages (stemming from labor disputes or otherwise), or increases in costs of
labor or production in countries where manufacturing contractors and suppliers are located;
labor disputes or strikes at the location of the source of our goods and/or at ports of entry;
disruptions or delays in shipments, including port delays and congestion, and/or capacity constraints on
transportation of goods due to COVID-19;
political or military conflict;
heightened terrorism security concerns;
a significant decrease in availability or an increase in the cost of raw materials;
the migration and development of manufacturing contractors;
product quality issues;
imposition of regulations, quotas and safeguards relating to imports and our ability to adjust in a timely manner to
changes in trade regulations;
increases in the costs of fuel (including volatility in the price of oil), travel and transportation (including vessel
and freight);
imposition of duties, taxes and other charges on imports;
significant fluctuation of the value of the U.S. Dollar against foreign currencies;
restrictions on transfers of funds out of countries where our foreign licensees are located;
compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct and other
applicable compliance policies; and
compliance with U.S. laws regarding the identification and reporting on the use of “conflict minerals” sourced
from the Democratic Republic of the Congo in the Company’s products and the U.S. Foreign Corrupt Practices
Act, U.K. Bribery Act and other global anti-corruption laws, as applicable.
If we fail to comply with labor laws or collective bargaining agreements, or if our independent manufacturing contractors
fail to use acceptable, ethical business practices, our business and reputation could suffer.
We are subject to labor laws governing relationships with employees, including minimum wage requirements, overtime,
working conditions and citizenship requirements. We are also subject to collective bargaining agreements with respect to
employees in certain European countries. Compliance with these laws and regulations, as well as collective bargaining
agreements, may lead to increased costs and operational complexity and may increase our exposure to governmental
investigations or litigation.
We require our independent manufacturing contractors to operate in compliance with applicable laws, rules and
regulations regarding working conditions, employment practices and environmental compliance, as well as our Supplier Code
of Conduct and other compliance policies under our Factory Social Compliance Program. Our staff and third parties we retain
for such purposes periodically visit and monitor the operations of our independent manufacturing contractors to determine
compliance. However, we generally do not control these manufacturing contractors or suppliers or their labor, environmental or
other business practices. The violation of labor, environmental or other laws by an independent manufacturer or supplier, or
divergence of an independent manufacturer’s or supplier’s labor practices from those generally accepted as ethical or
appropriate in the U.S. or that violate our Supplier Code of Conduct, could interrupt or otherwise disrupt the shipment of our
products, harm our trademarks or damage our reputation. The occurrence of any of these events could materially adversely
affect our business, financial condition and results of operations.
We may be unable to protect our trademarks, copyrights and other intellectual property rights, and others may allege that we
infringe upon their intellectual property rights.
Our VERSACE, JIMMY CHOO and MICHAEL KORS trademarks, as well as other material trademarks, copyrights and
design and patent rights related to the production, marketing and distribution of our products, are important to our success and
our competitive position. We are susceptible to others imitating our products and infringing our intellectual property rights in
the Americas, EMEA, Asia and elsewhere in the world in both online and offline channels. Our brands enjoy significant
worldwide consumer recognition and the generally higher pricing of our products creates additional incentive for counterfeiters
26 to infringe on our brands. We work with customs authorities, law enforcement, legal representatives and brand specialists
globally in an effort to prevent the sale of counterfeit products, but we cannot guarantee the extent to which our efforts to
prevent counterfeiting of our brands and other intellectual property infringement will be successful. Such counterfeiting and
other intellectual property infringement could dilute our brands and otherwise harm our reputation and business.
Our trademark and other intellectual property applications may fail to result in registered trademarks or other intellectual
property or to provide the scope of coverage sought, and others may seek to invalidate our trademarks, copyrights or other
intellectual property or block sales of our products as an alleged violation of their trademarks and/or intellectual property rights.
In addition, others may assert rights in, or ownership of, trademarks, copyrights and/or other intellectual property rights of ours
or in trademarks, copyrights or other intellectual property that are similar to ours or that we license, and we may not be able to
successfully resolve these types of conflicts to our satisfaction. In some cases, other intellectual property owners may have prior
rights to our trademarks or similar trademarks or intellectual property. Furthermore, the laws of certain foreign countries may
not protect trademarks, copyrights and/or other intellectual property rights to the same extent as the laws of the United States or
the European Union.
From time to time, in the ordinary course of our business, we become involved in opposition and cancellation
proceedings with respect to trademarks or other intellectual property similar to some of our brands. Any litigation or dispute
involving the scope or enforceability of our intellectual property rights or any allegation that we infringe upon the intellectual
property rights of others could be costly and time-consuming and, if determined adversely to us, could result in harm to our
competitive position.
We self-insure certain risks and may be impacted by unfavorable claims experience.
We use a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to
provide for the potential liabilities for certain risks including, employee health-care benefits, workers’ compensation, general
liability, marine transport and inventory, property damage and business interruption. Claims are difficult to predict and may be
volatile. Any adverse claims experience could have a material adverse effect on our results of operations, financial condition
and cash flows.
We are subject to various proceedings, lawsuits, disputes, and claims in the ordinary course of business which could have an
adverse impact on our business, financial condition, and results of operations.
We are a global company and are subject to various proceedings, lawsuits, disputes and claims throughout the world in
the ordinary course of business. These claims could include commercial, intellectual property, employment, customer and data
privacy claims, as well as class action lawsuits. Typically, these claims raise complex factual and legal issues and are subject to
uncertainties. Plaintiffs may seek unspecified damages and/or injunctive or other equitable relief. Our potential liability may be
covered in part by our insurance policies, but we may not always have adequate insurance to defend all claims. An unfavorable
outcome in any proceeding, lawsuit, dispute or claim may have an adverse impact on our business, financial condition and
results of operations.
Our business is susceptible to the risks associated with climate change and other environmental impacts which could
negatively affect our business and operations.
Our retail stores, distribution centers and manufacturing facilities, including those operated by third-parties, are subject
to risks relating to climate change and other environmental impacts from our operations. For example, the physical effects of
climate change, such as severe weather events, natural disasters and/or significant changes in climate patterns as well as our
carbon emissions and our business’ overall impact on the environment could subject us to reputational, market and/or
regulatory risks. Climate change and other environmental concerns may cause social and economic disruptions in the places
where we operate, including disruptions to our supply chain and to local infrastructure and transportation systems which could
limit material availability and quality, impact our ability to ship and deliver product and prevent access to our physical
locations. These events could also adversely affect the economy and negatively impact consumer confidence and discretionary
spending. Concern over climate change may result in new or additional legal, legislative and regulatory requirements to reduce
or mitigate the effects of climate change on the environment. There is also increased focus, including by investors, customers,
and other stakeholders, on climate change and other sustainability matters. In April 2020, we announced a global strategy to
achieve significant, measurable goals across a range of important environmental and social sustainability issues, including,
material sourcing, reducing greenhouse gas emissions and converting to renewal energy, responsible water use and waste
reduction. We may not be successful in attaining our goals, and even if we meet our commitments, there remains a significant
risk that climate change and other environmental events could negatively impact our operations.
27 Increased scrutiny from investors and others regarding our corporate social responsibility initiatives, including
environmental, social and other matters of significance relating to sustainability, could result in additional costs or risks and
adversely impact our reputation.
Investor advocacy groups, certain institutional investors, investment funds, other market participants, shareholders and
customers have increasingly focused on the environmental, social and governance ("ESG") or “sustainability” practices of
companies. These parties have placed increased importance on the implications of the social cost of their investments. If our
ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our
brand, reputation and customer and employee retention may be negatively impacted. Any sustainability report that we publish
or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters,
including corporate governance, environmental compliance, employee health and safety practices, human capital management,
product quality, supply chain management, and workforce inclusion and diversity. It is possible that stakeholders may not be
satisfied with our ESG practices or the speed of adoption. We could also incur additional costs and require additional resources
to monitor, report and comply with various ESG practices. Also, our failure, or perceived failure, to meet the standards included
in any sustainability disclosure could negatively impact our reputation, employee retention and the willingness of our customers
and suppliers to do business with us.
The accessories, footwear and apparel industries are heavily influenced by general macroeconomic cycles that affect
consumer spending and a prolonged period of depressed consumer spending could have a material adverse effect on our
business, results of operations and financial condition.
The accessories, footwear and apparel industries have historically been subject to cyclical variations, recessions in the
general economy and uncertainties regarding future economic prospects that can affect consumer spending habits. Purchases of
discretionary luxury items, such as our products, tend to decline during recessionary periods when disposable income is lower.
The success of our operations depends on a number of factors impacting discretionary consumer spending, including the
duration and severity of the pandemic and the success of vaccination efforts, new information concerning the virus or variants
of the variance, and actions different states, regions or countries may take to contain the virus (including extended lock-downs
and travel restrictions), among others, general economic conditions, consumer confidence, wages and unemployment, housing
prices, consumer debt, interest rates, fuel and energy costs, taxation and political conditions. A worsening of the economy may
negatively affect consumer and wholesale purchases of our products and could have a material adverse effect on our business,
results of operations and financial condition.
Our industry is subject to significant pricing pressure caused by many factors which may cause our profitability and gross
margins in the future to be materially lower than our expectations.
Our industry is subject to significant pricing pressure caused by many factors, including the impact of COVID-19 on the
economy and consumer discretionary spending, intense competition and a highly promotional environment, fragmentation in
the retail industry, pressure from retailers to reduce the costs of products, changes in consumer behavior, fashion trends,
pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, the
success of marketing programs and weather and other environmental conditions. These factors may cause our profitability and
gross margins in the future to be materially lower than in recent periods and our expectations, which could have a material
adverse effect on our business, results of operations and financial condition. We may be faced with significant excess
inventories (due to the impact of COVID-19 or otherwise), and in the future, if we misjudge the market for our products, we
may have excess inventories for some products and missed opportunities for other products. We may be forced to rely on
markdowns or promotional sales to dispose of excess and slow-moving inventory, which also may negatively impact our gross
margin and profitability.
Risks Related to Privacy and Data Security
Privacy breaches and other cyber security risks related to our business could negatively affect our reputation, credibility and
business.
We are dependent on information technology (“IT”) systems and networks for a significant portion of our direct-to-
consumer sales, including our e-commerce sites and retail business credit card transaction authorization and processing. We are
responsible for storing data relating to our customers and employees and also rely on third party vendors for the storage,
processing and transmission of personal and Company information. Consumers, lawmakers and consumer advocates alike are
increasingly concerned over the security of personal information transmitted over the Internet, consumer identity theft and
privacy and the retail industry, in particular, has been the target of many recent cyber-attacks. In addition to taking the
necessary precautions ourselves, we generally require that third-party service providers implement reasonable security measures
28 to protect our employees’ and customers’ identity and privacy. We do not, however, control these third-party service providers
and cannot guarantee the elimination of electronic or physical computer break-ins or security breaches in the future. Cyber
security breaches, including physical or electronic break-ins, security breaches due to employee error or misconduct, attacks by
“hackers,” phishing scams, malicious software programs such as viruses and malware, and other breaches outside of our
control, could result in unauthorized access or damage to our IT systems and the IT systems of our third party service providers.
Despite our efforts and the efforts of our third-party service providers to secure our and their IT systems, attacks on these
systems do occur from time to time. As the techniques used to obtain unauthorized access to IT systems become more varied
and sophisticated (including in connection with the COVID-19 pandemic, as cybercriminals are finding new ways to launch
their attacks) and if the occurrence of such security breaches becomes more frequent, we and our third-party service providers
may be unable to adequately anticipate these techniques and implement appropriate preventative measures. While we maintain
cyber risk insurance to provide some coverage for certain risks associated with cyber security incidents, there is no assurance
that such insurance would cover all or a significant portion of the costs or consequences associated with a cyber security
incident. A significant breach of customer, employee or Company data could damage our reputation, our relationship with
customers and our brands, and could result in lost sales, sizable fines, significant breach-notification and other costs and
lawsuits, as well as adversely affect our results of operations. We may also incur additional costs in the future related to the
implementation of additional security measures to protect against new or enhanced data security and privacy threats, or to
comply with current and new state, federal and international laws governing the unauthorized disclosure of confidential
information which are continuously being enacted and proposed, such as the General Data Protection Regulation in the EU and
the California Consumer Privacy Act in California in the United States, as well as increased cyber security protection costs such
as organizational changes, deploying additional personnel and protection technologies, training employees, engaging third party
experts and consultants and lost revenues resulting from unauthorized use of proprietary information.
A material delay or disruption in our information technology systems or e-commerce websites or our failure or inability to
upgrade our information technology systems precisely and efficiently could have a material adverse effect on our business,
results of operations and financial condition.
We rely extensively on our IT systems to track inventory, manage our supply chain, record and process transactions,
manage customer communications, summarize results and manage our business. The failure of our IT systems to operate
properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in or failure to implement
new systems, could adversely affect our business. We also operate a number of e-commerce websites throughout the world. Our
IT systems and e-commerce websites may be subject to damage and/or interruption from power outages, computer, network
and telecommunications failures, malicious software, such as viruses and malware, attacks by “hackers”, security breaches,
usage errors or misconduct by our employees and bad acts by our customers and website visitors which could materially
adversely affect our business.
In early Fiscal 2020, we embarked on a multi-year ERP implementation, but as a result of COVID-19 and our need to
significantly reduce our capital expenditures in order to protect our liquidity and cash flows, we temporarily suspended our ERP
project. Parts of the project have resumed as of the fourth quarter of Fiscal 2021. Our inability to fully resume our ERP
implementation and to upgrade our IT systems could result in system failures, disruptions, damage or malfunctions, cause
critical information upon which we rely to be delayed, defective, corrupted, inadequate, inaccessible or lost and otherwise cause
delays or disruptions to our operations. If any of these events happen, we may have to make significant investments to fix or
replace impacted systems. Our failure or inability to upgrade IT systems effectively also could cause us to be unable to compete
effectively, could harm our reputation and credibility, and could have a material adverse effect on our business, results of
operations and financial condition.
Risks Related to Our Debt
We have incurred a substantial amount of indebtedness, which could adversely affect our financial condition and restrict
our ability to incur additional indebtedness or engage in additional transactions.
As of March 27, 2021, our consolidated indebtedness was approximately $1.3 billion, net of debt issuance costs. Our
total borrowings as of March 27, 2021 primarily relate to senior notes of $450 million and term loans of $870 million. Our
ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our
ability to generate cash from our operations. This, to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Until recently, we have been able to use our cash from
operations to fund our debt service obligations and to utilize our 2018 Revolving Credit Facility to supplement our near-term
liquidity needs. Our cash from operations have declined significantly, largely due to retail store closures and reduced store
traffic caused by the COVID-19 pandemic. Our substantial level of indebtedness could have negative consequences to our
business and we cannot guarantee that our business will generate sufficient cash flow from our operations or that future
29 borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs,
make necessary capital expenditures or pursue certain business opportunities. Our financial results, our substantial indebtedness
and our credit ratings could adversely affect the availability and terms of our financing and negatively impact our ability to
enter into new financing arrangements in the future.
The obligations under the second amendment, dated June 25, 2020 (the “Second Amendment”), to the third amended and
restated credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”) are secured by liens on substantially all of
the assets of the Company and its U.S. subsidiaries that are borrowers and guarantors, subject to certain exceptions, and
substantially all of the registered intellectual property of the Company and its subsidiaries. This requirement for collateral will
be removed if the Company achieves an investment grade ratings requirement for two consecutive full fiscal quarters but there
can be no assurance that the ratings requirement will be satisfied. In addition, our ability to access the credit and capital markets
in the future as a source of funding, and the borrowing costs associated with such financing, is dependent upon market
conditions and our credit rating and outlook. In March 2020, Moody’s Investor Service downgraded their credit rating of us
from Baa2 to Ba1, and in April 2020 Fitch Ratings downgraded their credit rating of us from BBB- to BB+. These downgrades,
and any future reduction in our credit ratings, could result in reduced access to the credit and capital markets, more restrictive
covenants in future financial documents and higher interest costs, and potentially increased lease or hedging costs.
We may be unable to meet financial covenants in our indebtedness agreements which could result in an event of default and
restrictive covenants in such agreements may restrict our ability to pursue our business strategies.
Pursuant to the Second Amendment, the financial covenant in the Company’s 2018 Credit Facility requiring it to
maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four
fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.0 has been waived through the fiscal quarter ending June
26, 2021. The Company terminated the waiver period effective May 26, 2021. Effective as of that date, the applicable ratio will
be calculated net of the Company’s unrestricted cash and cash equivalents in excess of $100 million and shall exclude up to
$150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0. The Second
Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with
respect to the fiscal quarter ending June 26, 2021, to maintain at all times unrestricted cash and cash equivalents plus the
aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $500 million.
In addition, the 2018 Credit Facility and the Indenture governing our senior notes contain certain restrictive covenants
that impose operating and financial restrictions on us, and the Second Amendment imposes incremental restrictions on certain
of these covenants during the covenant relief period provided under the 2018 Credit Facility, including restrictions on our
ability to:
•
•
•
•
•
•
•
incur additional indebtedness and guarantee indebtedness;
pay dividends or make other distributions or repurchase or redeem capital stock;
make loans and investments, including acquisitions;
sell assets;
incur liens;
enter into transactions with affiliates; and
consolidate, merge or sell all or substantially all of our assets
which collectively may limit our ability to engage in acts that may be in our long-term best interest.
A breach of the covenants or restrictions under the documents that govern our indebtedness could result in an event of
default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in
the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of
default under the credit agreement governing our 2018 Credit Facility would permit the lenders under our 2018 Credit Facility
to terminate all commitments to extend further credit under that facility and foreclose on the collateral that secures the 2018
Credit Facility. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may
not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:
•
•
•
limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business downturns,
including as a result of COVID-19; or
unable to compete effectively or to take advantage of new business opportunities.
30 Risks Related to Our Ordinary Shares
Our share price may periodically fluctuate based on the accuracy of our earnings guidance or other forward-looking
statements regarding our financial performance.
Our business and long-range planning process is designed to maximize our long-term growth and profitability and not to
achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of our
Company and our shareholders. At the same time, however, we recognize that it is helpful to provide investors with guidance as
to our forecast of total revenue, earnings per share, comparable store sales and other financial metrics or projections. While we
generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any
responsibility to update any of our forward-looking statements at such times or otherwise. In addition, any longer-term
guidance that we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth
and performance over a number of years. However, such long-range targets are more difficult to predict than our current quarter
and fiscal year expectations. If, or when, we announce actual results that differ from those that have been predicted by us,
outside investment analysts, or others, our share price could be adversely affected. Investors who rely on these predictions when
making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses
suffered as a result of such changes in our share price.
We periodically return value to shareholders through our share repurchase program. Investors may have an expectation
that we will repurchase all shares available under our share repurchase program. As a result of COVID-19, we suspended our
share repurchase program. The market price of our securities could be adversely affected if our share repurchase activity differs
from investors’ expectations or if our share repurchase program were to terminate.
Failure to maintain adequate financial and management processes and controls could lead to errors in our financial
reporting, which could harm our business and cause a decline in the price of our ordinary shares.
As a public company, we are required to document and test our internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act. If our management is unable to certify the effectiveness of our internal controls or if
our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal control over
financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny
and a loss of public confidence, which could have an adverse effect on our business and cause a decline in the price of our
ordinary shares.
Provisions in our organizational documents may delay or prevent our acquisition by a third party.
Our Memorandum and Articles of Association (together, as amended from time to time, our “Memorandum and
Articles”) contain several provisions that may make it more difficult or expensive for a third party to acquire control of us
without the approval of our board of directors. These provisions may delay, prevent or deter a merger, acquisition, tender offer,
proxy contest or other transaction that might otherwise result in our shareholders receiving a premium over the market price for
their ordinary shares. These provisions include, among others:
•
•
•
•
•
our board of directors’ ability to amend the Memorandum and Articles to create and issue, from time to time, one
or more classes of preference shares and, with respect to each such class, to fix the terms thereof by resolution;
provisions relating to the multiple classes and three-year terms of directors, the manner of election of directors,
removal of directors and the appointment of directors upon an increase in the number of directors or vacancy on
our board of directors;
restrictions on the ability of shareholders to call meetings and bring proposals before meetings;
elimination of the ability of shareholders to act by written consent; and
the requirement of the affirmative vote of 75% of the shares entitled to vote to amend certain provisions of our
Memorandum and Articles.
These provisions of our Memorandum and Articles could discourage potential takeover attempts and reduce the price
that investors might be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary
shares.
31 Rights of shareholders under British Virgin Islands law differ from those under United States law, and, accordingly, our
shareholders may have fewer protections.
Our corporate affairs are governed by our Memorandum and Articles, the BVI Business Companies Act, 2004 (as
amended, the “BVI Act”) and the common law of the British Virgin Islands. The rights of shareholders to take legal action
against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British Virgin
Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act. The common
law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as
well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The
rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly
established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the
British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states (such as
Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of the foregoing, holders of
our ordinary shares may have more difficulty in protecting their interests through actions against our management, directors or
major shareholders than they would as shareholders of a U.S. company.
The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders will
have limited or no recourse if they are dissatisfied with the conduct of our affairs.
Under the laws of the British Virgin Islands, there is limited statutory law for the protection of minority shareholders
other than the provisions of the BVI Act dealing with shareholder remedies. The principal protection under statutory law is that
shareholders may bring an action to enforce the constituent documents of a British Virgin Islands company and are entitled to
have the affairs of the Company conducted in accordance with the BVI Act and the memorandum and articles of association of
the Company. As such, if those who control the Company have persistently disregarded the requirements of the BVI Act or the
provisions of the Company’s memorandum and articles of association, then the courts will likely grant relief. Generally, the
areas in which the courts will intervene are the following: (i) an act complained of which is outside the scope of the authorized
business or is illegal or not capable of ratification by the majority; (ii) acts that constitute fraud on the minority where the
wrongdoers control the Company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and
(iv) acts where the Company has not complied with provisions requiring approval of a special or extraordinary majority of
shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the
United States.
It may be difficult to enforce judgments against us or our executive officers and directors in jurisdictions outside the United
States.
Under our Memorandum and Articles, we may indemnify and hold our directors harmless against all claims and suits
brought against them, subject to limited exceptions. Furthermore, to the extent allowed by law, the rights and obligations among
or between us, any of our current or former directors, officers and employees and any current or former shareholder will be
governed exclusively by the laws of the British Virgin Islands and subject to the jurisdiction of the British Virgin Islands courts,
unless those rights or obligations do not relate to or arise out of their capacities as such. Although there is doubt as to whether
United States' courts would enforce these provisions in an action brought in the United States under United States securities
laws, these provisions could make judgments obtained outside of the British Virgin Islands more difficult to enforce against our
assets in the British Virgin Islands or jurisdictions that would apply British Virgin Islands law.
British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders
of one avenue to protect their interests.
British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of
the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be
available in respect of any such action, may result in the rights of shareholders of a British Virgin Islands' company being more
limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer
alternatives available to them if they believe that corporate wrongdoing has occurred. The British Virgin Islands courts are also
unlikely to recognize or enforce judgments of courts in the United States based on certain liability provisions of United States
securities law or to impose liabilities, in original actions brought in the British Virgin Islands, based on certain liability
provisions of the United States securities laws that are penal in nature. There is no statutory recognition in the British Virgin
Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally recognize
and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. This means that
even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.
32 Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
The following table sets forth the location, use and size of our significant distribution and corporate facilities as of
March 27, 2021, all of which are leased with the exception of our distribution center in the Netherlands, our central warehouse
in Italy and luxury shoe factory in Italy, which are owned. The leases expire at various times through Fiscal 2044, subject to
renewal options.
Location
Use
Whittier, CA
Michael Kors U.S. Distribution Center
Venlo, Netherlands Michael Kors and Jimmy Choo European Distribution Center
New York, NY
Michael Kors, Versace and Jimmy Choo U.S. Corporate Offices
Montreal, Quebec
Michael Kors Canadian Corporate Office and Distribution Center
Novara, Italy
Versace European Distribution Center
Milan, Italy
Milan, Italy
Versace Corporate Offices
Versace Showroom
Novara, Italy
Versace Manufacturing and Distribution Center
East Rutherford, NJ Michael Kors U.S. Corporate Offices
Pistoia, Italy
Milan, Italy
Capri Luxury Shoe Factory
Michael Kors Regional Corporate Office and Showroom
London, England
Jimmy Choo Corporate Offices
Manno, Switzerland Michael Kors European Corporate Offices
London, England
Capri Corporate Headquarters and Michael Kors Regional Corporate Office
Approximate Square
Footage
1,179,000
1,096,000
284,000
150,000
109,000
90,000
54,000
46,000
43,000
41,000
25,000
24,000
18,000
18,000
As of March 27, 2021, we also occupied 1,257 leased retail stores worldwide (including concessions). We consider our
properties to be in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity
to meet our anticipated requirements.
Other than the land and building for our Michael Kors and Jimmy Choo European distribution center in the Netherlands,
our Versace central warehouse in Italy and our Capri luxury shoe factory in Italy, property and equipment related to our stores
(e.g. leasehold improvements, fixtures, etc.) and computer equipment, we did not own any material property as of March 27,
2021.
Item 3. Legal Proceedings
We are involved in various routine legal proceedings incident to the ordinary course of our business. We believe that the
outcome of all pending legal proceedings in the aggregate will not have a material adverse effect on our business, results of
operations and financial condition.
Item 4. Mine Safety Disclosures
None.
33 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
PART II
Securities
Market Information
Our ordinary shares trade on the NYSE under the symbol “CPRI”. At March 27, 2021, there were 151,280,011 ordinary
shares outstanding, and the closing price of our ordinary shares was $50.18. Also as of that date, we had approximately 119
ordinary shareholders of record.
Share Performance Graph
The line graph below compares the cumulative total shareholder return on our ordinary shares with the Standard &
Poor’s ("S&P") 500 Stock Index, the S&P 500 Apparel, Accessories & Luxury Goods Index, the S&P Retailing Index, and a
prior peer group of companies (the "Prior Peer Group") for the five-year period from April 1, 2016 through March 26, 2021, the
last business day of our fiscal year. The Prior Peer Group consists of the following companies: Tapestry, Inc., Guess?, Inc.,
PVH Corp., L Brands, Inc., Ralph Lauren Corporation, Tiffany & Co. and VF Corporation. During Fiscal 2021, management
re-assessed the companies that comprise the S&P Retailing Index and determined that the S&P 500 Apparel, Accessories &
Luxury Goods Index is a more appropriate comparison given the composition of companies it contains. In this transition year,
the share performance graph below includes the comparative performance of the newly selected index and the previously
reported indices. Going forward, we will show a comparison of return on our ordinary shares with the S&P 500 Stock Index
and the S&P 500 Apparel, Accessories & Luxury Goods Index only.
The graph below assumes an investment of $100 made at the closing of trading on April 1, 2016, in our ordinary shares
and each of the indices presented. All values assume reinvestment of the full amount of all dividends, if any, into additional
shares of the same class of equity securities at the frequency with which dividends are paid on such securities during the
applicable time period.
Issuer Purchases of Equity Securities
Our share repurchases were made under our $500 million share repurchase program, which was approved by our Board
of Directors on August 1, 2019. During the first quarter of Fiscal 2021, the Company suspended its $500 million share-
repurchase program in response to the continued impact of the COVID-19 pandemic. We also have in place a “withhold to
cover” repurchase program, which allows us to withhold ordinary shares from certain executive officers and directors to satisfy
minimum tax withholding obligations relating to the vesting of their restricted share awards.
CPRIS&P 500S&P 500 Apparel, Accessories & Luxury GoodsS&P RetailingPrior Peer Group4/1/20163/31/20173/29/20183/29/20193/27/20203/26/2021$0$50$100$150$200$250$30034
The following table provides information regarding our ordinary share repurchases during the three months ended
March 27, 2021:
December 27, 2020 – January 23, 2021
January 24, 2021 – February 20, 2021
February 21, 2021 – March 27, 2021
Total Number
of Shares
Average
Price Paid
per Share
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number (or
Approximated Dollar
Value) of Shares
(or Units) That
May Yet Be Purchased
Under the Plans or
Programs (in millions)
— $
— $
—
—
381 $
48.26
381
— $
— $
— $
—
400
400
400
35
Item 6.
Selected Financial Data
The following table sets forth selected historical consolidated financial and other data for Capri Holdings Limited and
its consolidated subsidiaries for the periods presented. The statement of operations data for Fiscal 2021, Fiscal 2020 and Fiscal
2019 and the balance sheet data as of the end of Fiscal 2021 and Fiscal 2020 have been derived from our audited consolidated
financial statements included elsewhere in this report. The statement of operations data for Fiscal 2018 and Fiscal 2017 and the
balance sheet data as of the end of Fiscal 2019, Fiscal 2018 and Fiscal 2017 have been derived from our prior audited
consolidated financial statements, which are not included in this report.
The selected historical consolidated financial data below should be read in conjunction with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included in
this annual report.
Fiscal Years Ended
March 27,
2021
March 28,
2020
March 30,
2019
March 31,
2018
April 1,
2017
(data presented in millions, except for shares and per share data)
$
Statement of Operations Data:
Total revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Impairment of assets
Restructuring and other charges
Total operating expenses
Income (loss) from operations
Other income
Interest expense, net
Foreign currency (gain) loss
Income (loss) before provision for income taxes
Provision for income taxes
Net (loss) income
Less: Net loss attributable to noncontrolling interest
and redeemable noncontrolling interest
4,060 $
1,463
2,597
2,018
212
316
32
2,578
19
(7)
43
(20)
3
66
(63)
(1)
5,551 $
2,280
3,271
2,464
249
708
42
3,463
(192)
(6)
18
11
(215)
10
(225)
(2)
5,238 $
2,058
3,180
2,075
225
21
124
2,445
735
(4)
38
80
621
79
542
(1)
4,719 $
1,860
2,859
1,767
208
33
102
2,110
749
(2)
22
(13)
742
150
592
—
Net (loss) income attributable to Capri
$
(62) $
(223) $
543 $
592 $
4,494
1,833
2,661
1,541
220
199
11
1,971
690
(6)
4
3
689
137
552
(1)
553
Weighted average ordinary shares outstanding:
Basic
Diluted
Net (loss) income per ordinary share (1):
Basic
Diluted
150,453,568
150,453,568
150,714,598
150,714,598
149,765,468
151,614,350
152,283,586
155,102,885
165,986,733
168,123,813
$
$
(0.41) $
(0.41) $
(1.48) $
(1.48) $
3.62 $
3.58 $
3.89 $
3.82 $
3.33
3.29
(1) Basic net (loss) income per ordinary share is computed by dividing net (loss) income available to ordinary
shareholders of Capri by basic weighted average ordinary shares outstanding. Diluted net (loss) income per
ordinary share is computed by dividing net (loss) income attributable to ordinary shareholders of Capri by diluted
weighted average ordinary shares outstanding.
36
Fiscal Years Ended
March 27,
2021
March 28,
2020
March 30,
2019
March 31,
2018
April 1,
2017
(data presented in millions, except for share and store data)
Operating Data:
Retail stores, including concessions, end of period
1,257
1,271
1,249
1,011
827
Balance Sheet Data:
Working capital
Total assets
Short-term debt
Long-term debt
Shareholders’ equity of Capri
Number of ordinary shares issued
$
$
$
$
$
(75) $
493 $
187 $
302 $
7,481 $
7,946 $
6,650 $
4,059 $
123 $
167 $
630 $
1,219 $
2,012 $
1,936 $
200 $
675 $
599
2,410
133
—
2,158 $
2,167 $
2,429 $
2,018 $
1,593
219,222,937
217,320,010
216,050,939
210,991,091
209,332,493
37
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following Management’s Discussion and Analysis (“MD&A”) of our Financial Condition and Results of Operations
should be read in conjunction with the consolidated financial statements and notes thereto included as part of this Annual
Report on Form 10-K. Forward-looking statements are prospective in nature and are not based on historical facts, but rather
on current expectations and projections of the management of the Company about future events, and are therefore subject to
risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the
forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking
statements. Without limitation, any statements preceded or followed by or that include the words “plans”, “believes”,
“expects”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “might” or similar words or phrases, are
forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such
forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results
and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied
in any forward-looking statements. These risks, uncertainties and other factors include the impact of the COVID-19 pandemic,
levels of cash flow and future availability of credit, compliance with restrictive covenants under the Company’s credit
agreement, the Company’s ability to integrate successfully and to achieve anticipated benefits of any acquisition and to
successfully execute our growth strategies; the risk of disruptions to the Company’s businesses; risks associated with operating
in international markets and our global sourcing activities; the risk of cybersecurity threats and privacy or data security
breaches; the negative effects of events on the market price of the Company’s ordinary shares and its operating results;
significant transaction costs; unknown liabilities; the risk of litigation and/or regulatory actions related to the Company’s
businesses; fluctuations in demand for the Company’s products; levels of indebtedness (including the indebtedness incurred in
connection with acquisitions); the timing and scope of future share buybacks, which may be made in open market or privately
negotiated transactions, and are subject to market conditions, applicable legal requirements, trading restrictions under the
Company’s insider trading policy and other relevant factors, and which share repurchases may be suspended or discontinued
at any time, the level of other investing activities and uses of cash; changes in consumer traffic and retail trends; loss of market
share and industry competition; fluctuations in the capital markets; fluctuations in interest and exchange rates; the occurrence
of unforeseen epidemics and pandemics, disasters or catastrophes; political or economic instability in principal markets;
adverse outcomes in litigation; and general, local and global economic, political, business and market conditions, as well as
those risks set forth in the Company’s filings with the U.S. Securities and Exchange Commission, including in this Annual
Report on Form 10-K, particularly under “Item 1A. Risk Factors”
Overview
Our Business
Capri Holdings Limited is a global fashion luxury group, consisting of iconic brands that are industry leaders in design,
style and craftsmanship, led by a world-class management team and renowned designers. Our brands cover the full spectrum of
fashion luxury categories, including women’s and men’s accessories, footwear and ready-to-wear, as well as wearable
technology, watches, jewelry, eyewear and a full line of fragrance products. Our goal is to continue to extend the global reach
of our brands while ensuring that they maintain their independence and exclusive DNA.
Our Versace brand has long been recognized as one of the world’s leading international fashion design houses and is
synonymous with Italian glamour and style. Founded in 1978 in Milan, Versace is known for its iconic and unmistakable style
and unparalleled craftsmanship, over the past several decades the House of Versace has grown globally from its roots in haute
couture, expanding into the design, manufacturing, distribution and retailing of ready-to-wear, accessories, footwear, eyewear,
watches, jewelry, fragrance and home furnishings businesses. Versace’s design team is led by Donatella Versace, who has been
the brand’s artistic director for over 20 years. Versace distributes its products through a worldwide distribution network, which
includes boutiques in some of the world’s most glamorous cities, its e-commerce site, as well as through the most prestigious
department and specialty stores worldwide.
38 Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a
leading global luxury accessories brand, whose core product offering is women’s luxury shoes, complemented by accessories,
including handbags, small leather goods, scarves and belts, as well as a growing men’s luxury shoes and accessory business. In
addition, certain categories, such as fragrances and eyewear, are produced under licensing agreements. Jimmy Choo’s design
team is led by Sandra Choi, who has been the Creative Director for the brand since its inception in 1996. Jimmy Choo products
are unique, instinctively seductive and chic. The brand offers classic and timeless luxury products, as well as innovative
products that are intended to set and lead fashion trends. Jimmy Choo is represented through its global store network, its e-
commerce sites, as well as through the most prestigious department and specialty stores worldwide.
Our Michael Kors brand was launched 40 years ago by Michael Kors, whose vision has taken the Company from its
beginnings as an American luxury sportswear house to a global accessories, footwear and apparel company with a global
distribution network that has presence in over 100 countries through Company-operated retail stores and e-commerce sites,
leading department stores, specialty stores and select licensing partners. Michael Kors is a highly recognized luxury fashion
brand in the Americas and Europe with growing brand awareness in other international markets. Michael Kors features
distinctive designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude.
Michael Kors offers three primary collections: the Michael Kors Collection luxury line, the MICHAEL Michael Kors accessible
luxury line and the Michael Kors Mens line. The Michael Kors Collection establishes the aesthetic authority of the entire brand
and is carried by many of our retail stores, our e-commerce sites, as well as in the finest luxury department stores in the
world. MICHAEL Michael Kors has a strong focus on accessories, in addition to offering footwear and apparel, and addresses
the significant demand opportunity in accessible luxury goods. We have also been developing our men’s business in recognition
of the significant opportunity afforded by the Michael Kors brand’s established fashion authority and the expanding men’s
market. Taken together, our Michael Kors collections target a broad customer base while retaining our premium luxury image.
Certain Factors Affecting Financial Condition and Results of Operations
COVID-19 Pandemic. A novel strain of coronavirus commonly referred to as COVID-19 has spread rapidly across the
globe, including throughout all major geographies in which we operate (the Americas, EMEA and Asia), resulting in adverse
economic conditions and business disruptions, as well as significant volatility in global financial markets. Governments
worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business
closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in
a significant decline in retail traffic, tourism and consumer spending on discretionary items. Additionally, during this period of
uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and
preserve cash balances, including work furloughs and reduced pay, which could lower consumers’ disposable income levels or
willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted,
consumer behavior, spending levels and/or shopping preferences, such as their willingness to congregate in shopping centers or
other populated locations, could be adversely affected.
In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods
of closures of our stores, distribution centers and corporate facilities, as have our wholesale customers, licensing partners,
suppliers and vendors. Retail traffic also continues to be challenging in those regions in which our stores are open. Additionally,
our stores in the Americas and in Europe closed mid-March 2020, and although the majority of our stores have since reopened,
certain stores remain closed due to local government mandates. Our wholesale business has also been adversely affected,
particularly in the Americas and Europe, as a result of department store closures and lower traffic and consumer demand.
In response to the COVID-19 pandemic, during Fiscal 2021 we took a number of preemptive actions to preserve cash
and strengthen our liquidity, including:
•
•
•
•
•
•
for Fiscal 2021, our board of directors annual total cash compensation was reduced;
temporarily foregoing and reducing executive compensation for Fiscal 2021. In addition, the company reduced overall
salaries at various levels throughout the organization;
reducing our corporate workforce in order to generate additional payroll savings;
temporarily furloughing or reducing work hours for a significant portion of our retail employees who nevertheless
remain eligible for employee benefits during such period;
applying for national payroll subsidy programs in various countries throughout Europe to further reduce payroll
expense;
significantly reducing inventory purchases by reducing or canceling commitments, redeploying inventory and
consolidating upcoming seasons;
39 •
•
extending payment terms of our payables with our partners in order to maintain our financial flexibility for the long
term;
reducing capital expenditures in Fiscal 2021;
• minimizing operating expenses, including decreasing marketing spend, delaying or canceling select new store
openings, reducing external third-party services and halting non-critical systems implementations in order to reduce
costs;
•
•
•
temporarily suspending our ERP project;
suspending the remaining $400 million under our current share repurchase program; and
adding a $230 million 364-day Revolver due June 2021 to bolster cash availability.
The COVID-19 pandemic remains highly volatile and continues to evolve on a daily basis. Accordingly, we cannot
predict for how long and to what extent this crisis will impact our business operations or the global economy as a whole. We
will continue to assess our operations location-by-location, taking into account the guidance of local governments and global
health organizations to determine when our operations can return to normal course of business. See Item 1A — "Risk Factors"
— “The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations.” For
additional discussion regarding risks to our business associated with the COVID-19 pandemic.
Establishing brand identity and enhancing global presence. We intend to continue to increase our international presence
and global brand recognition by growing our existing international operations through the formation of various joint ventures
with international partners and continuing with our international licensing arrangements. We feel this is an efficient method for
continued penetration into the global luxury goods market, especially for markets where we have yet to establish a substantial
presence. In addition, our growth strategy includes assuming direct control of certain licensed international operations to better
manage our growth opportunities in the related regions.
Channel shift and demand for our accessories and related merchandise. Our performance is affected by trends in the
luxury goods industry, as well as shifts in demographics and changes in lifestyle preferences. Although overall consumer
spending for personal luxury products has increased in recent years, consumer shopping preferences have continued to shift
from physical stores to on-line shopping. We currently expect that this trend will continue in the foreseeable future. We
continue to adjust our operating strategy to the changing business environment. In addition, last year we announced our Capri
Retail Store Optimization Program to close approximately 170 of our retail stores over the next two years, in order to improve
the profitability of our retail store fleet. Over this time period, we expect to incur approximately $75 million of one-time costs
associated with these store closures. As of March 27, 2021, we have closed a total of 101 stores relating to the plan. We
recorded net restructuring charges of $5 million during Fiscal 2021 relating to the plan. See Item 9B - Other Information for
additional information. Collectively, we continue to anticipate ongoing savings as a result of the store closures and lower
depreciation associated with the impairment charges being recorded.
Foreign currency fluctuation. Our consolidated operations are impacted by the relationships between our reporting
currency, the U.S. dollar, and those of our non-U.S. subsidiaries whose functional/local currency is other than the U.S. dollar,
particularly the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar,
among others. We continue to expect volatility in the global foreign currency exchange rates, which may have a negative
impact on the reported results of certain of our non-U.S. subsidiaries in the future, when translated to U.S. Dollars.
Disruptions in shipping and distribution. Our operations are subject to the impact of shipping disruptions as a result of
changes or damage to our distribution infrastructure, as well as due to external factors, including the impacts of COVID-19.
Any future disruptions in our shipping and distribution network could have a negative impact on our results of operations. See
Item 1A — "Risk Factors" — "We primarily use foreign manufacturing contractors and independent third-party agents to
source our finished goods and our business is subject to risks inherent in global sourcing activities, including disruptions or
delays in manufacturing or shipments." for additional discussion.
40 Costs of Manufacturing and Tariffs. Our industry is subject to volatility in costs related to certain raw materials used in
the manufacturing of our products. This volatility applies primarily to costs driven by commodity prices, which can increase or
decrease dramatically over a short period of time. In addition, our costs may be impacted by sanction tariffs imposed on our
products due to changes in trade terms. For example, we have historically received benefits from duty-free imports on certain
products from certain countries pursuant to the U.S. Generalized System of Preferences ("GSP") program. The GSP program
expired on December 31, 2020. If the GSP program is not renewed or otherwise made retroactive, we could experience
significant additional duties and our gross margin could be negatively impacted. Additionally, we are subject to government
import regulations, including U.S. Customs and Border Protection ("CBP") withhold release orders. The imposition of taxes,
duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our
goods pursuant to a withhold release order could have a material adverse effect on our business, results of operations and
financial condition. If additional tariffs or trade restrictions are implemented by the U.S. or other countries, the cost of our
products could increase which could adversely affect our business. In addition, commodity prices and tariffs may have an
impact on our revenues, results of operations and cash flows. We use commercially reasonable efforts to mitigate these effects
by sourcing our products as efficiently as possible and diversifying the countries where we produce. In addition, manufacturing
labor costs are also subject to degrees of volatility based on local and global economic conditions. We use commercially
reasonable efforts to source from localities that suit our manufacturing standards and result in more favorable labor driven costs
to our products.
Segment Information
We operate in three reportable segments, which are as follows:
Versace
We generate revenue through the sale of Versace luxury ready-to-wear, accessories and footwear through directly
operated Versace boutiques throughout North America (United States and Canada), EMEA (Europe, Middle East and Africa)
and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites. In addition, revenue is generated
through wholesale sales to distribution partners (including geographic licensing arrangements), multi-brand department stores
and specialty stores worldwide, as well as through product license agreements in connection with the manufacturing and sale of
products, including jeans, fragrances, watches, jewelry, eyewear and home furnishings.
Jimmy Choo
We generate revenue through the sale of Jimmy Choo luxury goods through directly operated Jimmy Choo retail and
outlet stores throughout the Americas (United States, Canada and Latin America), EMEA and certain parts of Asia, through our
e-commerce sites, as well as through wholesale sales of luxury goods to distribution partners (including geographic licensing
arrangements that allow third parties to use the Jimmy Choo tradename in connection with retail and/or wholesale sales of
Jimmy Choo branded products in specific geographic regions), multi-brand department stores and specialty stores worldwide.
In addition, revenue is generated through product licensing agreements, which allow third parties to use the Jimmy Choo brand
name and trademarks in connection with the manufacturing and sale of products, including fragrances and eyewear.
Michael Kors
We generate revenue through the sale of Michael Kors products through four primary Michael Kors retail store formats:
“Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-commerce, through which we sell our
products, as well as licensed products bearing our name, directly to consumers throughout the Americas, Europe and certain
parts of Asia. Our Michael Kors e-commerce business includes e-commerce sites in the U.S., Canada and certain parts of
Europe and Asia. We also sell Michael Kors products directly to department stores, primarily located across the Americas and
Europe, to specialty stores and travel retail shops in the Americas, Europe and Asia, and to our geographic licensees in certain
parts of EMEA, Asia and Brazil. In addition, revenue is generated through product and geographic licensing arrangements,
which allow third parties to use the Michael Kors brand name and trademarks in connection with the manufacturing and sale of
products, including watches, jewelry, fragrances and eyewear, as well as through geographic licensing arrangements, which
allow third parties to use the Michael Kors tradename in connection with the retail and/or wholesale sales of our Michael Kors
branded products in specific geographic regions.
41 Unallocated Expenses
In addition to the reportable segments discussed above, we have certain corporate costs that are not directly attributable
to our brands and, therefore, are not allocated to segments. Such costs primarily include certain administrative, corporate
occupancy, shared service and information systems expenses, including ERP system implementation costs. In addition, certain
other costs are not allocated to segments, including restructuring and other charges (including transaction and transition costs
related to our acquisitions), impairment costs and COVID-19 related charges. The segment structure is consistent with how our
chief operating decision maker plans and allocates resources, manages the business and assesses performance. The following
table presents our total revenue and income (loss) from operations by segment for Fiscal 2021, Fiscal 2020 and Fiscal 2019 (in
millions):
Total revenue:
Versace
Jimmy Choo
Michael Kors
Total revenue
Income (loss) from operations:
Versace
Jimmy Choo
Michael Kors
Total segment income from operations
Less: Corporate expenses
Impairment of assets
COVID-19 related charges (1)
Restructuring and other charges
$
$
$
Fiscal Years Ended
March 27,
2021
March 28,
2020
March 30,
2019
718 $
843 $
418
2,924
555
4,153
4,060 $
5,551 $
137
590
4,511
5,238
21 $
(55)
595
561
(152)
(316)
(42)
(32)
(8) $
(13)
850
829
(152)
(708)
(119)
(42)
(11)
20
964
973
(93)
(21)
—
(124)
735
Total income (loss) from operations
$
19 $
(192) $
(1) COVID-19 related charges during Fiscal 2021 primarily include net incremental inventory reserves and severance
expense of $10 million and $24 million, respectively, recorded within costs of goods sold and selling, general and
administrative expenses in the consolidated statements of income and comprehensive (loss) income. COVID-19
related charges during Fiscal 2020, primarily include additional inventory reserves and credit losses of $92 million
and $25 million, respectively, recorded within costs of goods sold and selling, general and administrative expenses
in the consolidated statements of operations and comprehensive (loss) income.
42
The following table presents our global network of retail stores and wholesale doors:
Number of full price retail stores (including concessions):
Versace
Jimmy Choo
Michael Kors
Number of outlet stores:
Versace
Jimmy Choo
Michael Kors
Total number of retail stores
Total number of wholesale doors:
Versace
Jimmy Choo
Michael Kors
March 27,
2021
As of
March 28,
2020
March 30,
2019
153
176
529
858
57
51
291
399
157
179
568
904
49
47
271
367
146
169
587
902
42
39
266
347
1,257
1,271
1,249
868
450
2,852
4,170
824
554
2,982
4,360
1,028
596
3,202
4,826
The following table presents our retail stores by geographic location:
Store count by region:
The Americas
EMEA
Asia
As of
March 27, 2021
As of
March 28, 2020
Versace
Jimmy Choo
Michael Kors
Versace
Jimmy Choo
Michael Kors
34
57
119
210
44
74
109
227
353
176
291
820
30
60
116
206
45
76
105
226
380
180
279
839
Key Performance Indicators and Statistics
We use a number of key indicators of operating results to evaluate our performance, including the following (dollars in
millions):
Total revenue
Gross profit as a percent of total revenue
Income (loss) from operations
Income (loss) from operations as a percent of total revenue
Fiscal Years Ended
March 27,
2021
March 28,
2020
March 30,
2019
$
$
$
$
4,060
64.0 %
19
0.5 %
5,551
$
5,238
58.9 %
(192)
$
(3.5) %
60.7 %
735
14.0 %
43
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
(“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported
amounts of revenue and expenses during the reporting period. Critical accounting policies are those that are the most important
to the portrayal of our results of operations and financial condition and that require our most difficult, subjective and complex
judgments to make estimates about the effect of matters that are inherently uncertain. In applying such policies, we must use
certain assumptions that are based on our informed judgments, assessments of probability and best estimates. Estimates, by
their nature, are subjective and are based on analysis of available information, including current and historical factors and the
experience and judgment of management. We evaluate our assumptions and estimates on an ongoing basis. While our
significant accounting policies are detailed in Note 2 to the accompanying financial statements, our critical accounting policies
are discussed below and include revenue recognition, inventories, long-lived assets, goodwill and other indefinite-lived
intangible assets, share-based compensation, derivatives and income taxes.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount that
reflects the consideration we expect to be entitled to in exchange for goods or services. We recognize retail store revenue when
control of the product is transferred at the point of sale at our owned stores, including concessions. Revenue from sales through
our e-commerce sites is recognized at the time of delivery to the customer, reduced by an estimate of returns. Wholesale
revenue is recognized net of estimates for sales returns, discounts, markdowns and allowances, after merchandise is shipped and
control of the underlying product is transferred to our wholesale customers. To arrive at net sales for retail, gross sales are
reduced by actual customer returns, as well as by a provision for estimated future customer returns, which is based on
management’s review of historical and current customer returns. The amounts reserved for retail sales returns were $20 million,
$12 million and $15 million at March 27, 2021, March 28, 2020 and March 30, 2019, respectively. Net sales for wholesale
equals gross sales, reduced by provisions for estimated future returns based on current expectations, as well as trade discounts,
markdowns, allowances, operational chargebacks, and certain cooperative selling expenses. Total sales reserves for wholesale
were $78 million, $154 million and $112 million at March 27, 2021, March 28, 2020 and March 30, 2019, respectively. These
estimates are based on such factors as historical trends, actual and forecasted performance and market conditions, which are
reviewed by management on a quarterly basis. Our historical estimates of these costs were not materially different from actual
results.
Royalty revenue generated from product licenses, which includes contributions for advertising, is based on reported sales
of licensed products bearing our tradenames at rates specified in the license agreements. These agreements are also subject to
contractual minimum levels. Royalty revenue generated by geographic licensing agreements is recognized as it is earned under
the licensing agreements based on reported sales of licensees applicable to specified periods, as outlined in the agreements.
These agreements allow for the use of our tradenames to sell our branded products in specific geographic regions.
Inventories
Our inventory costs include amounts paid to independent manufacturers, plus duties and freight to bring the goods to the
Company’s warehouses, as well as shipments to stores. We continuously evaluate the composition of our inventory and make
adjustments when the cost of inventory is not expected to be fully recoverable. The net realizable value of our inventory is
estimated based on historical experience, current and forecasted demand and market conditions. In addition, reserves for
inventory losses are estimated based on historical experience and inventory counts. Our inventory reserves are estimates, which
could vary significantly from actual results if future economic conditions, customer demand or competition differ from
expectations. Our historical estimates of these adjustments have not differed materially from actual results.
The combined total of raw materials and work in process inventory recorded on the our consolidated balance sheets as of
March 27, 2021 and March 28, 2020 were $28 million and $27 million, respectively. The net realizable value of our inventory
as of March 27, 2021 includes the adverse impacts related to the COVID-19 pandemic. This includes the impact from
temporary retail store closures, wholesale customer store closures, reductions in retail store traffic, international tourism and
consumer consumption.
Long-lived Assets
We evaluate all long-lived assets, including operating lease right-of-use assets, property and equipment and definite-
lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of any
44 such asset may not be recoverable. For the purposes of impairment testing, we group long-lived assets at the lowest level of
identifiable cash flow. Our leasehold improvements are typically amortized over the life of the store lease, including reasonably
assured renewals and our shop-in-shops are amortized over a useful life of three or four years. Our impairment testing is based
on our best estimate of the future operating cash flows. If the sum of our estimated undiscounted future cash flows associated
with the asset is less than the asset’s carrying value, we would recognize an impairment charge, which is measured as the
amount by which the carrying value exceeds the fair value of the asset. The fair values determined by management require
significant judgment and include certain assumptions regarding future sales and expense growth rates, discount rates and
estimates of real estate market fair values. As such, these estimates may differ from actual results and are affected by future
market and economic conditions.
During Fiscal 2021, Fiscal 2020 and Fiscal 2019, we recorded impairment charges of $158 million, $357 million and $21
million, respectively, which were primarily related to operating lease right-of-use assets and fixed assets of our retail store
locations. Please refer to Note 8 and Note 14 of the accompanying consolidated audited financial statements for additional
information.
Goodwill and Other Indefinite-lived Intangible Assets
We record intangible assets based on their fair value on the date of acquisition. Goodwill is recorded as the difference
between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible assets
acquired. The brand intangible assets recorded in connection with the acquisitions of Versace and Jimmy Choo were
determined to be indefinite-lived intangible assets, which are not subject to amortization. We perform an impairment
assessment of goodwill, as well as the Versace brand and Jimmy Choo brand intangible assets on an annual basis, or whenever
impairment indicators exist. In the absence of any impairment indicators, goodwill, the Versace brand and the Jimmy Choo
brand are assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence of
impairment indicators are based on market conditions and operational performance of the business.
We may assess our goodwill and our brand indefinite-lived intangible assets for impairment initially using a qualitative
approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value.
When performing a qualitative test, we assess various factors including industry and market conditions, macroeconomic
conditions and performance of our businesses. If the results of the qualitative assessment indicate that it is more likely than not
that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis is performed to
determine if impairment is required. We may also elect to perform a quantitative analysis of goodwill and our indefinite-lived
intangible assets initially rather than using a qualitative approach.
The impairment testing for goodwill is performed at the reporting unit level. We use industry accepted valuation models
and set criteria that are reviewed and approved by various levels of management and, in certain instances, we engage
independent third-party valuation specialists for advice. To determine the fair value of a reporting unit, we use a combination of
the income and market approaches, when applicable. We believe the blended use of both models, when applicable, compensates
for the inherent risk associated with either model if used on a stand-alone basis, and this combination is indicative of the factors
a market participant would consider when performing a similar valuation. If the fair value of a reporting unit exceeds the related
carrying value, the reporting unit’s goodwill is considered not to be impaired and no further testing is performed. If the carrying
value of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. These valuations are affected
by certain estimates, including future revenue growth rates, future operating expense growth rates, gross margins and discount
rates. Future events could cause us to conclude that impairment indicators exist, and goodwill may be impaired.
When performing a quantitative impairment assessment of our brand intangible assets, the fair value of the Versace and
the Jimmy Choo brands is estimated using a discounted cash flow analysis based on the "relief from royalty" method, assuming
that a third party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is dependent on
many factors, including estimates of future revenue growth rates, royalty rates and discount rates. Actual future results may
differ from these estimates. An impairment loss is recognized when the estimated fair value of the brand intangible assets is less
than its carrying amount.
During the fourth quarter of Fiscal 2021, we performed our annual goodwill and indefinite-lived intangible assets
impairment analysis for each brand. Based on qualitative impairment assessment of the Michael Kors reporting units, we
concluded that it is more likely than not that the fair value of the Michael Kors reporting units exceeded its carrying value and,
therefore, was not impaired. We elected to perform quantitative impairment analyses for both the Versace and Jimmy Choo
reporting units, using a combination of income and market approaches to estimate the fair values of each brand's reporting
units. We also elected to perform an impairment analysis for both the Versace and Jimmy Choo brand intangible assets using an
income approach to estimate the fair values. Based on the results of these assessments, we determined there was no impairment
45 loss for the Jimmy Choo retail reporting unit as its fair value is approximately 3% higher than the carrying value, which has a
goodwill balance of $221 million. We also concluded that the fair values of the Versace reporting units and the brand intangible
assets exceeded the related carrying amounts and no impairment was required. The fair value of the Versace retail reporting
unit, Versace wholesale reporting unit and Versace licensing reporting unit are at least 20% higher than their respective carrying
values. The fair value of the Versace retail brand and Versace wholesale brand are more than 10% higher than their respective
carrying values.
However, we concluded that the fair values of the Jimmy Choo wholesale and Jimmy Choo licensing reporting units,
along with the Jimmy Choo brand intangible assets, did not exceed their related carrying amounts. These impairment charges
were primarily related to higher discount rates in the current year driven by a change in market factors as well as a shift in
expected revenue and earnings mix to the retail segment.
Accordingly, we recorded a goodwill impairment charge of $94 million related to the Jimmy Choo wholesale and Jimmy
Choo licensing reporting units and $69 million impairment charge related to the Jimmy Choo brand intangible assets during
Fiscal 2021. We recorded a goodwill impairment charge of $171 million related to the Jimmy Choo retail and Jimmy Choo
licensing reporting units and $180 million impairment charge related to the Jimmy Choo brand intangible assets during Fiscal
2020. The impairment charges were recorded within impairment of assets on our consolidated statement of operations and
comprehensive (loss) income for the fiscal years ended March 27, 2021 and March 28, 2020. We did not incur any impairment
charges in Fiscal 2019. See Note 9 to the accompanying audited financial statements for information relating to the annual
impairment analysis performed during the fourth quarters of Fiscal 2021, Fiscal 2020 and Fiscal 2019.
It is possible that our conclusions regarding impairment or recoverability of goodwill or other indefinite intangible assets
could change in future periods if, for example, (i) our businesses do not perform as projected, (ii) overall economic conditions
in future years vary from current assumptions, (iii) business conditions or strategies change from our current assumptions, (iv)
discount rates change, (v) market multiples change or (vi) the identification of our reporting units change, among other factors.
Such changes could result in a future impairment charge of goodwill or other indefinite intangible assets.
Share-based Compensation
We grant share-based awards to certain of our employees and directors. The grant date fair value of share options is
calculated using the Black-Scholes option pricing model, which requires us to use subjective assumptions. The closing market
price at the grant date is used to determine the grant date fair value of restricted stock units (“RSUs”) and performance-based
RSUs. These values are recognized as expense over the requisite service period, net of estimated forfeitures, based on expected
attainment of pre-established performance goals for performance grants, or the passage of time for those grants which have only
time-based vesting requirements. Compensation expense for performance-based RSUs is recognized over the employees'
requisite service period when attainment of the performance goals is deemed probable, which involves judgment as to
achievement of certain performance metrics.
We use our own historical experience in determining the expected holding period and volatility of our time-based share
option awards. Determining the grant date fair value of share-based awards requires considerable judgment, including
estimating expected volatility, expected term, risk-free rate and forfeitures. If factors change and we employ different
assumptions, the fair value of future awards and resulting share-based compensation expense may differ significantly from what
we have estimated in the past.
Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
We use forward currency exchange contracts to manage our exposure to fluctuations in foreign currency for certain of
our transactions. We are exposed to risks on certain purchase commitments to foreign suppliers based on the value of our
purchasing subsidiaries’ local currency relative to the currency requirement of the supplier on the date of the commitment. As
such, we enter into forward currency contracts that generally mature in 12 months or less, which is consistent with the related
purchase commitments. We designate certain contracts related to the purchase of inventory that qualify for hedge accounting as
cash flow hedges. All of our derivative instruments are recorded in our consolidated balance sheets at fair value on a gross
basis, regardless of their hedge designation. The effective portion of changes in the fair value for contracts designated as cash
flow hedges is recorded in equity as a component of accumulated other comprehensive income (loss) until the hedged item
effects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third party, the
gains or losses deferred in accumulated other comprehensive income (loss) are recognized within cost of goods sold. We use
regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which compares the change
46 in the fair value of the derivative instrument to the change in the related hedged item. Effectiveness is assessed on a quarterly
basis and any portion of the designated hedge contracts deemed ineffective is recorded to foreign currency (gain) loss. If the
hedge is no longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings. For
those contracts that are not designated as hedges, changes in the fair value are recorded in foreign currency (gain) loss in our
consolidated statements of operations and comprehensive (loss) income.
Net Investment Hedges
We also use fixed-to-fixed cross currency swap agreements to hedge our net investments in foreign operations against
future volatility in the exchange rates between its U.S. Dollars and these foreign currencies. We have elected the spot method of
designating these contracts under ASU 2017-12, as defined in Note 2 to the accompanying consolidated financial statements,
and have designated these contracts as net investment hedges. The net gain or loss on net investment hedges is reported within
foreign currency translation gains and losses (“CTA”), as a component of accumulated other comprehensive income (loss) on
our consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense in our
consolidated statements of operations and comprehensive (loss) income. Upon discontinuation of a hedge, all previously
recognized amounts remain in CTA until the net investment is sold, diluted or liquidated.
We are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. In
order to mitigate counterparty credit risk, we only enter into contracts with carefully selected financial institutions based upon
their credit ratings and certain other financial factors, adhering to established limits for credit exposure.
During the fourth quarter of Fiscal 2020, we terminated all of our net investment hedges related to our Euro-denominated
subsidiaries. The early termination of these hedges resulted in the receipt of $296 million in cash during the fourth quarter of
Fiscal 2020. During Fiscal 2021, the Company resumed its normal hedging program and entered into multiple fixed-to-fixed
cross-currency swap agreements with aggregate notional amounts of $3 billion to hedge its net investment in Euro-denominated
subsidiaries.
Interest Rate Swap Agreements
We also use interest rate swap agreements to hedge the variability of our cash flows resulting from floating interest rates
on our borrowings. When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in
the fair value are recorded within equity as a component of accumulated other comprehensive income (loss) and are reclassified
into interest expense in the same period during which the hedged transactions affect earnings.
Income Taxes
Deferred income tax assets and liabilities reflect temporary differences between the tax basis and financial reporting
basis of our assets and liabilities and are determined using the tax rates and laws in effect for the periods in which the
differences are expected to reverse. We periodically assess the realizability of deferred tax assets and the adequacy of deferred
tax liabilities, based on the results of local, state, federal or foreign statutory tax audits or our own estimates and judgments.
Realization of deferred tax assets associated with net operating loss and tax credit carryforwards is dependent upon
generating sufficient taxable income prior to their expiration in the applicable tax jurisdiction. We periodically review the
recoverability of our deferred tax assets and provide valuation allowances as deemed necessary to reduce deferred tax assets to
amounts that more-likely-than-not will be realized. This determination involves considerable judgment and our management
considers many factors when assessing the likelihood of future realization of deferred tax assets, including recent earnings
results within various taxing jurisdictions, expectations of future taxable income, the carryforward periods remaining and other
factors. Changes in the required valuation allowance are recorded in income in the period such determination is made. Deferred
tax assets could be reduced in the future if our estimates of taxable income during the carryforward period are significantly
reduced or alternative tax strategies are no longer viable.
We recognize the impact of an uncertain income tax position taken on our income tax returns at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant taxing authority. The effect of an uncertain income tax position
will not be taken into account if the position has less than a 50% likelihood of being sustained. Our tax positions are analyzed
periodically (at least quarterly) and adjustments are made as events occur that warrant adjustments for those positions. We
record interest expense and penalties payable to relevant tax authorities as income tax expense.
In response to the COVID-19 pandemic, local governments enacted, or are in the process of enacting, measures to
provide aid and economic stimulus to companies. On March 27, 2020, the United States government enacted the Coronavirus
47 Aid, Relief, and Economic Security Act (the “CARES Act”), which includes various tax provisions aimed at providing
economic relief. We realized a slight favorable cash flow impact in Fiscal 2021 as a result of the deferral of income tax
payments under the CARES Act and other local government relief initiatives. We also considered the significant adverse impact
of COVID-19 on our business in assessing the realizability of our deferred tax assets. Based on this assessment, we determined
that valuation allowances of approximately $65 million were needed against a portion of our non-US deferred tax assets in
Fiscal 2020 and increased to $95 million in Fiscal 2021. We will continue to monitor the impacts of COVID-19 on our ability
to realize our deferred tax assets and on the tax provision. Another provision of the CARES Act applicable to us is the
modification to allow for a five-year carryback of net operating losses. We recognized a $13 million benefit from the net
operating loss (“NOL”) carryback claim in Fiscal 2021. This reflects our provisional estimate and is subject to adjustment as
estimation approaches are refined.
New Accounting Pronouncements
Please refer to Note 2 to the accompanying consolidated financial statements for detailed information relating to recently
adopted and recently issued accounting pronouncements and the associated impacts.
48 Results of Operations
A discussion regarding our results of operations for Fiscal 2021 compared to Fiscal 2020 is presented below. A
discussion regarding our results of operations for Fiscal 2020 compared to Fiscal 2019 can be found under Item 7 in our Annual
Report on Form 10-K for the year ended March 28, 2020, filed with the SEC on July 8, 2020, which is available on the SEC’s
website at www.sec.gov and our investor website at www.capriholdings.com.
Comparison of Fiscal 2021 with Fiscal 2020
The following table details the results of our operations for Fiscal 2021 and Fiscal 2020 and expresses the relationship of
certain line items to total revenue as a percentage (dollars in millions):
Fiscal Years Ended
March 27,
2021
March 28,
2020
$ Change % Change
% of Total
Revenue for
Fiscal 2021
% of Total
Revenue for
Fiscal 2020
Statements of Operations Data:
Total revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Impairment of assets
Restructuring and other charges
Total operating expenses
Income (loss) from operations
Other income, net
Interest expense, net
Foreign currency (gain) loss
Income (loss) before provision for
income taxes
Provision for income taxes
Net loss
Less: Net loss attributable to noncontrolling
interests
Net loss attributable to Capri
NM Not meaningful
Total Revenue
$ 4,060 $ 5,551 $ (1,491)
1,463
2,597
2,018
212
316
32
2,280
3,271
2,464
249
708
42
2,578
3,463
(817)
(674)
(446)
(37)
(392)
(10)
(885)
(192)
211
19
(7)
43
(20)
(6)
18
11
3
66
(215)
10
(63)
(225)
(1)
25
(31)
218
56
162
(26.9) %
(35.8) %
(20.6) %
(18.1) %
(14.9) %
(55.4) %
(23.8) %
(25.6) %
NM
(16.7) %
NM
NM
NM
NM
(72.0) %
36.0 %
64.0 %
49.7 %
5.2 %
7.8 %
0.8 %
63.5 %
0.5 %
(0.2) %
1.1 %
(0.5) %
0.1 %
1.6 %
41.1 %
58.9 %
44.4 %
4.5 %
12.8 %
0.8 %
62.4 %
(3.5) %
(0.1) %
0.3 %
0.2 %
(3.9) %
0.2 %
(1)
(2)
1
NM
$
(62) $
(223) $
161
(72.2) %
Total revenue decreased $1.491 billion, or 26.9%, to $4.060 billion for Fiscal 2021, compared to $5.551 billion for Fiscal
2020, which included net favorable foreign currency effects of $107 million primarily related to the strengthening of the Euro,
the Chinese Renminbi and the British Pound against the U.S. Dollar in Fiscal 2021, as compared to Fiscal 2020. On a constant
currency basis, our total revenue decreased $1.598 billion, or 28.8%. The decrease is attributable to lower revenues across all
three brands, as compared to the prior year, reflecting the adverse impact of COVID-19.
Gross Profit
Gross profit decreased $674 million, or 20.6%, to $2.597 billion during Fiscal 2021, compared to $3.271 billion for
Fiscal 2020, which included net favorable foreign currency effects of $64 million. Gross profit as a percentage of total revenue
increased 510 basis points to 64.0% during Fiscal 2021, compared to 58.9% during Fiscal 2020. The increase in gross profit
margin was primarily attributable to a higher gross profit margin for Michael Kors driven by a higher average unit price and
favorable channel mix during Fiscal 2021, as compared to Fiscal 2020.
49
Total Operating Expenses
Total operating expenses decreased $885 million, or 25.6%, to $2.578 billion during Fiscal 2021, compared to $3.463
billion for Fiscal 2020. Our operating expenses included a net unfavorable foreign currency impact of approximately $108
million. Total operating expenses as a percentage of total revenue increased to 63.5% in Fiscal 2021, compared to 62.4% in
Fiscal 2020. The components that comprise total operating expenses are detailed below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $446 million, or 18.1%, to $2.018 billion during Fiscal 2021,
compared to $2.464 billion for Fiscal 2020, primarily due to lower variable costs, as well as decreases from our cost reduction
initiatives as a result of COVID-19.
Selling, general and administrative expenses as a percentage of total revenue increased to 49.7% during Fiscal 2021,
compared to 44.4% for Fiscal 2020, primarily due to deleverage on lower revenue and increased e-commerce related costs as a
percentage of total revenue.
Corporate unallocated expenses, which are included within selling, general and administrative expenses discussed above,
but are not directly attributable to a reportable segment, were $152 million in Fiscal 2021 and Fiscal 2020.
Depreciation and Amortization
Depreciation and amortization decreased $37 million, or 14.9%, to $212 million during Fiscal 2021, compared to $249
million for Fiscal 2020. The decrease in depreciation and amortization expense was primarily attributable to lower depreciation
due to previously recorded property and equipment impairment charges. Depreciation and amortization increased to 5.2% as a
percentage of total revenue during Fiscal 2021, compared to 4.5% for Fiscal 2020 primarily due to lower revenues during Fiscal
2021 due to COVID-19.
Impairment of Assets
During Fiscal 2021, we recognized asset impairment charges of $316 million. The decrease was primarily related to
lower impairment of operating lease right-of-use assets, as well as lower impairment of Jimmy Choo goodwill and its brand
intangible assets. During Fiscal 2020, we recognized asset impairment charges of approximately $708 million, which were
primarily related to the impairment of operating right-of-use assets, as well as the impairment of Jimmy Choo goodwill and its
brand intangible assets as part of our annual assessments (see Note 14 to the accompanying consolidated financial statements
for additional information).
Restructuring and Other Charges
During Fiscal 2021, we recognized restructuring and other charges of $32 million, which included other costs of
$27 million, primarily related to equity awards associated with the acquisition of Versace and closures of corporate locations
during Fiscal 2021 and $5 million related to our Capri Retail Store Optimization Program.
During Fiscal 2020, we recognized restructuring and other charges of $42 million, which included restructuring charges
of $8 million, primarily related to our Michael Kors Retail Fleet Optimization Plan and other costs of $34 million. The other
costs recorded during Fiscal 2020 primarily related to equity awards associated with the acquisition of Versace and Jimmy
Choo (see Note 11 to the accompanying consolidated financial statements for additional information).
Income (Loss) from Operations
As a result of the foregoing, income (loss) from operations increased $211 million to income from operations of $19
million during Fiscal 2021, compared to a loss from operations of $192 million for Fiscal 2020. Income (loss) from operations
as a percentage of total revenue increased to 0.5% in Fiscal 2021, compared to (3.5)% in Fiscal 2020. See Note 20 to the
accompanying consolidated financial statements for a reconciliation of our segment operating income to total operating income.
50 Interest expense, net
Interest expense, net increased $25 million, to $43 million for Fiscal 2021 as compared to $18 million for Fiscal 2020,
primarily due to a decrease of interest income attributable to lower average interest rates and lower average notional amount
outstanding on our net investment hedges in the current year. The decrease in interest income was largely offset by a decrease
in interest expense attributable to lower average borrowings outstanding in the current year and the addition of an interest rate
swap in the current year which converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest
rate of 0.237% through December 2022 (see Note 12 and Note 15 to the accompanying consolidated financial statements for
additional information).
Foreign Currency (Gain) Loss
We recognized a net foreign currency gain of $20 million during Fiscal 2021, primarily attributable to the
remeasurement of U.S. dollar-denominated intercompany payables with certain of our subsidiaries.
We recognized a net foreign currency loss of $11 million during Fiscal 2020, primarily attributable to the revaluation and
settlement of certain of our accounts payable in currencies other than their functional currency, as well as the remeasurement of
dollar-denominated intercompany loans with certain of our subsidiaries.
Provision for Income Taxes
We recognized $66 million of income tax expense on pre-tax income of $3 million during Fiscal 2021, compared with
$10 million of income tax expense on a pre-tax loss of $215 million for Fiscal 2020. Our effective tax rate for Fiscal 2021 was
significantly higher than our effective tax rate in Fiscal 2020, and not a meaningful or comparable metric, primarily due to the
relationship between our income tax expense and minimal pre-tax income in the current year. The Fiscal 2021 income tax
expense was higher than Fiscal 2020 primarily due to tax effects of changes in our geographic mix of earnings, a lower
favorable effect of our global financing activities during Fiscal 2021 compared to Fiscal 2020, increases in uncertain tax
positions during Fiscal 2021 as well as the impact of the United Kingdom’s increase in the enacted corporate income tax rate
during Fiscal 2021. The increase was partially offset by reduced effects of valuation allowances established on a portion of our
non-US deferred tax assets, a release of a valuation allowance on a portion of our deferred tax assets, and a lower unfavorable
impact of non-tax deductible goodwill impairment during Fiscal 2021, compared to Fiscal 2020. The variance between Fiscal
2021 and Fiscal 2020 effective income tax rates is substantially affected by the material change in our pre-tax (loss) income. As
a result, the effect that discrete tax amounts have on the effective income tax rate during the year is not comparable. See Note
18 to the accompanying consolidated financial statements for additional information.
The global financing activities are related to our previously disclosed 2014 move of our principal executive office from
Hong Kong to the U.K. and decision to become a U.K. tax resident. In connection with this decision, we funded our
international growth strategy through intercompany debt financing arrangements between certain of our U.S., U.K. and
Switzerland subsidiaries in December 2015. Accordingly, due to the difference in the statutory income tax rates between these
jurisdictions, we realized a lower effective tax rate on consolidated pre-tax income.
Our effective tax rate may fluctuate from time to time due to the effects of changes in U.S. state and local taxes and tax
rates in foreign jurisdictions. In addition, factors such as the geographic mix of earnings, enacted tax legislation and the results
of various global tax strategies, may also impact our effective tax rate in future periods.
Net Loss Attributable to Capri
As a result of the foregoing, our net loss attributable to Capri decreased $161 million, or 72.2%, to a net loss of $62
million during Fiscal 2021, compared to net loss of $223 million for Fiscal 2020.
51 Segment Information
Versace
Revenues
Income (loss) from operations
Operating margin
NM Not meaningful
Revenues
Fiscal Years Ended
March 27,
2021
March 28,
2020
$
$
718
21
2.9 %
843
(8)
(0.9) %
% Change
$ Change As Reported
$
Constant
Currency
(14.8) % (19.8) %
(125)
29
NM
Versace revenues decreased $125 million to $718 million for Fiscal 2021, compared to $843 million for Fiscal 2020,
which included favorable foreign currency effects of $42 million. On a constant currency basis, revenue decreased $167
million, or 19.8%, primarily reflecting the adverse impacts related to COVID-19.
Income (loss) from Operations
During Fiscal 2021, Versace recorded income from operations of $21 million compared to a loss from operations of $8
million for Fiscal 2020. Operating margin increased from (0.9)% for Fiscal 2020 to 2.9% for Fiscal 2021, primarily due to a
favorable channel mix, partially offset by a decline in revenue as a result of COVID-19.
Jimmy Choo
Revenues
Loss from operations
Operating margin
NM Not meaningful
Revenues
Fiscal Years Ended
March 27,
2021
March 28,
2020
$
$
418
(55)
(13.2) %
555
(13)
(2.3) %
% Change
$ Change As Reported
(24.7) %
$
NM
(137)
(42)
Constant
Currency
(26.8) %
Jimmy Choo revenues decreased $137 million, or 24.7% to $418 million for Fiscal 2021, compared to $555 million for
Fiscal 2020, which included favorable foreign currency effects of $12 million. On a constant currency basis, revenue decreased
$149 million, or 26.8%, primarily reflecting adverse impacts related to COVID-19.
Loss from Operations
During Fiscal 2021, Jimmy Choo recorded a loss from operations of $55 million compared to $13 million for Fiscal
2020. Operating margin declined from (2.3)% for Fiscal 2020 to (13.2)% for Fiscal 2021, primarily reflecting adverse impacts
related to COVID-19.
52
Michael Kors
Revenues
Income from operations
Operating margin
Revenues
Fiscal Years Ended
$
March 27,
2021
2,924
595
20.3 %
March 28,
2020
$ 4,153
850
20.5 %
% Change
$ Change As Reported
(29.6) %
$ (1,229)
(30.0) %
(255)
Constant
Currency
(30.9) %
Michael Kors revenues decreased $1.229 billion, or 29.6%, to $2.924 billion for Fiscal 2021, compared to $4.153 billion
for Fiscal 2020, which included favorable foreign currency effects of $53 million. On a constant currency basis, revenue
decreased $1.282 billion, or 30.9%, primarily reflecting adverse impacts related to COVID-19.
Income from Operations
During Fiscal 2021, Michael Kors recorded income from operations of $595 million compared to $850 million for Fiscal
2020. Operating margin declined from 20.5% for Fiscal 2020 to 20.3% for Fiscal 2021, primarily due to a decline in revenue
related to COVID-19, partially offset by higher gross profit margins related to a higher average unit price and favorable channel
mix, as well as our cost reduction initiatives as a result of COVID-19.
53
Liquidity and Capital Resources
Our primary sources of liquidity are the cash flows generated from our operations, along with borrowings available
under our credit facilities (see below discussion regarding “Revolving Credit Facilities”) and available cash and cash
equivalents. Our primary use of this liquidity is to fund the ongoing cash requirements, including our working capital needs and
capital investments in our business, debt repayments, acquisitions, returns of capital, including share repurchases and other
corporate activities. We believe that the cash generated from our operations, together with borrowings available under our
revolving credit facilities and available cash and cash equivalents, will be sufficient to meet our working capital needs for the
next 12 months and beyond, including investments made and expenses incurred in connection with our store growth plans,
shop-in-shop growth, investments in corporate and distribution facilities, continued systems development, e-commerce and
marketing initiatives. We spent $111 million on capital expenditures during Fiscal 2021, and expect to spend approximately
$200 million during Fiscal 2022. This anticipated increase reflects continued expenditures related to our retail operations
(including e-commerce), ERP system implementation and our corporate offices. The majority of the Fiscal 2021 expenditures
related to our retail operations (including e-commerce) and our corporate offices.
The following table sets forth key indicators of our liquidity and capital resources (in millions):
Balance Sheet Data:
Cash and cash equivalents
Working capital
Total assets
Short-term debt
Long-term debt
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Net (decrease) increase in cash, cash equivalents and
restricted cash
Cash Provided by Operating Activities
As of
March 27,
2021
March 28,
2020
$
$
$
$
$
232 $
(75) $
7,481 $
123 $
1,219 $
592
493
7,946
167
2,012
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
$
624 $
(124)
(870)
12
859 $
62
(497)
(4)
694
(2,125)
1,451
(11)
(358) $
420 $
9
Cash provided by operating activities decreased $235 million to $624 million during Fiscal 2021, as compared to $859
million for Fiscal 2020, which was due to a decrease in our net income after non-cash adjustments, primarily driven by a
decrease in impairments and a decrease in net loss, partially offset by increases related to changes in our working capital,
primarily attributable to fluctuations in the timing of payments and receipts due to the impact of COVID-19.
Cash provided by operating activities increased $165 million to $859 million during Fiscal 2020, as compared to $694
million for Fiscal 2019, which was primarily due to increases related to changes in our working capital, primarily attributable to
decreased inventory purchases, as well as the timing of payments and receipts. The net increase in cash flows also included
decreases to our net income after non-cash adjustments.
Cash (Used in) Provided by Investing Activities
Net cash used in investing activities was $124 million during Fiscal 2021, as compared to net cash provided by investing
activities of $62 million during Fiscal 2020. The $186 million increase in cash used in investing activities was primarily
attributable to a $298 million settlement of net investment hedges during Fiscal 2020, partially offset by a $112 million
decrease in capital expenditures compared to prior year.
54
Net cash provided by investing activities was $62 million during Fiscal 2020, as compared to net cash used in investing
activities of $2.125 billion during Fiscal 2019. The $2.187 billion increase in cash from investing activities was primarily
attributable to $1.862 billion of cash paid, net of cash acquired, in connection with our Fiscal 2019 acquisition of the Versace
business. The increase in cash from investing activities was also due to a $77 million realized loss related to an undesignated
derivative contract during Fiscal 2019 associated with the Versace acquisition and the settlement of net investment hedges of
$298 million during Fiscal 2020, partly offset by higher capital expenditures of $42 million, due to higher spending related to
the ERP system implementation and expenditures related to corporate infrastructure.
Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $870 million during Fiscal 2021, as compared to $497 million during Fiscal
2020. The increase in cash used by financing activities of $373 million was primarily due to an increase in net debt repayments
of $474 million, partially offset by a decrease of $101 million in cash payments to repurchase our ordinary shares during Fiscal
2021.
Net cash used in financing activities was $497 million during Fiscal 2020, as compared to net cash provided by financing
activities of $1.451 billion during Fiscal 2020. The increase in cash used by financing activities of $1.948 billion was due to
decreased debt borrowings of $2.038 billion, net of debt repayments, primarily attributable to higher term loan borrowings to
finance the acquisition of Versace during Fiscal 2019, partially offset by a decrease of $105 million in cash payments to
repurchase our ordinary shares during Fiscal 2020.
55 Debt Facilities
The following table presents a summary of the Company’s borrowing capacity and amounts outstanding as of March 27,
2021 and March 28, 2020 (dollars in millions):
Senior Secured Revolving Credit Facility:
Revolving Credit Facility (excluding up to a $500 million accordion feature) (1)
Total Availability
Borrowings outstanding (2)
Letter of credit outstanding
Remaining availability
Term Loan Facility ($1.6 billion)
Borrowings Outstanding, net of debt issuance costs (2)
Remaining availability
364 Credit Facility ($230 million)
Total availability
Remaining availability
Senior Notes due 2024
Borrowings Outstanding, net of debt issuance costs and discount amortization (2)
Other Borrowings (3)
Hong Kong Uncommitted Credit Facility:
Total availability (100 million Hong Kong Dollars)
Borrowings outstanding
Bank guarantees outstanding (3 million and 4 million Hong Kong Dollars)
Remaining availability (97 million and 96 million Hong Kong Dollars)
China Uncommitted Credit Facility:
Borrowings outstanding
Remaining availability (100 million Chinese Yuan)
Japan Credit Facility:
Total availability (1.0 billion Japanese Yen)
Borrowings outstanding (1.0 billion and 0.0 billion Japanese Yen) (4)
Remaining availability (0.0 billion and 1.0 billion Japanese Yen)
Versace Uncommitted Credit Facility:
Total availability (57 million and 52 million Euro)
Borrowings outstanding (0 million and 35 million Euro) (4)
Remaining availability (57 million and 17 million Euro)
Total borrowings outstanding (1)
Total remaining availability
Fiscal Years Ended
March 27,
2021
March 28,
2020
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,000
—
27
973
865
—
230
230
447
21
13
—
—
13
—
15
9
9
—
67
—
67
1,342
1,298
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,000
681
18
301
1,010
—
—
—
446
3
14
—
1
13
—
14
9
—
9
58
39
19
2,179
356
(1) The financial covenant in our 2018 Credit Facility requiring us to maintain a ratio of the sum of total indebtedness
plus the capitalized amount of all operating lease obligations for the last four fiscal quarters to Consolidated
EBITDAR of no greater than 3.75 to 1 has been waived through the fiscal quarter ending June 26, 2021. We
terminated the waiver period effective May 26, 2021. Effective as of that date, the applicable ratio will be calculated
56
net of our unrestricted cash and cash equivalents to the extent in excess of $100 million and shall exclude up to $150
million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0. As
of March 27, 2021 and March 28, 2020, we were in compliance with all covenants related to our agreements then in
effect governing our debt.
(2) Recorded as long-term debt in our consolidated balance sheets as of March 27, 2021 and March 28, 2020, except for
the current portion of $97 million and $128 million, respectively, outstanding under the 2018 Term Loan Facility,
which was recorded within short-term debt at March 27, 2021 and March 28, 2020.
(3) The balance as of March 27, 2021 consists of $17 million related to our supplier finance program recorded within
short-term debt in our consolidated balance sheets and $4 million of other loans recorded as long-term debt in our
consolidated balance sheets. The balance as of March 28, 2020 consists of $3 million of other loans recorded as
long-term debt in our consolidated balance sheets.
(4) Recorded as short-term debt in our consolidated balance sheets as of March 27, 2021 and March 28, 2020.
We believe that our 2018 Credit Facility is adequately diversified with no undue concentration in any one financial
institution. As of March 27, 2021, there were 29 financial institutions participating in the facility, with none maintaining a
maximum commitment percentage in excess of 10%. We have no reason to believe that the participating institutions will be
unable to fulfill their obligations to provide financing in accordance with the terms of the 2018 Credit Facility.
See Note 12 and Note 22 in the accompanying consolidated financial statements for detailed information relating to our
credit facilities and debt obligations.
Share Repurchase Program
The following table presents our treasury share repurchases during the fiscal years ended March 27, 2021 and March 28,
2020 (dollars in millions):
Cost of shares repurchased under share repurchase program
Fair value of shares withheld to cover tax obligations for vested restricted share awards
Total cost of treasury shares repurchased
Shares repurchased under share repurchase program
Shares withheld to cover tax withholding obligations
Fiscal Years Ended
March 27,
2021
March 28,
2020
$
$
— $
1
1 $
100
2
102
—
48,528
48,528
2,711,807
63,958
2,775,765
During the first quarter of Fiscal 2021, the Company suspended its $500 million share-repurchase program in response to
the continued impact of the COVID-19 pandemic. See Note 12 in the accompanying financial statements for additional
information.
As of March 27, 2021, the remaining availability under our share repurchase program was $400 million. Under this
program, share repurchases may be made in open market or privately negotiated transactions, subject to market conditions,
applicable legal requirements, trading restrictions under our insider trading policy and other relevant factors. This program may
be suspended or discontinued at any time.
See Note 16 and Note 22 to the accompanying consolidated financial statements for additional information.
57
Contractual Obligations and Commercial Commitments
As of March 27, 2021, our contractual obligations and commercial commitments were as follows (in millions):
Fiscal Years
Operating leases
Interest, net
Inventory purchase obligations
Other commitments
Short-term debt
Long-term debt
Total
Fiscal
2022
Fiscal
2023-2024
Fiscal
2025-2026
Fiscal 2027
and thereafter
Total
$
$
502 $
9
688
59
123
—
1,381 $
807 $
23
—
11
—
194
1,035 $
512 $
3
—
—
—
1,033
1,548 $
493 $
—
—
—
—
—
493 $
2,314
35
688
70
123
1,227
4,457
Operating lease obligations represent equipment leases and the minimum lease rental payments due under non-
cancelable operating leases for our real estate locations globally. In addition to the above amounts, we are typically required to
pay real estate taxes, contingent rent based on sales volume and other occupancy costs relating to leased properties for our retail
stores.
Interest, net represents the estimated net interest expense associated with our term loan based on the current interest rate
and interest from our interest rate swap. It also includes the estimated net interest income from our net investment hedges.
Inventory purchase obligations represent contractual obligations for future purchases of inventory.
Other commitments include non-cancelable contractual obligations related to marketing and advertising agreements,
information technology agreements and supply agreements.
Excluded from the above commitments is $107 million of long-term liabilities related to net uncertain tax positions, due
to the uncertainty of the timing and nature of resolution.
The above table also excludes current liabilities (other than short-term debt and short-term operating lease liabilities)
recorded as of March 27, 2021, as these items will be paid within one year, and non-current liabilities that have no cash
outflows associated with them (e.g., deferred taxes).
Off-Balance Sheet Arrangements
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising
capital, incurring debt or operating our business. In addition to the commitments in the above table, our off-balance sheet
commitments relating to our outstanding letters of credit were $33 million at March 27, 2021, including $6 million in letters of
credit issued outside of the 2018 Credit Facility. In addition, as of March 27, 2021, bank guarantees of approximately
$35 million were supported by our various credit facilities. We do not have any other off-balance sheet arrangements or
relationships with entities that are not consolidated into our financial statements that have or are reasonably likely to have a
material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of
operations, liquidity, capital expenditures or capital resources.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to certain market risks during the normal course of our business, such as risk arising from fluctuations in
foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to manage these risks, we employ certain
strategies to mitigate the effect of these fluctuations. We enter into foreign currency forward contracts to manage our foreign
currency exposure to the fluctuations of certain foreign currencies. The use of these instruments primarily helps to manage our
exposure to our foreign purchase commitments and better control our product costs. We do not use derivatives for trading or
speculative purposes.
58
Foreign Currency Exchange Risk
Forward Foreign Currency Exchange Contracts
We are exposed to risks on certain purchase commitments to foreign suppliers based on the value of our purchasing
subsidiaries’ local currency relative to the currency requirement of the supplier on the date of the commitment. As such, we
enter into forward currency exchange contracts that generally mature in 12 months or less and are consistent with the related
purchase commitments, to manage our exposure to the changes in the value of the Euro and the Canadian Dollar. These
contracts are recorded at fair value in our consolidated balance sheets as either an asset or liability, and are derivative contracts
to hedge cash flow risks. Certain of these contracts are designated as hedges for hedge accounting purposes, while certain of
these contracts, are not designated as hedges for accounting purposes. Accordingly, the changes in the fair value of the majority
of these contracts at the balance sheet date are recorded in our equity as a component of accumulated other comprehensive
income (loss), and upon maturity (settlement) are recorded in, or reclassified into, our cost of sales or operating expenses, in our
consolidated statements of operations and comprehensive (loss) income, as applicable to the transactions for which the forward
currency exchange contracts were established.
We perform a sensitivity analysis on our forward currency contracts, both designated and not designated as hedges for
accounting purposes, to determine the effects of fluctuations in foreign currency exchange rates. For this sensitivity analysis, we
assume a hypothetical change in U.S. Dollar against foreign exchange rates. Based on all foreign currency exchange contracts
outstanding as of March 27, 2021, a 10% appreciation or devaluation of the U.S. Dollar compared to the level of foreign
currency exchange rates for currencies under contract as of March 27, 2021, would result in a net increase and decrease,
respectively, of approximately $37 million in the fair value of these contracts.
Net Investment Hedge
We are exposed to adverse foreign currency exchange rate movements related to interest from our net investment hedges.
As of March 27, 2021, we have multiple fixed to fixed cross-currency swap agreements with aggregate notional amounts of $3
billion to hedge our net investment in Euro-denominated subsidiaries and $194 million to hedge our net investments in Japanese
Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S. Dollar and this currency. Under
the term of these contracts, we will exchange the semi-annual fixed rate payments on U.S. denominated debt for fixed rate
payments of 0% to 4.508% in Euros and 0% to 3.588% in Japanese Yen. Based on the net investment hedges outstanding as
of March 27, 2021, a 10% appreciation or devaluation of the U.S. Dollar compared to the level of foreign currency exchange
rates for currencies under contract as of March 27, 2021, would result in a potential net increase or decrease upon settlement of
approximately $329 million in the fair value of this contract, which include mandatory early termination dates between
November 2022 and February 2026, while the remaining contracts have maturity dates between July 2022 and August 2027.
Interest Rate Risk
We are exposed to interest rate risk in relation to borrowings outstanding under our 2018 Term Loan Facility, our Credit
Facility, our Hong Kong Credit Facility, our Japan Credit Facility and our Versace Credit Facilities. Our 2018 Term Loan
Facility carries interest at a rate that is based on LIBOR. Our 2018 Credit Facility carries interest rates that are tied to LIBOR
and the prime rate, among other institutional lending rates (depending on the particular origination of borrowing), as further
described in Note 12 to the accompanying consolidated financial statements. Our Hong Kong Credit Facility carries interest at a
rate that is tied to the Hong Kong Interbank Offered Rate. Our China Credit Facility carries interest at a rate that is tied to the
People’s Bank of China’s Benchmark lending rate. Our Japan Credit Facility carries interest at a rate posted by the Mitsubishi
UFJ Financial Group. Our Versace Credit Facility carries interest at a rate set by the bank on the date of borrowing that is tied
to the European Central Bank. Therefore, our consolidated statements of operations and comprehensive (loss) income and cash
flows are exposed to changes in those interest rates. At March 27, 2021, we had no borrowings outstanding under our
Revolving Credit Facility, $865 million, net of debt issuance costs, outstanding under our 2018 Term Loan Facility and no
borrowings outstanding under our Versace Credit Facilities. At March 28, 2020, we had $681 million in long-term borrowings
outstanding under our Revolving Credit Facility, $1.010 billion, net of debt issuance costs, outstanding under our 2018 Term
Loan Facility and $39 million outstanding under our Versace Credit Facility. These balances are not indicative of future
balances that may be outstanding under our revolving credit facilities that may be subject to fluctuations in interest rates. Any
increases in the applicable interest rate(s) would cause an increase to the interest expense relative to any outstanding balance at
that date.
59 Credit Risk
We have outstanding $450 million aggregate principal amount of Senior Notes due in 2024. The Senior Notes bear
interest at a fixed rate equal to 4.500% per year, payable semi-annually. Our Senior Notes interest rate payable may be subject
to adjustments from time to time if either Moody’s or S&P (or a substitute rating agency), downgrades (or downgrades and
subsequently upgrades) the credit rating assigned to the Senior Notes. In March 2020, Moody's Investor Service downgraded
their credit rating of us from Baa2 to Ba1, and in April 2020 Fitch ratings downgraded their credit rating of us from BBB- to
BB+. As a result, the Senior Notes currently bear interest at a fixed rate equal to 4.500% per year, payable semi-annually.
Item 8.
Financial Statements and Supplementary Data
The response to this item is provided in this Annual Report on Form 10-K under Item 15. “Exhibits and Financial
Statement Schedule” and is incorporated herein by reference.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, of the
design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a - 15(e) and 15(d) - 15(e)
under the Securities and Exchange Act of 1934, as amended, (the “Exchange Act”)) as of March 27, 2021. Based on the
evaluation, the Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures are
effective as of March 27, 2021.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined under the Exchange Act Rule 13a-15 (f)) to provide reasonable assurance regarding the reliability of financial reporting
and that the consolidated financial statements have been prepared in accordance with U.S. GAAP. Such internal control over
financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets; (ii) provide reasonable assurance (A) that
transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that
receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors;
and (B) regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of March 27, 2021. In
making this assessment, it used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), the 2013 Framework. Based on this assessment, management
has determined that, as of March 27, 2021, our internal control over financial reporting is effective based on those criteria.
The Company’s internal control over financial reporting as of March 27, 2021, as well as the consolidated financial
statements, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their
report which appears herein.
Changes in Internal Control over Financial Reporting
Except as discussed below, there have been no changes in our internal control over financial reporting during the three
months ended March 27, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
60 COVID-19
We expect to continue to experience varying degrees of business disruptions related to the COVID-19 pandemic,
including periods of closures of our retail stores, distribution centers and corporate facilities. In addition, many of our corporate
employees in affected regions continue to work remotely. Despite such actions, we have not experienced any material changes
to our internal controls over financial reporting. We will continue to evaluate and monitor the impact of the COVID-19
pandemic on our internal controls. See Item 1A — "Risk Factors" — "The COVID-19 pandemic may continue to have a
material adverse effect on our business and results of operations." for additional discussion regarding risks to our business
associated with the COVID-19 pandemic.
Item 9B. Other Information
As previously announced, the Board of Directors of the Company approved a retail optimization program (the “Capri
Retail Store Optimization Program”) to improve the profitability of its retail store fleet. As part of the Capri Retail Store
Optimization Program, the Company intends to close approximately 170 of its retail stores over two fiscal years, which began
during Fiscal 2021 and will continue into Fiscal 2022. In addition, in connection with the Capri Retail Store Optimization
Program, the Company expects to incur approximately $75 million of one-time costs, including lease termination and other
store closure costs, the majority of which are expected to result in future cash expenditures. During Fiscal 2021, the Company
closed 101 of its retail stores as part of the Capri Retail Store Optimization Program. Net restructuring charges recorded in
connection with the Capri Retail Store Optimization Program during Fiscal 2021 were $5 million, which was comprised of
lease-related and other store closing costs.
The exact amounts and timing of the Capri Retail Optimization Program charges and future cash expenditures associated
therewith are undeterminable at this time. The Company will either disclose in a Current Report on Form 8-K, or disclose in
another periodic filing with the U.S. Securities and Exchange Commission, the amount of any material charges relating to the
Capri Retail Optimization Program by major type of cost once such amounts or range of amounts are determinable.
This disclosure is intended to satisfy the requirements of Item 2.05 of Form 8-K.
61 Item 10. Directors, Executive Officers and Corporate Governance
Part III
Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is
incorporated herein by reference.
Item 11. Executive Compensation
Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is
incorporated herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information as of March 27, 2021 regarding compensation plans under which the
Company’s equity securities are authorized for issuance:
Equity Compensation Plan Information
Plan category
Equity compensation plans approved by security holders (1)
Equity compensation plans not approved by security holders (3)
Total
(a)
(b)
(c)
Number of securities to
be issued upon
exercise of outstanding
options, warrants and
rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
6,585,275 $
42,761 $
6,628,036 $
37.58 (2)
12.12 (2)
37.41 (2)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
4,998,829
—
4,998,829
(1) Reflects share options and restricted stock units issued under the Company’s Amended and Restated Omnibus
Incentive Plan.
(2) Represents the weighted average exercise price of outstanding share awards only.
(3) Reflects share options issued under the Company’s Amended and Restated Stock Option Plan (the “Option Plan”),
which was in effect prior to our initial public offering. As of March 27, 2021, there were no shares available for
future issuance under the Option Plan.
Item 13. Certain Relationships, Related Transactions and Director Independence
Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information with respect to this Item is included in the Company’s Proxy Statement to be filed in June 2021, which is
incorporated herein by reference.
62
Item 15. Exhibits and Financial Statement Schedules
(a)
The following documents are filed as part of this annual report on Form 10-K:
PART IV
1.
The following consolidated financial statements listed below are filed as a separate section of this Annual
Report on Form 10-K:
Report of Independent Registered Public Accounting Firm - Ernst & Young LLP.
Consolidated Balance Sheets as of March 27, 2021 and March 28, 2020.
Consolidated Statements of Operations and Comprehensive (Loss) Income for the fiscal years
ended March 27, 2021, March 28, 2020 and March 30, 2019.
Consolidated Statements of Shareholders’ Equity for the fiscal years ended March 27, 2021,
March 28, 2020 and March 30, 2019.
Consolidated Statements of Cash Flows for the fiscal years ended March 27, 2021, March 28,
2020 and March 30, 2019.
to Consolidated Financial Statements for
Notes
2021, March 28, 2020 and March 30, 2019.
the fiscal years ended March 27,
2.
Exhibits:
EXHIBIT INDEX
Exhibit
No.
2.1
3.1
4.1
4.2
4.3
10.1
10.2
Document Description
Stock Purchase Agreement, dated as of September 24, 2018, by and among Allegra Donata Versace Beck, Donatella
Versace, Santo Versace, Borgo Luxembourg S.À R.L., Blackstone GPV Capital Partners (Mauritius) VI-D FDI Ltd.,
Blackstone GPV Tactical Partners (Mauritius)-N Ltd. and Capri Holdings Limited (f/k/a Michael Kors Holdings
Limited) (included as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 001-35368), filed on
September 25, 2018 and incorporated herein by reference).
Amended and Restated Memorandum and Articles of Association of Capri Holdings Limited (included as Exhibit 3.1
to the Company’s Current Report on Form 8-K filed on December 31, 2018 and incorporated herein by reference).
Specimen of Ordinary Share Certificate of Capri Holdings Limited (included as Exhibit 4.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 30, 2019 (File No. 001-35368), filed on May 29, 2019 and
incorporated herein by reference).
Shareholders Agreement, dated as of July 11, 2011, among Michael Kors Holdings Limited and certain shareholders
of Michael Kors Holdings Limited (included as Exhibit 10.2 to the Company’s Registration Statement on Form F-1,
as amended (File No. 333-178282), filed on December 2, 2011 and incorporated herein by reference).
Indenture, dated as of October 20, 2017, by and among Michael Kors (USA), Inc., Michael Kors Holdings Limited,
the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (included as Exhibit 4.1 to the
Company's Current Report on Form 8-K (File No. 001-35368), filed on October 20, 2017 and incorporated herein by
reference).
Second Amendment, dated as of June 25, 2020, to the Third Amended and Restated Credit Agreement dated as of
November 15, 2018 among Capri Holdings Limited, Michael Kors (USA), Inc., the foreign subsidiary borrowers party
thereto, the guarantors party thereto, the financial institutions party thereto as lenders and issuing banks and JPMorgan
Chase Bank, N.A., as administrative agent (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K
(File No. 001-35368), filed on July 1, 2020 and incorporated herein by reference).
Form of Indemnification Agreement between Michael Kors Holdings Limited and its directors and executive officers
(included as Exhibit 10.5 to the Company’s Registration Statement on Form F-1, as amended (File No. 333-178282),
filed on December 2, 2011 and incorporated herein by reference).
63
Exhibit
No.
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Document Description
Amended and Restated Michael Kors (USA), Inc. Stock Option Plan (included as Exhibit 10.4 to the Company’s
Registration Statement on Form F-1, as amended (File No. 333-178282), filed on December 2, 2011 and incorporated
herein by reference).
Amendment No. 1 to the Amended and Restated Michael Kors (USA), Inc. Share Option Plan (included as Exhibit 4.9
to the Company’s Annual Report on Form 20-F for the fiscal year ended March 31, 2012, filed on June 12, 2012 and
incorporated herein by reference).
Capri Holdings Limited Second Amended and Restated Omnibus Incentive Plan (included as Annex A to the
Company’s Definitive Proxy Statement on Schedule 14A (File No. 001-35368), filed on July 22, 2020 and
incorporated herein by reference).
Third Amended and Restated Employment Agreement, dated as of March 28, 2018, by and among Michael Kors
(USA), Inc., Michael Kors Holdings Limited and John D. Idol (included as Exhibit 10.8 to the Company’s Annual
Report on Form 10-K for the fiscal year ended March 31, 2018, filed on May 30, 2018 and incorporated herein by
reference).
Executive Bonus Program (included as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended June 29, 2013 filed on August 8, 2013 and incorporated herein by reference).
Form of Employee Non-Qualified Option Award Agreement (included as Exhibit 10.15 to the Company’s Annual
Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by
reference).
Form of Employee Restricted Stock Unit Award Agreement (included as Exhibit 10.16 to the Company’s Annual
Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated herein by
reference).
10.10 Form of Performance-Based Restricted Stock Unit Award Agreement (included as Exhibit 10.17 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated
herein by reference).
10.11 Form of Independent Director Restricted Stock Unit Award Agreement (included as Exhibit 10.18 to the Company’s
Annual Report on Form 10-K for the fiscal year ended March 28, 2015, filed on May 27, 2015 and incorporated
herein by reference).
10.12 Aircraft Time Sharing Agreement, dated November 24, 2014, by and between Michael Kors (USA), Inc. and John
Idol (included as Exhibit 10.19 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 28,
2015, filed on May 27, 2015 and incorporated herein by reference).
10.13 Employment Agreement, dated as of April 17, 2017, by and among Michael Kors (USA), Inc., Michael Kors
Holdings Limited and Thomas J. Edwards, Jr. (including as Exhibit 10.19 to the Company’s Annual Report on Form
10-K for the fiscal year ended April 1, 2017, filed on May 31, 2017 and incorporated herein by reference).
10.14 Capri Holdings Limited Deferred Compensation Plan (included as Exhibit 10.1 to the Company's Current Report on
Form 8-K (File No. 001.35368), filed on November 14, 2019 and incorporated herein by reference).
10.15 Employment Agreement between Michael Kors (USA), Inc. and Krista McDonough made as of October 1, 2016
(included as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended March 28, 2020
(File No 001-35368), filed on July 8, 2020 and incorporated herein by reference).
10.16 Employment Agreement, dated as of March 30, 2020, by and among Capri Holdings Limited, Michael Kors (USA),
21.1
23.2
31.1
31.2
32.1
32.2
Inc. and Daniel Purefoy.
List of subsidiaries of Capri Holdings Limited.
Consent of Ernst & Young LLP.
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101.1 Interactive Data Files.
64 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 26, 2021
CAPRI HOLDINGS LIMITED
By:
Name:
Title:
/s/ John D. Idol
John D. Idol
Chairman & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
By:
By:
By:
By:
By:
By:
By:
By:
/s/ John D. Idol
John D. Idol
/s/ Thomas J. Edwards, Jr.
Thomas J. Edwards Jr.
/s/ M. William Benedetto
M. William Benedetto
/s/ Robin Freestone
Robin Freestone
/s/ Judy Gibbons
Judy Gibbons
/s/ Ann Korologos
Ann Korologos
/s/ Stephen F. Reitman
Stephen F. Reitman
/s/ Jane Thompson
Jane Thompson
/s/ Jean Tomlin
Jean Tomlin
Chairman, Chief Executive Officer and Director (Principal Executive
Officer)
May 26, 2021
Chief Financial Officer and Chief Operating Officer (Principal Financial
and Accounting Officer)
May 26, 2021
Director
Director
Director
Director
Director
Director
Director
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
May 26, 2021
65
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Capri Holdings Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Capri Holdings Limited and subsidiaries (“the
Company”) as of March 27, 2021 and March 28, 2020, and the related consolidated statements of operations and
comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended March 27,
2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at March 27, 2021 and
March 28, 2020, and the results of its operations and its cash flow for each of the three years in the period ended March 27,
2021, in conformity with the U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of March 27, 2021, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated May 26, 2021 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 and Note 4 to the consolidated financial statements, the Company changed its method of
accounting for leases in the fiscal year ended March 28, 2020 due to the adoption of ASU No. 2016-02, Leases and associated
amendments (Topic 842).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on
the critical audit matters or on the accounts or disclosures to which they relate.
66 Valuation of Goodwill and Indefinite-lived Intangible Assets
Description of
the Matter
At March 27, 2021, the Company’s goodwill and indefinite-lived intangible assets, consisting of brand
names, totaled $1.5 billion and $1.3 billion, respectively. As discussed in Note 2 to the consolidated
financial statements, goodwill and indefinite-lived intangible assets are assessed for impairment on an
annual basis, or whenever impairment indicators exist. During Fiscal 2021, the Company recognized a
goodwill impairment charge of $94 million associated with two of its Jimmy Choo reporting units. The
Company also recognized an impairment charge of $69 million associated with the Jimmy Choo indefinite-
lived brand name intangible asset.
How We
Addressed the
Matter in Our
Audit
Auditing the Company’s annual impairment assessments was complex and highly judgmental due to the
significant estimation required in determining the fair value of the reporting units for goodwill and the fair
value of indefinite-lived brand name intangible assets. In particular, the fair value estimates were sensitive
to significant assumptions, such as changes in the discount rate, revenue growth rate, margin and royalty
rates, which are affected by expectations about future market or economic conditions (including the effects
of the global pandemic).
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Company’s goodwill and indefinite-lived intangible assets impairment review process, including
controls over management’s review of the significant assumptions described above.
To test the estimated fair value of the Company’s reporting units and indefinite-lived intangible assets, we
performed audit procedures that included, among others, assessing the valuation methodologies and testing
the significant assumptions discussed above and the completeness and accuracy of the underlying data used
by the Company in its analyses. We compared the significant assumptions used by management to current
industry and economic trends and evaluated whether changes to the Company’s business environment
would affect the significant assumptions. For example, we compared the royalty rates used in estimating
the fair value of certain indefinite-lived brand name intangible assets to current industry licensing
agreements. We assessed the historical accuracy of management’s estimates and performed sensitivity
analyses of the significant assumptions to evaluate the changes in the fair value of the reporting units and
indefinite-lived brand name intangible assets that would result from changes in the assumptions. We also
involved our internal valuation specialists to assist in our evaluation of the significant assumptions and
methodologies used by the Company in developing the fair value estimates. In addition, we tested
management’s reconciliation of the fair value of the reporting units to the market capitalization of the
Company.
Impairment of Retail Store Long-Lived assets
Description of
the Matter
As discussed in Note 2 to the consolidated financial statements, the Company evaluates its long-lived
assets, which primarily include property, plant, and equipment and operating lease right-of-use assets at
retail stores, for impairment whenever events or changes in circumstances indicate that the carrying
amounts of such assets may not be recoverable. During the year ended March 27, 2021, the Company
recognized an impairment charge of $158 million related to the long-lived assets.
Auditing the Company’s impairment assessment of retail store long-lived assets was complex and highly
judgmental due to the significant estimation required in determining the future cash flows used to assess
recoverability of each retail store long-lived asset group (undiscounted) and determining the fair value
(discounted). The significant assumptions used include estimated future cash flows directly related to the
future operation of the stores (including sales and expense growth rates) and the discount rate used to
determine fair value. Significant assumptions used in determining the fair value of certain operating lease
right-of-use assets include the current market rent and discount rate for the remaining lease term of the
related stores. These assumptions are subjective in nature and are affected by expectations about future
market or economic conditions (including the effects of the global pandemic).
67 How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the retail store long-lived assets impairment process, including, determining the undiscounted future cash
flows of the stores and the fair value of the long-lived assets (including those related to operating leases)
for the stores that were deemed to be impaired. We also tested controls over management’s review of the
significant assumptions described above.
Our testing of the Company’s impairment measurement included, among other procedures, evaluating the
significant assumptions and operating data used to calculate the estimated future cash flows and to
determine the fair value of the store long lived asset groups. For a sample of retail stores, we tested the
completeness and accuracy of the data used by the Company in its analyses and we compared the
significant assumptions used to determine the forecasted cash flows to historical results of the retail stores,
current industry and economic trends and inquired of the Company’s executives to understand the business
initiatives supporting the assumptions in the future cash flows. We involved our internal valuation
specialists to assist in evaluating the fair value of certain operating lease right-of-use assets, which included
assessing the estimated market rental rates of these leases by comparing them to rental rates for comparable
leases and evaluating the applied discount rate.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2014.
New York, New York
May 26, 2021
68 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Capri Holdings Limited
Opinion on Internal Control over Financial Reporting
We have audited Capri Holdings Limited and subsidiaries’ internal control over financial reporting as of March 27, 2021,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Capri Holdings Limited and subsidiaries (“the
Company”) maintained, in all material respects, effective internal control over financial reporting as of March 27, 2021, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of March 27, 2021 and March 28, 2020, the related
consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three
years in the period ended March 27, 2021, and the related notes and our report dated May 26, 2021 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
New York, New York
May 26, 2021
69 CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
Assets
Current assets
Cash and cash equivalents
Receivables, net
Inventories, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Deferred tax assets
Other assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued payroll and payroll related expenses
Accrued income taxes
Short-term operating lease liabilities
Short-term debt
Accrued expenses and other current liabilities
Total current liabilities
Long-term operating lease liabilities
Deferred tax liabilities
Long-term debt
Other long-term liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity
March 27,
2021
March 28,
2020
$
$
$
232 $
373
736
205
1,546
485
1,504
1,992
1,498
278
178
7,481 $
512 $
116
126
447
123
297
1,621
1,657
397
1,219
430
5,324
592
308
827
167
1,894
561
1,625
1,986
1,488
225
167
7,946
428
93
42
430
167
241
1,401
1,758
465
2,012
142
5,778
Ordinary shares, no par value; 650,000,000 shares authorized; 219,222,937 shares
issued and 151,280,011 outstanding at March 27, 2021; 217,320,010 shares issued
and 149,425,612 outstanding at March 28, 2020
Treasury shares, at cost (67,942,926 shares at March 27, 2021 and 67,894,398 shares
at March 28, 2020)
Additional paid-in capital
Accumulated other comprehensive income
Retained earnings
Total shareholders’ equity of Capri
Noncontrolling interest
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
See accompanying notes to consolidated financial statements.
—
—
(3,326)
1,158
56
4,270
2,158
(1)
2,157
7,481 $
(3,325)
1,085
75
4,332
2,167
1
2,168
7,946
70
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(In millions, except share and per share data)
Fiscal Years Ended
March 27,
2021
March 28,
2020
March 30,
2019
$
4,060 $
5,551 $
Total revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Impairment of assets
Restructuring and other charges
Total operating expenses
Income (loss) from operations
Other income, net
Interest expense, net
Foreign currency (gain) loss
Income (loss) before provision for income taxes
Provision for income taxes
Net (loss) income
Less: Net loss attributable to noncontrolling interest and
redeemable noncontrolling interest
Net (loss) income attributable to Capri
Weighted average ordinary shares outstanding:
Basic
Diluted
Net (loss) income per ordinary share attributable to Capri:
Basic
Diluted
Statements of Comprehensive (Loss) Income:
Net (loss) income
Foreign currency translation adjustments
Net (loss) gain on derivatives
Comprehensive (loss) income
Less: Net loss attributable to noncontrolling interest and
redeemable noncontrolling interest
Comprehensive (loss) income attributable to Capri
1,463
2,597
2,018
212
316
32
2,578
19
(7)
43
(20)
3
66
(63)
(1)
(62) $
2,280
3,271
2,464
249
708
42
3,463
(192)
(6)
18
11
(215)
10
(225)
(2)
(223) $
5,238
2,058
3,180
2,075
225
21
124
2,445
735
(4)
38
80
621
79
542
(1)
543
$
$
$
$
$
150,453,568
150,453,568
150,714,598
150,714,598
149,765,468
151,614,350
(0.41) $
(0.41) $
(1.48) $
(1.48) $
(63) $
(15)
(4)
(82)
(1)
(81) $
(225) $
145
(4)
(84)
(2)
(82) $
3.62
3.58
542
(134)
17
425
(1)
426
See accompanying notes to consolidated financial statements.
71
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions, except share data which is in thousands)
Ordinary Shares
Shares
Amounts
Additional
Paid-in
Capital
Treasury Shares
Shares
Amounts
Accumulated
Other
Comprehensive
Income (Loss)
—
—
—
—
—
—
—
—
—
831
(61,293)
(3,016)
—
—
—
91
—
29
60
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,826)
(207)
51
—
(117)
—
—
—
—
—
—
Retained
Earnings
4,164
543
—
—
—
—
—
—
—
Total
Equity of
Capri
Non-
controlling
Interests
Total
Equity
2,030
543
(117)
426
91
—
29
60
(207)
4
(1)
—
(1)
—
—
—
—
—
2,034
542
(117)
425
91
—
29
60
(207)
Balance as of April 1, 2018
210,991
Net income (loss)
Other comprehensive loss
Total comprehensive income (loss)
Issuance of ordinary shares
Vesting of restricted awards, net of
forfeitures
—
—
—
2,395
818
Exercise of employee share options
1,847
Share based compensation expense
Repurchase of common stock
Balance at March 30, 2019, as
previously reported
—
—
216,051 $ — $
1,011
(65,119) $ (3,223) $
(66) $ 4,707 $ 2,429 $
3 $ 2,432
Adoption of accounting standard
(See Note 2)
—
Balance as of March 31, 2019
216,051
Net loss
Other comprehensive income
Total comprehensive loss
Vesting of restricted awards, net of
forfeitures
Exercise of employee share options
Share based compensation expense
Repurchase of common stock
Adjustment of redeemable non-
controlling interests to redemption
value
—
—
—
1,262
7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,011
(65,119)
(3,223)
—
—
—
—
—
70
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,775)
(102)
4
—
—
—
(66)
—
141
—
—
—
—
—
—
(152)
4,555
(223)
—
—
—
—
—
—
—
(152)
2,277
(223)
141
(82)
—
—
70
(102)
4
—
3
(2)
—
(2)
—
—
—
—
—
(152)
2,280
(225)
141
(84)
—
—
70
(102)
4
Balance at March 28, 2020
217,320 $ — $
1,085
(67,894) $ (3,325) $
75 $ 4,332 $ 2,167 $
1 $ 2,168
Net loss
Other comprehensive loss
Total comprehensive loss
—
—
—
Vesting of restricted awards, net of
forfeitures
1,456
Exercise of employee share options
447
Share based compensation expense
Repurchase of common stock
Other
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3
70
—
—
—
—
—
—
—
—
(49)
—
—
—
—
—
—
—
(1)
—
—
(19)
—
—
—
—
—
—
(62)
—
—
—
—
—
—
—
(62)
(19)
(81)
—
3
70
(1)
—
(1)
—
(1)
—
—
—
—
(1)
(63)
(19)
(82)
—
3
70
(1)
(1)
Balance at March 27, 2021
219,223
— $
1,158
(67,943) $ (3,326) $
56 $ 4,270 $ 2,158 $
(1) $ 2,157
See accompanying notes to consolidated financial statements.
72
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
(63) $
(225) $
542
Depreciation and amortization
Share-based compensation expense
Impairment of assets
Credit loss
Losses on store lease exits
Deferred income taxes
Changes to lease related balances, net
Amortization of deferred financing costs
Tax deficit (benefit) on exercise of share options
Foreign currency (gains) losses
Other non-cash charges
Change in assets and liabilities:
Receivables, net
Inventories, net
Prepaid expenses and other current assets
Accounts payable
Accrued expenses and other current liabilities
Other long-term assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities
Capital expenditures
Purchase of intangible assets
Cash paid for asset/business acquisitions, net of cash acquired
Realized loss on hedge related to acquisitions
Settlement of net investment hedges
Net cash (used in) provided by investing activities
Cash flows from financing activities
Debt borrowings
Debt repayments
Debt issuance costs
Repurchase of common stock
Exercise of employee share options
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash, cash equivalents and restricted
cash
Beginning of period
End of period
Supplemental disclosures of cash flow information
Cash paid for interest
Cash paid for income taxes
Supplemental disclosure of non-cash investing and financing
activities
Accrued capital expenditures
$
$
$
$
212
71
316
(3)
—
(70)
(112)
6
4
(15)
—
(52)
145
(31)
50
153
13
624
(111)
—
(13)
—
—
(124)
2,443
(3,311)
(4)
(1)
3
(870)
12
(358)
592
234 $
52 $
45 $
249
70
708
29
—
(73)
(55)
8
2
11
3
42
115
20
63
(95)
(13)
859
(223)
—
(13)
—
298
62
2,282
(2,676)
(1)
(102)
—
(497)
(4)
420
172
592 $
80 $
98 $
225
60
21
4
18
(71)
—
4
(24)
80
—
(23)
(125)
(31)
(48)
20
42
694
(181)
(3)
(1,875)
(77)
11
(2,125)
4,204
(2,560)
(15)
(207)
29
1,451
(11)
9
163
172
45
172
17 $
30 $
25
See accompanying notes to consolidated financial statements.
73
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Basis of Presentation
The Company was incorporated in the British Virgin Islands (“BVI”) on December 13, 2002 as Michael Kors Holdings
Limited and changed its name to Capri Holdings Limited (“Capri,” and together with its subsidiaries, the “Company”) on
December 31, 2018. The Company is a holding company that owns brands that are leading designers, marketers, distributors
and retailers of branded women’s and men’s accessories, apparel and footwear bearing the Versace, Jimmy Choo and Michael
Kors tradenames and related trademarks and logos. The Company operates in three reportable segments: Versace, Jimmy Choo
and Michael Kors. See Note 20 for additional information.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States (“U.S. GAAP”) and include the accounts of the Company and its wholly-owned or controlled subsidiaries. All
significant intercompany balances and transactions have been eliminated in consolidation.
The Company utilizes a 52 to 53 week fiscal year, and the term "Fiscal Year" or "Fiscal" refers to that 52-week or 53-
week period. The fiscal years ending on March 27, 2021, March 28, 2020 and March 30, 2019 (“Fiscal 2021”, “Fiscal 2020”
and “Fiscal 2019”, respectively) contain 52 weeks. The Company’s Fiscal 2022 is a 53-week period ending April 2, 2022.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to use judgment and make
estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting period. The level of
uncertainty in estimates and assumptions increases with the length of time until the underlying transactions are completed. The
most significant assumptions and estimates involved in preparing the financial statements include allowances for customer
deductions, sales returns, sales discounts and credit losses, estimates of inventory net realizable value, the valuation of share-
based compensation, the valuation of deferred taxes and the valuation of goodwill, intangible assets, operating lease right-of-
use assets and property and equipment, along with the estimated useful lives assigned to these assets. Actual results could differ
from those estimates.
Seasonality
The Company experiences certain effects of seasonality with respect to its business. The Company generally experiences
greater sales during its third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during its first fiscal
quarter.
Revenue Recognition
The Company accounts for contracts with its customers when there is approval and commitment from both parties, the
rights of the parties and payment terms have been identified, the contract has commercial substance and collectability of
consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the
Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods
or services. The Company recognizes retail store revenues when control of the product is transferred at the point of sale at
Company owned stores, including concessions, net of estimated returns. Revenue from sales through the Company’s e-
commerce sites is recognized at the time of delivery to the customer, reduced by an estimate of returns. Wholesale revenue is
recognized net of estimates for sales returns, discounts, markdowns and allowances, after merchandise is shipped and control of
the underlying product is transferred to the Company’s wholesale customers. To arrive at net sales for retail revenue, gross sales
are reduced by actual customer returns as well as by a provision for estimated future customer returns, which is based on
management’s review of historical and future customer return expectations. Sales taxes collected from retail customers are
presented on a net basis and, as such, are excluded from revenue. To arrive at net sales for wholesale revenue, gross sales are
reduced by provisions for estimated future returns, based on current expectations, as well as trade discounts, markdowns,
allowances, operational chargebacks, and certain cooperative selling expenses. These estimates are based on such factors as
74 historical trends, actual and forecasted performance and current market conditions, which are reviewed by management on a
quarterly basis.
The following table details the activity and balances of the Company’s sales reserves for the fiscal years ended
March 27, 2021, March 28, 2020, and March 30, 2019 (in millions):
Retail
Return Reserves:
Fiscal Year Ended March 27, 2021
Fiscal Year Ended March 28, 2020
Fiscal Year Ended March 30, 2019
Wholesale
Total Sales Reserves:
Fiscal Year Ended March 27, 2021
Fiscal Year Ended March 28, 2020
Fiscal Year Ended March 30, 2019
$
$
Balance
Beginning
of Year
Amounts
Charged to
Revenue
Write-offs
Against
Reserves
Balance
at
Year End
12 $
15
12
176 $
231
226
(168) $
(234)
(223)
20
12
15
Balance
Beginning
of Year
Amounts
Charged to
Revenue
Write-offs
Against
Reserves
Balance
at
Year End
154 $
112
109
137 $
266
262
(213) $
(224)
(259)
78
154
112
Royalty revenue generated from product licenses, which includes contributions for advertising, is based on reported sales
of licensed products bearing the Company’s trademarks at rates specified in the license agreements. These agreements are also
subject to contractual minimum levels. Royalty revenue generated by geographic licensing agreements is recognized as it is
earned under the licensing agreements based on reported sales of licensees applicable to specified periods, as outlined in the
agreements. These agreements allow for the use of the Company’s tradenames to sell its branded products in specific
geographic regions.
The adverse impact from the COVID-19 pandemic which includes, but is not limited to, temporary retail store closures,
wholesale customer store closures, a reduction in retail store traffic, a decline in international tourism and a decrease in
consumer consumption is reflected in the Company's Fiscal 2021 and Fiscal 2020 total revenue.
Loyalty Program
The Company offers a loyalty program, which allows its Michael Kors U.S. customers to earn points on qualifying
purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors retail stores and
e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative fair value of the
benefits based on projected timing of future redemptions and historical activity. These amounts include estimated “breakage”
for points that are not expected to be redeemed. The contract liability, net of an estimated “breakage,” is recorded within
accrued expenses and other current liabilities in the Company’s consolidated balance sheets and is expected to be recognized
within the next 12 months. See Note 3 for additional information.
Advertising and Marketing Costs
Advertising and marketing costs are generally expensed when the advertisement is first exhibited and are recorded in
selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss)
income. Advertising and marketing expense was $137 million, $201 million and $158 million in Fiscal 2021, Fiscal 2020 and
Fiscal 2019, respectively.
Cooperative advertising expense, which represents the Company’s participation in advertising expenses of its wholesale
customers, is reflected as a reduction of net sales. Expenses related to cooperative advertising for Fiscal 2021, Fiscal 2020 and
Fiscal 2019, were $3 million, $7 million and $8 million, respectively.
75
Shipping and Handling
Freight-in expenses are recorded as part of cost of goods sold, along with product costs and other costs to acquire
inventory. The costs of preparing products for sale, including warehousing expenses, are included in selling, general and
administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss) income. Selling,
general and administrative expenses also include the costs of shipping products to the Company’s e-commerce customers.
Shipping and handling costs included within selling, general and administrative expenses in the Company’s consolidated
statements of operations and comprehensive (loss) income were $160 million, $157 million and $132 million for Fiscal 2021,
Fiscal 2020 and Fiscal 2019, respectively. Shipping and handling costs charged to customers are included in total revenue.
COVID-19 Related Government Assistance and Subsidies
As there is no definitive guidance under U.S. GAAP, the Company has applied the guidance under International
Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance ("IAS 20"). The
Company has elected to follow the income approach under IAS 20 and recognize these funds as a reduction to the related
expense in the Company’s consolidated statements of operations and comprehensive (loss) income. During Fiscal 2021, the
Company recognized $37 million related to government assistance and subsidies.
Cash, Cash Equivalents and Restricted Cash
All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.
Included in the Company’s cash and cash equivalents as of March 27, 2021 and March 28, 2020 are credit card receivables of
$25 million and $4 million, respectively, which generally settle within two to three business days. The increase in credit card
receivables year over year is mainly due to the impact on sales from COVID-19.
A reconciliation of cash, cash equivalents and restricted cash as of March 27, 2021 and March 28, 2020 from the
consolidated balance sheets to the consolidated statements of cash flows is as follows:
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
Restricted cash included within prepaid expenses and other current assets
Total cash, cash equivalents and restricted cash shown in the consolidated
statements of cash flows
Inventories
Fiscal Years Ended
March 27,
2021
March 28,
2020
$
$
232 $
2
234 $
592
—
592
Inventories primarily consist of finished goods with the exception of raw materials and work in process inventory. The
combined total of raw materials and work in process inventory recorded on the Company's consolidated balance sheets as of
March 27, 2021 and March 28, 2020 were $28 million and $27 million, respectively. Inventories are stated at the lower of cost
or net realizable value. Cost is determined using the weighted-average cost method. Costs include amounts paid to independent
manufacturers, plus duties and freight to bring the goods to the Company’s warehouses, as well as shipments to stores. The
Company continuously evaluates the composition of its inventory and makes adjustments when the cost of inventory is not
expected to be fully recoverable. The net realizable value of the Company’s inventory is estimated based on historical
experience, current and forecasted demand, and market conditions. In addition, reserves for inventory losses are estimated
based on historical experience and physical inventory counts. The Company’s inventory reserves are estimates, which could
vary significantly from actual results if future economic conditions, customer demand or competition differ from expectations.
Our historical estimates of these adjustments have not differed materially from actual results.
The net realizable value of the Company's inventory as of March 27, 2021 and March 28, 2020 includes the adverse
impacts connected to the COVID-19 pandemic. This includes the impact from temporary retail store closures, wholesale
customer store closures, reductions in retail store traffic, a decline in international tourism and a decrease in consumer
consumption.
76
Store Pre-opening Costs
Costs associated with the opening of new retail stores and start up activities, are expensed as incurred.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and amortization (carrying value). Depreciation is
recorded on a straight-line basis over the expected remaining useful lives of the related assets. Equipment, furniture and
fixtures, are depreciated over five to seven years, computer hardware and software are depreciated over three to five years. The
Company’s share of the cost of constructing in-store shop displays within its wholesale customers’ floor-space (“shop-in-
shops”), which is paid directly to third-party suppliers, is capitalized as property and equipment and is generally amortized over
a useful life of three to five years. Leasehold improvements are amortized using the straight-line method over the shorter of the
estimated remaining useful lives of the related assets or the remaining lease term, including highly probable renewal periods.
The Company includes all depreciation and amortization expense as a component of total operating expenses, as the underlying
long-lived assets are not directly or indirectly related to bringing the Company’s products to their existing location and
condition. Maintenance and repairs are charged to expense in the year incurred.
The Company capitalizes, in property and equipment, direct costs incurred during the application development stage and
the implementation stage for developing, purchasing or otherwise acquiring software for its internal use. These costs are
amortized over the estimated useful lives of the software, generally five years. All costs incurred during the preliminary project
stage, including project scoping and identification and testing of alternatives, are expensed as incurred.
Definite-Lived Intangible Assets
The Company’s definite-lived intangible assets consist of trademarks and customer relationships which are stated at cost
less accumulated amortization. The Company’s customer relationships are amortized over five to eighteen years. Reacquired
rights recorded in connection with the acquisition of Michael Kors (HK) Limited and Subsidiaries (“MKHKL”) are amortized
through March 31, 2041, the original expiration date of the Michael Kors license agreement in the Greater China region. The
trademark for the Michael Kors brand is amortized over twenty years.
Long-lived Assets
The Company evaluates all long-lived assets, including operating lease right-of-use assets, property and equipment and
definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount
of any such asset may not be recoverable. For the purposes of impairment testing, the Company groups long-lived assets at the
lowest level of identifiable cash flow. The leasehold improvements are typically amortized over the life of the store lease,
including reasonably assured renewals and the shop-in-shops are amortized over a useful life of three or four years. The
Company's impairment testing is based on its best estimate of the future operating cash flows. If the sum of our estimated
undiscounted future cash flows associated with the asset is less than the asset’s carrying value, the Company would recognize
an impairment charge, which is measured as the amount by which the carrying value exceeds the fair value of the asset. The fair
values determined by management require significant judgment and include certain assumptions regarding future sales and
expense growth rates, discount rates and estimates of real estate market fair values. As such, these estimates may differ from
actual results and are affected by future market and economic conditions.
During Fiscal 2021, Fiscal 2020 and Fiscal 2019, the Company recorded impairment charges of $158 million,
$357 million and $21 million, respectively, which were primarily related to operating lease right-of-use assets and fixed assets
of our retail store locations. Please refer to Note 8, Note 9 and Note 14 for additional information.
77 Goodwill and Other Indefinite-lived Intangible Assets
The Company records intangible assets based on their fair value on the date of acquisition. Goodwill is recorded as the
difference between the fair value of the purchase consideration and the fair value of the net identifiable tangible and intangible
assets acquired. The brand intangible assets recorded in connection with the acquisitions of Versace and Jimmy Choo were
determined to be indefinite-lived intangible assets, which are not subject to amortization. The Company performs an
impairment assessment of goodwill, as well as the Versace brand and Jimmy Choo brand intangible assets on an annual basis,
or whenever impairment indicators exist. In the absence of any impairment indicators, goodwill, the Versace brand and the
Jimmy Choo brand are assessed for impairment during the fourth quarter of each fiscal year. Judgments regarding the existence
of impairment indicators are based on market conditions and operational performance of the business.
The Company may assess its goodwill and its brand intangible assets for impairment initially using a qualitative
approach to determine whether it is more likely than not that the fair value of these assets is greater than their carrying value.
When performing a qualitative test, the Company assesses various factors, including industry and market conditions,
macroeconomic conditions and performance of its businesses. If the results of the qualitative assessment indicate that it is more
likely than not that our goodwill and other indefinite-lived intangible assets are impaired, a quantitative impairment analysis is
performed to determine if impairment is required. The Company may also elect to perform a quantitative analysis of goodwill
and its indefinite-lived intangible assets initially rather than using a qualitative approach.
The impairment testing for goodwill is performed at the reporting unit level. The Company uses industry accepted
valuation models and set criteria that are reviewed and approved by various levels of management and, in certain instances, it
engages independent third-party valuation specialists. To determine the fair value of a reporting unit, the Company uses a
combination of the income and market approaches, when applicable. The Company believes the blended use of both models,
when applicable, compensates for the inherent risk associated with either model if used on a stand-alone basis, and this
combination is indicative of the factors a market participant would consider when performing a similar valuation. If the fair
value of a reporting unit exceeds the related carrying value, the reporting unit’s goodwill is considered not to be impaired and
no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded for
the difference. These valuations are affected by certain estimates, including future revenue growth rates, future operating
expense growth rates, gross margins and discount rates. Future events could cause us to conclude that impairment indicators
exist, and goodwill may be impaired.
When performing a quantitative impairment assessment of our brand intangible assets, the fair value of the Versace and
the Jimmy Choo brands is estimated using a discounted cash flow analysis based on the "relief from royalty" method, assuming
that a third party would be willing to pay a royalty in lieu of ownership for this intangible asset. This approach is dependent on
many factors, including estimates of future revenue growth rates, royalty rates and discount rates. Actual future results may
differ from these estimates. An impairment loss is recognized when the estimated fair value of the brand intangible assets is less
than its carrying amount.
During the fourth quarter of Fiscal 2021, the Company performed its annual goodwill and indefinite-lived intangible
assets impairment analysis for each brand. Based on qualitative impairment assessment of the Michael Kors reporting units, the
Company concluded that it is more likely than not that the fair value of the Michael Kors reporting units exceeded its carrying
value and, therefore, was not impaired. The Company elected to perform quantitative impairment analysis for both the Versace
and Jimmy Choo reporting units, using a combination of income and market approaches to estimate the fair values of each
brands' reporting units. The Company also elected to perform an impairment analysis for both the Versace and Jimmy Choo
brand intangible assets using an income approach to estimate the fair values. Based on the results of these assessments, the
Company determined there was no impairment loss for the Jimmy Choo retail reporting unit as its fair value is approximately
3% higher than the carrying value, which has a goodwill balance of $221 million. The Company also concluded that the fair
values of the Versace reporting units and the brand intangible assets exceeded the related carrying amounts and no impairment
was required. The fair value of the Versace retail reporting unit, Versace wholesale reporting unit and Versace licensing
reporting unit are at least 20% higher than their respective carrying values. The fair value of the Versace retail brand and
Versace wholesale brand are more than 10% higher than their respective carrying values.
However, the Company concluded that the fair values of the Jimmy Choo wholesale and Jimmy Choo licensing reporting
units, along with the Jimmy Choo brand intangible assets, did not exceed their related carrying amounts. These impairment
charges were primarily related to higher discount rates in the current year driven by a change in market factors as well as a shift
in expected revenue and earnings mix to the retail segment.
78 Accordingly, the Company recorded impairment charges of $94 million related to the Jimmy Choo wholesale and Jimmy
Choo licensing reporting units and $69 million related to the Jimmy Choo brand intangible assets during Fiscal 2021. The
Company recorded impairment charges of $171 million related to the Jimmy Choo retail and Jimmy Choo licensing reporting
units and $180 million related to the Jimmy Choo brand intangible assets during Fiscal 2020. The impairment charges were
recorded within impairment of assets on our consolidated statement of operations and comprehensive (loss) income for the
fiscal years ended March 27, 2021 and March 28, 2020. The Company did not incur any impairment charges in Fiscal 2019.
See Note 9 for information relating to its annual impairment analysis performed during the fourth quarter of Fiscal 2021, Fiscal
2020 and Fiscal 2019.
It is possible that the Company's conclusions regarding impairment or recoverability of goodwill or other indefinite
intangible assets could change in future periods if, for example, (i) the Company's businesses do not perform as projected, (ii)
overall economic conditions in future years vary from current assumptions, (iii) business conditions or strategies change from
our current assumptions, (iv) discount rates change, (v) market multiples change or (vi) the identification of the Company's
reporting units change, among other factors. Such changes could result in a future impairment charge of goodwill or other
indefinite-lived intangible assets.
Insurance
The Company uses a combination of insurance and self-insurance programs, including a wholly-owned captive insurance
entity, to provide for the potential liabilities for certain risks, including workers’ compensation and employee-related health
care benefits. The Company also maintains stop-loss coverage with third-party insurers to limit its exposure arising from
claims. Self-insurance claims filed and claims incurred but not reported are accrued based upon management’s estimates of the
discounted cost for self-insured claims incurred using actuarial assumptions, historical loss experience, actual payroll and other
data. Although the Company believes that it can reasonably estimate losses related to these claims, actual results could differ
from these estimates.
The Company also maintains other types of customary business insurance policies, including general liability, marine
transport and inventory and business interruption insurance. Insurance recoveries represent gain contingencies and are recorded
upon actual settlement with the insurance carrier.
Share-based Compensation
The Company grants share-based awards to certain employees and directors of the Company. The grant date fair value of
share options is calculated using the Black-Scholes option pricing model. The Company uses its own historical experience in
determining the expected holding period and volatility of its time-based share option awards. The risk-free interest rate is
derived from the zero-coupon United States (“U.S.”) Treasury Strips yield curve based on the grant’s estimated holding period.
Determining the grant date fair value of share-based awards requires considerable judgment, including estimating expected
volatility, expected term and risk-free rate. If factors change and the Company employs different assumptions, the fair value of
future awards and the resulting share-based compensation expense may differ significantly from what the Company has
estimated in the past.
The closing market price of the Company’s shares on the date of grant is used to determine the grant date fair value of
restricted shares, time-based restricted stock units (“RSUs") and performance-based RSUs. These fair values are recognized as
expense over the requisite service period, net of estimated forfeitures, based on expected attainment of pre-established
performance goals for performance grants, or the passage of time for those grants which have only time-based vesting
requirements.
Foreign Currency Translation and Transactions
The financial statements of the majority of the Company’s foreign subsidiaries are measured using the local currency as
the functional currency. The Company’s functional currency is the United States Dollar (“USD”) for Capri and its United States
based subsidiaries. Assets and liabilities are translated using period-end exchange rates, while revenues and expenses are
translated using average exchange rates over the reporting period. The resulting translation adjustments are recorded separately
in shareholders’ equity as a component of accumulated other comprehensive (loss) income. Foreign currency income and losses
resulting from the re-measuring of transactions denominated in a currency other than the functional currency of a particular
entity are included in foreign currency (gain) loss on the Company’s consolidated statements of operations and comprehensive
(loss) income.
79 Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
The Company uses forward currency exchange contracts to manage its exposure to fluctuations in foreign currency for
certain transactions. The Company, in its normal course of business, enters into transactions with foreign suppliers and seeks to
minimize risks related to these transactions. The Company employs these forward currency contracts to hedge the Company’s
cash flows, as they relate to foreign currency transactions. Certain of these contracts are designated as hedges for accounting
purposes, while others remain undesignated. All of the Company’s derivative instruments are recorded in the Company’s
consolidated balance sheets at fair value on a gross basis, regardless of their hedge designation.
In connection with the September 24, 2018 definitive agreement to acquire all of the outstanding shares of Versace, the
Company entered into forward foreign currency exchange contracts with notional amounts totaling €1.680 billion
(approximately $2.001 billion) to mitigate its foreign currency exchange risk through the expected closing date of the
acquisition, which were settled on December 21, 2018. This derivative contract was not designated as an accounting hedge.
Therefore, changes in fair value were recorded to foreign currency loss (gain) in the Company’s consolidated statements of
operations and comprehensive (loss) income. The Company’s accounting policy is to classify cash flows from derivative
instruments in the same category as the cash flows from the items being hedged. Accordingly, the Company classified $77
million of realized losses relating to this derivative instrument within cash flows from investing activities during Fiscal 2019.
The Company designates certain contracts related to the purchase of inventory that qualify for hedge accounting as cash
flow hedges. Formal hedge documentation is prepared for all derivative instruments designated as hedges, including description
of the hedged item and the hedging instrument and the risk being hedged. The changes in the fair value for contracts designated
as cash flow hedges is recorded in equity as a component of accumulated other comprehensive income (loss) until the hedged
item affects earnings. When the inventory related to forecasted inventory purchases that are being hedged is sold to a third
party, the gains or losses deferred in accumulated other comprehensive income (loss) are recognized within cost of goods sold.
The Company uses regression analysis to assess effectiveness of derivative instruments that are designated as hedges, which
compares the change in the fair value of the derivative instrument to the change in the related hedged item. If the hedge is no
longer expected to be highly effective in the future, future changes in the fair value are recognized in earnings. For those
contracts that are not designated as hedges, changes in the fair value are recorded to foreign currency (gain) loss in the
Company’s consolidated statements of operations and comprehensive (loss) income. The Company classifies cash flows
relating to its forward foreign currency exchange contracts related to purchase of inventory consistently with the classification
of the hedged item, within cash flows from operating activities.
The Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual
obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected
financial institutions based upon their credit ratings and certain other financial factors, adhering to established limits for credit
exposure. The aforementioned forward contracts generally have a term of no more than 12 months. The period of these
contracts is directly related to the foreign transaction they are intended to hedge.
Net Investment Hedges
The Company also uses fixed-to-fixed cross currency swap agreements to hedge its net investments in foreign operations
against future volatility in the exchange rates between its U.S. Dollars and these foreign currencies. The Company has elected
the spot method of designating these contracts under ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities,” and has designated these contracts as net investment hedges. The net gain
or (loss) on the net investment hedge is reported within foreign currency translation gains and losses (“CTA”), as a component
of accumulated other comprehensive income (loss) on the Company’s consolidated balance sheets. Interest accruals and coupon
payments are recognized directly in interest expense in the Company’s consolidated statements of operations and
comprehensive (loss) income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net
investment is sold, diluted or liquidated.
During the fourth quarter of Fiscal 2020, the Company terminated all of its net investment hedges related to its Euro-
denominated subsidiaries. The early termination of these hedges resulted in the Company receiving $296 million in cash during
the fourth quarter of Fiscal 2020. During Fiscal 2021, the Company resumed its normal hedging program and entered into
multiple fixed-to-fixed cross-currency swap agreements to hedge its net investment in Euro-denominated and Japanese Yen-
denominated subsidiaries against future volatility in the exchange rate between the U.S. Dollar and these currencies.
80 Interest Rate Swap Agreements
The Company also uses interest rate swap agreements to hedge the variability of its cash flows resulting from floating
interest rates on the Company’s borrowings. When an interest rate swap agreement qualifies for hedge accounting as a cash
flow hedge, the changes in the fair value are recorded in equity as a component of accumulated other comprehensive income
(loss) and are reclassified into interest expense in the same period during which the hedged transactions affect earnings.
Income Taxes
Deferred income tax assets and liabilities have been provided for temporary differences between the tax bases and
financial reporting bases of the Company’s assets and liabilities using the tax rates and laws in effect for the periods in which
the differences are expected to reverse. The Company periodically assesses the realizability of deferred tax assets and the
adequacy of deferred tax liabilities, based on the results of local, state, federal or foreign statutory tax audits or estimates and
judgments used.
Realization of deferred tax assets associated with net operating loss and tax credit carryforwards is dependent upon
generating sufficient taxable income prior to their expiration in the applicable tax jurisdiction. The Company periodically
reviews the recoverability of its deferred tax assets and provides valuation allowances, as deemed necessary, to reduce deferred
tax assets to amounts that more-likely-than-not will be realized. The Company’s management considers many factors when
assessing the likelihood of future realization of deferred tax assets, including recent earnings within various taxing jurisdictions,
expectations of future taxable income, the carryforward periods remaining and other factors. Changes in the required valuation
allowance are recorded in income in the period such determination is made. Deferred tax assets could be reduced in the future if
the Company’s estimates of taxable income during the carryforward period are significantly reduced or alternative tax strategies
are no longer viable.
The Company recognizes the impact of an uncertain income tax position taken on its income tax returns at the largest
amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax
position will be recognized if it has less than a 50% likelihood of being sustained. The tax positions are analyzed periodically
(at least quarterly) and adjustments are made as events occur that warrant adjustments for those positions. The Company
records interest expense and penalties payable to relevant tax authorities as income tax expense.
Leases
On March 31, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize a
lease liability and a right-of-use asset on the balance sheet for all leases, except certain short-term leases. The Company adopted
the new standard recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of
adoption without restating the comparative prior year periods.
The Company leases retail stores, office space and warehouse space under operating lease agreements that expire at
various dates through September 2043. The Company’s leases generally have terms of up to 10 years, generally require a fixed
annual rent and may require the payment of additional rent if store sales exceed a negotiated amount. Although most of the
Company’s equipment is owned, the Company has limited equipment leases that expire on various dates through November
2024. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores under its restructuring
initiatives, as defined in Note 11. Fixed sublease payments received are recognized on a straight-line basis over the sublease
term. The Company determines the sublease term based on the date it provides possession to the subtenant through the
expiration date of the sublease.
The Company recognizes operating lease right-of-use assets and lease liabilities at lease commencement date, based on
the present value of fixed lease payments over the expected lease term. The Company uses its incremental borrowing rates to
determine the present value of fixed lease payments based on the information available at the lease commencement date, as the
rate implicit in the lease is not readily determinable for the Company’s leases. The Company’s incremental borrowing rates are
based on the term of the leases, the economic environment of the leases and reflect the expected interest rate it would incur to
borrow on a secured basis. Certain leases include one or more renewal options, generally for the same period as the initial term
of the lease. The exercise of lease renewal options is generally at the Company’s sole discretion and as such, the Company
typically determines that exercise of these renewal options is not reasonably certain. As a result, the Company generally does
not include the renewal option period in the expected lease term and the associated lease payments are not included in the
measurement of the operating lease right-of-use asset and lease liability. Certain leases also contain termination options with an
associated penalty. Generally, the Company is reasonably certain not to exercise these options and as such, they are not
81 included in the determination of the expected lease term. The Company recognizes operating lease expense on a straight-line
basis over the lease term.
Leases with an initial lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes
lease expense for its short-term leases on a straight-line basis over the lease term.
The Company’s leases generally provide for payments of non-lease components, such as common area maintenance, real
estate taxes and other costs associated with the leased property. The Company accounts for lease and non-lease components of
its real estate leases together as a single lease component and, as such, includes fixed payments of non-lease components in the
measurement of the operating lease right-of-use assets and lease liabilities for its real estate leases. Variable lease payments,
such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any
variable common area maintenance and any other variable costs associated with the leased property, are expensed as incurred as
variable lease costs and are not recorded on the balance sheet. The Company’s lease agreements do not contain any material
residual value guarantees or material restrictions or covenants.
Debt Issuance Costs and Unamortized Discounts
The Company defers debt issuance costs directly associated with acquiring third party financing. These debt issuance
costs and any discounts on issued debt are amortized on a straight-line basis, which approximates the effective interest method,
as interest expense over the term of the related indebtedness. Deferred financing fees associated with the Company’s Revolving
Credit Facilities are primarily recorded within other assets in the Company’s consolidated balance sheets. Deferred financing
fees and unamortized discounts associated with the Company’s other borrowings are primarily recorded as an offset to long-
term debt in the Company’s consolidated balance sheets. See Note 12 for additional information.
Net (Loss) Income per Share
The Company’s basic net (loss) income per ordinary share is calculated by dividing net (loss) income by the weighted
average number of ordinary shares outstanding during the period. Diluted net (loss) income per ordinary share reflects the
potential dilution that would occur if share option grants or any other potentially dilutive instruments, including restricted
shares and RSUs, were exercised or converted into ordinary shares. These potentially dilutive securities are included in diluted
shares to the extent they are dilutive under the treasury stock method for the applicable periods. Performance-based RSUs are
included in diluted shares if the related performance conditions are considered satisfied as of the end of the reporting period and
to the extent they are dilutive under the treasury stock method.
The components of the calculation of basic net (loss) income per ordinary share and diluted net (loss) income per
ordinary share are as follows (in millions, except share and per share data):
Numerator:
Net (loss) income attributable to Capri
Denominator:
Basic weighted average shares
Weighted average dilutive share equivalents:
Share options and restricted stock units, and performance
restricted stock units
Diluted weighted average shares
Basic net (loss) income per share (1)
Diluted net (loss) income per share (1)
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
(62) $
(223) $
543
150,453,568
150,714,598
149,765,468
—
150,453,568
$
$
(0.41) $
(0.41) $
—
150,714,598
1,848,882
151,614,350
3.62
3.58
(1.48) $
(1.48) $
(1) Basic and diluted net (loss) income per share are calculated using unrounded numbers.
Share equivalents of 3,658,959 shares, 3,752,560 shares and 1,409,415 shares, for Fiscal 2021, Fiscal 2020 and Fiscal
2019, respectively, have been excluded from the above calculation due to their anti-dilutive effect.
82
Diluted net loss per share attributable to Capri for Fiscal 2021 and Fiscal 2020 excluded all potentially dilutive securities
because there was a net loss attributable to Capri for the period and, as such, the inclusion of these securities would have been
anti-dilutive.
Noncontrolling Interest
The Company has an ownership interest in the Michael Kors Latin American joint venture, MK (Panama) Holdings, S.A.
and subsidiaries of 75%, an ownership interest in the Jimmy Choo EMEA joint venture JC Gulf Trading LLC of 49%, an
ownership interest in the Jimmy Choo Macau joint venture J. Choo (Macau) Co. Limited of 70%, and a 50% ownership interest
in J. Choo Russia J.V. Limited and its subsidiary.
Recently Adopted Accounting Pronouncements
Measurement of Credit Losses on Financial Instruments
On March 29, 2020, the Company adopted ASU No. 2016-13, “Measurement of Credit Losses on Financial
Instruments” (“ASU 2016-13”), which amends the guidance on measuring credit losses for certain financial assets measured at
amortized cost, including trade receivables. The Financial Accounting Standards Board has subsequently issued several updates
to the standard, providing additional guidance on certain topics covered by the standard. This update requires entities to
recognize an allowance for credit losses using a forward-looking expected loss impairment model, taking into consideration
historical experience, current conditions and supportable forecasts that impact collectability. The adoption of this update did not
have a material impact on the Company’s consolidated financial statements.
Implementation Costs Associated with Cloud Computing Arrangements
On March 29, 2020, the Company adopted ASU No. 2018-15, “Intangibles – Goodwill and Other – Internal-Use
Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service
Contract" ("ASU 2018-15"), which provides guidance related to the accounting for implementation costs incurred in a cloud
computing arrangement that is a service contract. The guidance aligns the requirements for capitalizing implementation costs
incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred
to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The adoption
of this update did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
The Company has considered all new accounting pronouncements and, other than the recent pronouncements discussed
below, have concluded that there are no new pronouncements that may have a material impact on the Company’s results of
operations, financial condition or cash flows based on current information
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, "Facilitation of the Effects of
Reference Rate Reform on Financial Reporting" and in January 2021, issued ASU 2021-01, "Reference Rate Reform: Scope".
Both of these updates aim to ease the potential burden in accounting for reference rate reform. These updates provide optional
expedients and exceptions, if certain criteria are met, for applying accounting principles generally accepted in the United States
to contract modifications, hedging relationships and other transactions affected by the expected market transition from the
London interbank offered rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured
Overnight Financing Rate (“SOFR”). The amendments were effective upon issuance and allow companies to adopt the
amendments on a prospective basis through December 31, 2022. The Company is currently evaluating the impact of these
updates on its consolidated financial statements.
83 3. Revenue Recognition
The Company accounts for contracts with its customers when there is approval and commitment from both parties, the
rights of the parties and payment terms have been identified, the contract has commercial substance and collectability of
consideration is probable. Revenue is recognized when control of the promised goods or services is transferred to the
Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for goods
or services.
The Company sells its products through three primary channels of distribution: retail, wholesale and licensing. Within
the retail and wholesale channels, substantially all of the Company’s revenues consist of sales of products that represent a single
performance obligation, where control transfers at a point in time to the customer. For licensing arrangements, royalty and
advertising revenue is recognized over time based on access provided to the Company’s brands.
The Company has chosen to apply the practical expedient allowing it not to disclose the amount of the transaction price
allocated to the remaining performance obligations that have an expected duration of 12 months or less.
Retail
The Company generates sales through directly operated stores and e-commerce throughout the Americas (U.S., Canada
and Latin America), EMEA (Europe, Middle East and Africa) and certain parts of Asia (including Australia). Retail revenue is
recognized when control of the product is transferred at the point of sale at Company owned stores, including concessions. For
e-commerce transactions, control is transferred and revenue is recognized when products are delivered to the customer, net of
estimated returns. To arrive at net sales for retail, gross sales are reduced by actual customer returns, as well as by a provision
for estimated future customer returns.
Sales tax collected from retail customers are presented on a net basis and, as such, are excluded from revenue. Shipping
and handling costs that are billed to customers are included in net sales, with the related costs recorded in cost of goods sold.
Shipping and handling costs that are not billed to customers are accounted for as fulfillment costs.
Gift Cards. The Company sells gift cards that can be redeemed for merchandise, resulting in a contract liability upon
issuance. Revenue is recognized when the gift card is redeemed or upon “breakage” for the estimated portion of gift cards that
are not expected to be redeemed. “Breakage” revenue is calculated under the proportional redemption methodology, which
considers the historical patterns of redemption in jurisdictions where the Company is not required to remit the value of the
unredeemed gift cards as unclaimed property. The Company anticipates that substantially all of its outstanding gift cards will be
redeemed within the next 12 months. The contract liability related to gift cards, net of estimated “breakage,” was $12 million
and $11 million as of March 27, 2021 and March 28, 2020, respectively, and is included in accrued expenses and other current
liabilities in the Company’s consolidated balance sheets.
Loyalty Program. The Company offers a loyalty program, which allows its Michael Kors U.S. customers to earn points
on qualifying purchases toward monetary and non-monetary rewards, which may be redeemed for purchases at Michael Kors
retail stores and e-commerce sites. The Company defers a portion of the initial sales transaction based on the estimated relative
fair value of the benefits based on projected timing of future redemptions and historical activity. These amounts include
estimated “breakage” for points that are not expected to be redeemed.
Wholesale
The Company’s products are sold primarily to major department stores, specialty stores and travel retail shops
throughout the Americas, EMEA and Asia. The Company also has arrangements where its products are sold to geographic
licensees in certain parts of EMEA, Asia and South America. Wholesale revenue is recognized net of estimates for sales
returns, discounts, markdowns and allowances, when merchandise is shipped and control of the underlying product is
transferred to the Company’s wholesale customers. To arrive at net sales for wholesale, gross sales are reduced by provisions
for estimated future returns, as well as trade discounts, markdowns, allowances, operational chargebacks and certain
cooperative selling expenses. These estimates are developed based on historical trends, actual and forecasted performance and
market conditions, and are reviewed by management on a quarterly basis. Unfulfilled, non-cancelable purchase orders for
products from wholesale customers (including the Company’s geographic licensees) are expected to be fulfilled within the next
12 months.
84 Licensing
The Company provides its third-party licensees with the right to access its Versace, Jimmy Choo and Michael Kors
trademarks under product and geographic licensing arrangements. Under product licensing arrangements, the Company allows
third parties to manufacture and sell luxury goods, including watches and jewelry, fragrances, eyewear and home furnishings,
using the Company’s trademarks. Under geographic licensing arrangements, third party licensees receive the right to distribute
and sell products bearing the Company’s trademarks in retail and/or wholesale channels within certain geographical areas,
including Brazil, the Middle East, Eastern Europe, South Africa and certain parts of Asia.
The Company recognizes royalty revenue and advertising contributions based on the percentage of sales made by the
licensees. Advertising contributions are received to support the Company’s branded advertising and marketing campaigns and
are viewed as part of a single performance obligation with the right to access the Company’s trademarks. Royalty revenue
generated from licenses, which includes contributions for advertising, may be subject to contractual minimum levels, as defined
in the contract. Such minimums are generally fixed annually, based on the previous year’s sales. Licensing revenue is based on
reported current period sales of licensed products at rates that are specified in the license agreements for contracts that are
expected to exceed the related guaranteed minimums. If the Company expects the minimum guaranteed amounts to exceed
amounts calculated based on actual sales, the guaranteed minimums are recognized ratably over the contractual year to which
they relate. Generally the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that
do not exceed 12 months, however, some of our guaranteed minimums for Versace are multi-year based. As of March 27, 2021,
contractually guaranteed minimum fees from the Company's license agreements expected to be recognized as revenue during
future periods were as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 and thereafter
Total
Sales Returns
Contractually
Guaranteed
Minimum Fees
$
$
29
25
22
18
19
71
184
For the sale of goods with a right of return, the Company recognizes revenue for the consideration to which it expects to
be entitled and a refund liability for the amount it expects to refund to its customers within accrued expenses and other current
liabilities. The refund liability is estimated based on management’s review of historical and current customer returns for its
retail and wholesale customers, estimated future returns, adjusted for non-resalable products. The Company also considers its
product strategies, as well as the financial condition of its customers, store closings by wholesale customers, changes in the
retail environment and other macroeconomic factors. The Company recognizes an asset with a corresponding adjustment to cost
of sales for the right to recover the products from its retail and wholesale customers. The refund liability recorded as of
March 27, 2021 and March 28, 2020 was $46 million and $37 million, respectively, and the related asset for the right to recover
returned product as of March 27, 2021 and March 28, 2020 was $14 million and $14 million, respectively.
Contract Balances
The Company’s contract liabilities are recorded within accrued expenses and other current liabilities and other long-term
liabilities in its consolidated balance sheets depending on the short- or long-term nature of the payments to be recognized. The
Company’s contract liabilities primarily consist of gift card liabilities, loyalty program liabilities and advanced payments from
product licensees. Total contract liabilities were $18 million and $22 million as of March 27, 2021 and March 28, 2020,
respectively. During Fiscal 2021 and Fiscal 2020, the Company recognized $9 million and $20 million in revenue, respectively,
relating to contract liabilities that existed at March 28, 2020 and March 30, 2019, respectively. There were no material contract
assets recorded as of March 27, 2021 and March 28, 2020.
There were no changes in historical variable consideration estimates that were materially different from actual results.
85
Disaggregation of Revenue
The following table presents the Company’s segment revenues disaggregated by geographic location (in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
Versace revenue - the Americas
$
201 $
186 $
Versace revenue - EMEA
Versace revenue - Asia
Total Versace
Jimmy Choo revenue - the Americas
Jimmy Choo revenue - EMEA
Jimmy Choo revenue - Asia
Total Jimmy Choo
Michael Kors revenue - the Americas
Michael Kors revenue - EMEA
Michael Kors revenue - Asia
Total Michael Kors
Total revenue - the Americas
Total revenue - EMEA
Total revenue - Asia
Total revenue
4. Leases
276
241
718
102
146
170
418
1,869
607
448
2,924
2,172
1,029
859
420
237
843
107
282
166
555
2,822
821
510
4,153
3,115
1,523
913
$
4,060 $
5,551 $
22
66
49
137
96
321
173
590
3,064
892
555
4,511
3,182
1,279
777
5,238
The following table presents the Company’s supplemental balance sheets information related to leases (in millions):
Balance Sheet Location
March 27,
2021
March 28,
2020
Assets
Operating leases
Operating lease right-of-use assets
Liabilities
Current:
Operating leases
Short-term portion of operating lease liabilities
Non-current:
Operating leases
Long-term portion of operating lease liabilities
$
$
$
1,504 $
1,625
447 $
430
1,657 $
1,758
86
The components of net lease costs for the fiscal year ended March 27, 2021 and March 28, 2020 were as follows (in
millions):
Consolidated Statement of Operations and
Comprehensive (Loss) Income Location
March 27,
2021
March 28,
2020
Operating lease cost
Variable lease cost (1)
Short-term lease cost
Sublease income
Total lease cost
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses
$
$
432 $
69
15
(6)
510 $
449
155
18
(6)
616
(1) The Company elected to account for rent concessions negotiated in connection with COVID-19 as if it were
contemplated as part of the existing contract and these concessions are recorded as variable lease expense. As of the
fiscal year ended March 27, 2021, rent concessions due to COVID-19 were $52 million. There is an immaterial
impact from these concessions for the fiscal year ended March 28, 2020.
The following table presents the Company’s supplemental cash flow information related to leases (in millions):
March 27,
2021
March 28,
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases
$
488 $
Non-cash transactions:
Lease assets obtained in exchange for new lease liabilities
Rent concessions due to COVID-19
348
52
495
428
—
The following tables summarizes the weighted average remaining lease term and weighted average discount rate related
to the Company’s operating lease right-of-use assets and lease liabilities recorded on the balance sheets as of March 27, 2021
and March 28, 2020:
Operating leases:
Weighted average remaining lease term (years)
Weighted average discount rate
March 27,
2021
March 28,
2020
6.2
3.1 %
6.6
2.9 %
At March 27, 2021, the future minimum lease payments under the terms of these noncancelable operating lease
agreements are as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
Total lease payments
Less: interest
Total lease liabilities
March 27,
2021
$
$
502
437
370
291
221
493
2,314
(210)
2,104
87
At March 27, 2021, the future minimum sublease income under the terms of these noncancelable operating lease
agreements are as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Thereafter
March 27,
2021
$
5
5
4
4
3
8
Total sublease income
$
29
Additionally, the Company had approximately $23 million and $13 million of future payment obligations related to
executed lease agreements for which the related lease has not yet commenced as of March 27, 2021 and March 28, 2020,
respectively.
See Note 2 for additional information on the Company's accounting policies related to leases.
5. Acquisitions
Fiscal 2020
Acquisition of Alberto Gozzi S.r.L.
On December 16, 2019, the Company entered into a definitive agreement to acquire Italian atelier and shoe manufacturer
Alberto Gozzi S.r.L. The transaction was completed in the Company's fourth quarter of Fiscal 2020 and the assets and liabilities
acquired approximated fair value. The acquired identifiable assets and liabilities net to a nominal amount, with $11 million
recognized in goodwill allocated to the Jimmy Choo reportable segment.
Fiscal 2019
Acquisition of Versace
On December 31, 2018, the Company completed the acquisition of Versace for a total enterprise value of
approximately €1.753 billion (or approximately $2.005 billion), giving effect to an investment made by the Versace family at
acquisition of 2.4 million shares. The acquisition was funded through a combination of borrowings under the Company’s 2018
Term Loan Facility, drawings under the Company’s Revolving Credit Facility and cash on hand.
Versace’s results of operations have been included in our consolidated financial statements beginning on December 31,
2018. Versace contributed total revenue of $137 million and net loss of $12 million, after amortization of non-cash purchase
accounting adjustments and transition and transaction costs, from the date of acquisition on December 31, 2018 through
February 28, 2019 (reflecting a one-month reporting lag).
The Company recorded measurement period adjustments during Fiscal 2020. The measurement period adjustments are
primarily related to conclusions reached on the ability to utilize certain deferred tax assets based on new facts and
circumstances identified which existed at the acquisition date and if known, would have affected the measurement of the
amounts recognized as of that date. The net measurement period adjustments increased goodwill by $26 million.
88
The following table summarizes the unaudited pro-forma consolidated results of operations for the fiscal year ended
March 30, 2019 as if the acquisition had occurred on April 2, 2017, the beginning of Fiscal 2018 (in millions):
Pro-forma total revenue
Pro-forma net income
Pro-forma net income per ordinary share attributable to Capri:
Basic
Diluted
March 30,
2019
$
$
$
5,983
579
3.82
3.78
The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and
Versace and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was
completed at the beginning of Fiscal 2018 and are not indicative of the future operating results of the combined company. The
financial information for Versace prior to the acquisition has been included in the pro-forma results of operations on a calendar-
year basis and includes certain adjustments to Versace’s historical consolidated financial statements to align with U.S. GAAP
and the Company’s accounting policies. The pro-forma consolidated results of operations also include the effects of purchase
accounting adjustments, including amortization charges related to the definite-lived intangible assets acquired, fair value
adjustments relating to leases and property and equipment, and the related tax effects assuming that the business combination
occurred on April 2, 2017. Purchase accounting amortization of the inventory step-up adjustment has been excluded from the
above pro-forma amounts due to the short-term nature of this adjustment. The pro-forma consolidated financial statements also
reflect the impact of debt repayment and borrowings made to finance the acquisition and exclude historical interest expenses
related to Versace’s €90 million pre-existing debt. Transaction costs of $41 million for Fiscal 2019, which have been recorded
within restructuring and other charges in the Company’s consolidated statements of operations and comprehensive (loss)
income, have been excluded from the above pro-forma consolidated results of operations due to their non-recurring nature. The
shares used to calculate the pro-forma net income per ordinary share attributable to Capri reflect the weighted average impact of
a 2.4 million ordinary share investment made by the Versace family at acquisition date.
6. Receivables, net
Receivables, net consist of (in millions):
Trade receivables (1)
Receivables due from licensees
Less: allowances
March 27,
2021
March 28,
2020
$
$
412 $
20
432
(59)
373 $
432
14
446
(138)
308
(1) As of March 27, 2021 and March 28, 2020, $81 million and $80 million, respectively, of trade receivables were
insured.
Receivables are presented net of allowances for discounts, markdowns, operational chargebacks and credit losses.
Discounts are based on open invoices where trade discounts have been extended to customers. Markdowns are based on
wholesale customers’ sales performance, seasonal negotiations with customers, historical deduction trends and an evaluation of
current market conditions. Operational chargebacks are based on deductions taken by customers, net of expected recoveries.
Such provisions, and related recoveries, are reflected in revenues.
The Company’s allowance for credit losses is determined through analysis of periodic aging of receivables and
assessments of collectability based on an evaluation of historic and anticipated trends, the financial condition of the Company’s
customers and the impact of general economic conditions. The past due status of a receivable is based on its contractual terms.
Amounts deemed uncollectible are written off against the allowance when it is probable the amounts will not be recovered.
Allowance for credit losses was $25 million and $39 million as of March 27, 2021 and March 28, 2020, respectively, including
the impact related to COVID-19. The Company had credit loss of $(3) million, $29 million and $4 million, respectively, for
Fiscal 2021, Fiscal 2020 and Fiscal 2019.
89
7. Concentration of Credit Risk, Major Customers and Suppliers
Financial instruments that subject the Company to concentration of credit risk are cash and cash equivalents and
receivables. As part of its ongoing procedures, the Company monitors its concentration of deposits with various financial
institutions in order to avoid any undue exposure. The Company mitigates its risk by depositing cash and cash equivalents in
major financial institutions. The Company also mitigates its credit risk by obtaining insurance coverage for a portion of its
receivables (see Note 6). No individual customer accounted for 10% or more of the Company’s total revenues during Fiscal
2021, Fiscal 2020 or Fiscal 2019.
The Company contracts for the purchase of finished goods principally with independent third-party contractors, whereby
the contractor is generally responsible for all manufacturing processes. Although the Company does not have any long-term
agreements with any of its manufacturing contractors, the Company believes it has mutually satisfactory relationships with
them. The Company allocates product manufacturing among agents and contractors based on their capabilities, the availability
of production capacity, quality, pricing and delivery. The inability of certain contractors to provide needed services on a timely
basis could adversely affect the Company’s operations and financial condition. For Fiscal 2021, Fiscal 2020 and Fiscal 2019,
one contractor accounted for approximately 18%, 20% and 21%, respectively, of the Company’s total finished goods purchases,
based on dollar volume.
The Company also has relationships with various agents who source finished goods with numerous contractors on behalf
of its Michael Kors brand. For Fiscal 2021, Fiscal 2020 and Fiscal 2019, one agent sourced approximately 26%, 26% and 24%,
respectively, of Michael Kors finished goods, based on unit volume.
8. Property and Equipment, net
Property and equipment, net, consists of (in millions):
Leasehold improvements
Computer equipment and software
Furniture and fixtures
Equipment
In-store shops (1)
Building
Land
Less: accumulated depreciation and amortization (1)
Construction-in-progress
March 27,
2021
March 28,
2020
$
$
737 $
359
350
139
53
51
20
1,709
(1,271)
438
47
485 $
704
329
329
136
236
49
19
1,802
(1,310)
492
69
561
(1) The Company wrote off $179 million of fully depreciated assets which were no longer in service from in-store shops
and related accumulated depreciation during the fiscal year ended March 27, 2021.
Depreciation and amortization of property and equipment for the fiscal years ended March 27, 2021, March 28, 2020,
and March 30, 2019 totaled $165 million, $200 million and $188 million, respectively. During Fiscal 2021, Fiscal 2020 and
Fiscal 2019, the Company recorded property and equipment impairment charges of $23 million, $77 million and $19 million,
respectively, primarily related to the Company's retail store locations. See Note 14 for additional information.
90
9. Intangible Assets and Goodwill
The following table details the carrying values of the Company’s intangible assets other than goodwill (in millions):
March 27, 2021
March 28, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Definite-lived intangible assets:
Reacquired rights
Trademarks
Customer relationships
$
400 $
23
437
860
77 $
21
86
184
323 $
2
351
676
400 $
23
404
827
61 $
20
51
132
Indefinite-lived intangible assets:
Jimmy Choo brand (1)
Versace brand (2)
Total intangible assets, excluding
goodwill
587
978
1,565
249
—
249
338
978
1,316
547
924
1,471
180
—
180
$
2,425 $
433 $
1,992 $
2,298 $
312 $
1,986
339
3
353
695
367
924
1,291
(1) The year-over-year change in carrying value reflects an impairment charge of $69 million and foreign currency
translation of $40 million for the fiscal year ended March 27, 2021. The Company recorded an impairment charge of
$180 million for the fiscal year ended March 28, 2020.
(2) The year-over-year change in value relates to foreign currency translation.
Reacquired rights relate to the Company’s reacquisition of the rights to use the Michael Kors trademarks and to import,
sell, advertise and promote certain of its products in the previously licensed territories in the Greater China region and are being
amortized through March 31, 2041, the expiration date of the related license agreement. The trademarks relate to the Michael
Kors brand name and are amortized over twenty years. Customer relationships are generally amortized over five to eighteen
years. Amortization expense for the Company’s definite-lived intangibles was $47 million, $49 million and $37 million,
respectively, for each of the fiscal years ended March 27, 2021, March 28, 2020 and March 30, 2019.
Indefinite-lived intangible assets other than goodwill included the Versace and Jimmy Choo brands, which were
recorded in connection with the acquisitions of Versace and Jimmy Choo, and have an indefinite life due to being essential to
the Company’s ability to operate the Versace and Jimmy Choo businesses for the foreseeable future.
Estimated amortization expense for each of the next five years is as follows (in millions):
Fiscal 2022
Fiscal 2023
Fiscal 2024
Fiscal 2025
Fiscal 2026
Fiscal 2027 and thereafter
$
$
47
47
47
47
47
441
676
The future amortization expense above reflects weighted-average estimated remaining useful lives of 20 years for
reacquired rights, 2 years for trademarks and 12 years for customer relationships.
91
The following table details the changes in goodwill for each of the Company’s reportable segments (in millions):
Balance at March 30, 2019
Acquisition
Measurement period adjustment (1)
Impairment charges (2)
Foreign currency translation
Balance at March 28, 2020
Impairment charges (2)
Foreign currency translation
Balance at March 27, 2021
Versace
Jimmy Choo
861
—
26
—
(6)
881
—
52
678
11
—
(171)
(31)
487
(94)
52
Michael
Kors
Total
120 $
1,659
—
—
—
—
120
—
—
11
26
(171)
(37)
1,488
(94)
104
$
933 $
445 $
120 $
1,498
(1) See Note 5 for additional information.
(2) The Company recorded impairment charges during Fiscal 2021 of $94 million related to the Jimmy Choo wholesale
and licensing reporting units, and $171 million during Fiscal 2020 related to the Jimmy Choo retail and licensing
reporting units.
The Company’s goodwill and the Versace and Jimmy Choo brands are not subject to amortization but are evaluated for
impairment annually in the last quarter of each fiscal year, or whenever impairment indicators exist. During the fourth quarter
of Fiscal 2021, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis for its
three segments. The Company performed its goodwill impairment assessment for its Michael Kors segment using a qualitative
assessment. Based on the results of the Company’s qualitative impairment assessment, the Company concluded that it is more
likely than not that the fair value of the Michael Kors’ reporting units exceeded their carrying value and, therefore, were not
impaired.
The Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis for both the
Versace and Jimmy Choo reporting units, using a combination of income and market approaches to estimate the fair value of
each brands' reporting units. The Company also elected to perform an impairment analysis for both the Versace and Jimmy
Choo brand indefinite-lived intangible assets using an income approach to estimate the fair values. Based on the results of these
assessments, the Company determined there was no impairment loss for the Jimmy Choo Retail reporting unit. The Company
also concluded that the fair values of the Versace reporting units and the brand intangible assets exceeded the related carrying
amounts and no impairment was required.
However, the Company concluded that the fair value of the Jimmy Choo Wholesale and Jimmy Choo Licensing
reporting units, along with the Jimmy Choo brand indefinite-lived intangible assets, did not exceed their related carrying
amounts. These impairment charges were primarily related to higher discount rates in the current year driven by a change in
market factors as well as a shift in expected revenue and earnings mix to the retail segment.
Accordingly, the Company recorded impairment charges of $94 million related to the Jimmy Choo Retail and Jimmy
Choo Licensing reporting units and $69 million related to the Jimmy Choo brand intangible assets during Fiscal 2021. The
Company recorded impairment charges of $171 million related to the Jimmy Choo Retail and Jimmy Choo Licensing reporting
units and $180 million related to the Jimmy Choo brand intangible assets during Fiscal 2020. The impairment charges were
recorded within impairment of assets on our consolidated statement of operations and comprehensive (loss) income for the
fiscal years ended March 27, 2021 and March 28, 2020. The Company did not record any such impairment charges in Fiscal
2019. See Note 14 for additional information.
92
10. Current Assets and Current Liabilities
Prepaid expenses and other current assets consist of the following (in millions):
Prepaid taxes
Other accounts receivables
Interest receivable related to net investment hedges
Prepaid contracts
Other
March 27,
2021
March 28,
2020
$
$
133 $
13
12
11
36
205 $
Accrued expenses and other current liabilities consist of the following (in millions):
Other taxes payable
Return liabilities
Accrued rent (1)
Charitable donations (2)
Accrued capital expenditures
Professional services
Accrued litigation
Gift and retail store credits
Accrued advertising and marketing
Accrued interest
Restructuring liability
Accrued purchases and samples
Other
March 27,
2021
March 28,
2020
$
$
46 $
46
20
20
17
13
12
12
11
10
9
8
73
297 $
116
10
1
17
23
167
38
37
10
—
31
10
10
11
9
8
9
3
65
241
(1) The accrued rent balance relates to variable lease payments.
(2) Relates to a $20 million unconditional pledge to The Capri Holdings Foundation for the Advancement of Diversity
in Fashion.
11. Restructuring and Other Charges
Capri Retail Store Optimization Program
As previously announced, the Company intends to close approximately 170 of its retail stores over two fiscal years,
which began during Fiscal 2021 and will continue into Fiscal 2022, in connection with its Capri Retail Store Optimization
Program in order to improve the profitability of its retail store fleet. In addition, the Company expects to incur approximately
$75 million of one-time costs related to this program, including lease termination and other store closure costs, the majority of
which are expected to result in future cash expenditures.
93
During Fiscal 2021, the Company closed 101 of its retail stores which have been incorporated into the Capri Retail Store
Optimization Program. Net restructuring charges recorded in connection with the Capri Retail Store Optimization Program
during Fiscal 2021 was $5 million. The below table presents a roll forward of the Company's restructuring liability related to its
Capri Retail Store Optimization Program (in millions):
Balance at March 28, 2020
Additions charged to expense (1)
Payments
Other
Balance at March 27, 2021
Severance and
benefit costs
Lease-related
and other costs
Total
$
$
— $
2
(2)
—
— $
— $
11
(11)
3
3 $
—
13
(13)
3
3
(1) Excludes a net credit of $8 million related to lease termination gains of previously impaired operating lease right-of-
use assets partially offset by additional impairments for the stores closing under the Company’s Capri Retail Store
Optimization Program during Fiscal 2021.
Michael Kors Retail Fleet Optimization Plan
During Fiscal 2020, the Company recorded restructuring charges of $5 million under the Michael Kors Retail Fleet
Optimization Plan, which was completed during the fourth quarter of Fiscal 2020.
Other Restructuring Charges
In addition to the restructuring charges related to the Capri Retail Store Optimization Plan, the Company incurred
charges of $8 million primarily relating to closures of corporate locations during Fiscal 2021.
The Company incurred $3 million of restructuring charges related to the Michael Kors Retail Fleet Optimization Plan
during Fiscal 2020, primarily consisting of lease-related costs.
Other Costs
During Fiscal 2021, the Company recorded costs of $19 million primarily related to equity awards associated with the
acquisition of Versace.
During Fiscal 2020, the Company recorded costs of $34 million, which included $24 million in connection with the
Versace acquisition, $9 million in connection with the acquisition of Jimmy Choo and $1 million in connection with the
acquisition of Gozzi.
94
12. Debt Obligations
The following table presents the Company’s debt obligations (in millions):
Term Loan
Senior Notes due 2024
Revolving Credit Facility
Other
Total debt
Less: Unamortized debt issuance costs
Less: Unamortized discount on long-term debt
Total carrying value of debt
Less: Short-term debt
Total long-term debt
Senior Secured Revolving Credit Facility
March 27,
2021
March 28,
2020
$
$
870 $
450
—
30
1,350
7
1
1,342
123
1,219 $
1,015
450
720
3
2,188
8
1
2,179
167
2,012
On June 25, 2020, the Company entered into the second amendment (the “Second Amendment”) to its third amended
and restated credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”), with, among others, JPMorgan Chase
Bank, N.A., as administrative agent (the “Administrative Agent”). Pursuant to the Second Amendment, the obligations under
the 2018 Credit Facility are secured by liens on substantially all of the assets of the Company and its U.S. subsidiaries that are
borrowers and guarantors, subject to certain exceptions, and substantially all of the registered intellectual property of the
Company and its subsidiaries. This requirement for collateral will fall away if the Company achieves an investment grade
ratings requirement for two consecutive full fiscal quarters. The Amendment adds a restriction on the disposition of assets and a
requirement to prepay the term loans with certain net cash proceeds of non-ordinary course asset sales, subject to certain
exceptions and a reinvestment option with respect to up to $100 million of net cash proceeds in the aggregate.
Pursuant to the Second Amendment, the financial covenant in the Company’s 2018 Credit Facility requiring it to
maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four
fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.0 has been waived through the fiscal quarter ending June
26, 2021. The Company terminated the waiver period effective May 26, 2021. Effective as of that date, the applicable ratio will
be calculated net of the Company’s unrestricted cash and cash equivalents in excess of $100 million and shall exclude up to
$150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0. In addition, until
March 31, 2021, the material adverse change representation required to be made in connection with revolving borrowings and
the issuance or amendment of letters of credit will be modified to disregard certain COVID-19 pandemic-related impacts to the
business, results of operations or financial condition of the Company and its subsidiaries, taken as a whole. The Second
Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with
respect to the fiscal quarter ending June 26, 2021, to maintain at all times unrestricted cash and cash equivalents plus the
aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $300 million,
increasing to $400 million on October 1, 2020 and $500 million on December 1, 2020.
The 2018 Credit Facility and the Indenture governing the Company's senior notes contain certain restrictive covenants
that impose operating and financial restrictions on the Company, and the Second Amendment imposes incremental restrictions
on certain of these covenants during the covenant relief period provided under the 2018 Credit Facility, including restrictions on
its ability to incur additional indebtedness and guarantee indebtedness, pay dividends or make other distributions or repurchase
or redeem capital stock, make loans and investments, including acquisitions, sell assets, incur liens, enter into transactions with
affiliates and consolidate, merge or sell all or substantially all of its assets.
The 2018 Credit Facility provides for a $1 billion revolving credit facility (the "Revolving Credit Facility"), which
may be denominated in U.S. dollars and other currencies, including Euros, Canadian Dollars, Pounds Sterling, Japanese Yen
and Swiss Francs. The Revolving Credit Facility also provides sub-facilities for the issuance of letters of credit of up to
$75 million and swing loans of up to $75 million. The 2018 Credit Facility also provides for a $1.6 billion term loan facility
(the "2018 Term Loan Facility"). The 2018 Term Loan Facility is divided into two tranches, with the second tranche maturing
in December 2023, which requires a quarterly payment of $24 million. As of March 27, 2021, the Company has fully paid off
Tranche 1 of the 2018 Term Loan Facility.
95
In addition, the Second Amendment adds a new $230 million revolving line of credit that matures on June 24, 2021
(the “364 Day Facility”). The terms of the 364 Day Facility are substantially similar to the terms of the existing revolving
facility under the 2018 Credit Facility except that (i) no letters of credit or swingline loans are provided and (ii) for loans
subject to Adjusted LIBOR, the applicable margin is 225 basis points per annum, for loans subject to the base rate the
applicable margin is 125 basis points per annum and the commitment fee is 35 basis points per annum. In addition, while the
364 Day Facility is outstanding, (i) if the Company incurs any incremental indebtedness under the 2018 Credit Facility or
certain permitted indebtedness in lieu of such incremental indebtedness, the 364 Day Facility will be reduced on a dollar for
dollar basis and the Company will be required to make corresponding prepayments and (ii) the Company will be required to
prepay amounts outstanding under the 364 Day Facility on a weekly basis to the extent that cash and cash equivalents of the
Company and its subsidiaries exceed $200 million.
The Second Amendment also permits certain working capital facilities between the Company or any of its subsidiaries
with a lender or an affiliate of a lender under the 2018 Credit Facility to be guaranteed under the 2018 Credit Facility
guarantees and certain supply chain financings with, and up to $50 million outstanding principal amount of bilateral letters of
credit and bilateral bank guarantees issued by a lender or an affiliate of a lender to be guaranteed and secured under the 2018
Credit Facility guarantees and collateral documents.
Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at the following rates:
•
•
•
•
for any loans (except loans denominated in Canadian Dollars), the greater of Adjusted LIBOR for the applicable interest
period and zero, plus an applicable margin based on the Company’s public debt rating;
for loans denominated in U.S. Dollars, an alternate base rate, which is the greatest of: (a) the prime rate publicly
announced from time to time by JPMorgan Chase, (b) the greater of the federal funds effective rate and the Federal
Reserve Bank of New York overnight bank funding rate and zero, plus 50 basis points, and (c) the greater of the one-
month London Interbank Offered Rate adjusted for statutory reserve requirements for Eurocurrency liabilities (“Adjusted
LIBOR”) and zero, plus 100 basis points, in each case, plus an applicable margin based on the Company’s public debt
ratings;
for loans denominated in Canadian Dollars, the Canadian prime rate, which is the greater of the PRIMCAN Index rate
and the rate applicable to one-month Canadian Dollar banker’s acceptances quoted on Reuters (“CDOR”), plus 100 basis
points, plus an applicable margin based on the Company’s public debt ratings; or
for loans denominated in Canadian Dollars, the average CDOR rate for the applicable interest period, plus 10 basis
points per annum, plus an applicable margin based on the Company’s public debt ratings.
Borrowings under the 2018 Term Loan Facility bear interest, at the Company’s option, at (a) the alternate base rate plus
an applicable margin based on the Company’s public debt ratings; or (b) the greater of Adjusted LIBOR for the applicable
interest period and zero, plus an applicable margin based on the Company’s public debt ratings.
The Revolving Credit Facility also provides for an annual administration fee and a commitment fee equal
to 0.10% to 0.25% per annum, based on the Company’s public debt ratings, applied to the average daily unused amount of the
Revolving Credit Facility. The 2018 Term Loan Facility provides for a commitment fee equal to 0.10% to 0.25% per annum,
based on the Company’s public debt ratings, applied to the undrawn amount of the 2018 Term Loan Facility, from January 6,
2019 until the term loans are fully drawn or the commitments under the 2018 Term Loan Facility terminate or expire. Loans
under the 2018 Credit Facility may be repaid and commitments may be terminated or reduced by the borrowers without
premium or penalty other than the customary breakage costs with respect to loans bearing interest based on Adjusted LIBOR or
the CDOR rate.
As of the last day of Fiscal 2021, the 2018 Credit Facility requirement of the Company to maintain a leverage ratio as of
the end of each fiscal quarter of no greater than 3.75 to 1 has been waived through the fiscal quarter ending June 26, 2021. Such
leverage ratio is calculated based on the ratio of consolidated total indebtedness plus the capitalized amount of all operating
lease liabilities presented on our consolidated balance sheets to Consolidated EBITDAR (as defined below) for the last four
consecutive fiscal quarters. Consolidated EBITDAR is defined as consolidated net income plus income tax expense, net interest
expense, depreciation and amortization expense, consolidated rent expense and other non-cash charges, subject to certain
additions and deductions. The 2018 Credit Facility also includes covenants that limit additional indebtedness, guarantees, liens,
acquisitions and other investments and cash dividends that are customary for financings of this type. See Note 22 for additional
information. As of March 27, 2021 and the date these financial statements were issued, the Company was in compliance with
96 all covenants related to this agreement, which was calculated based on the unrestricted cash and cash equivalents plus the
aggregate undrawn amounts of no less than $500 million under the 2018 Credit Facility.
The 2018 Credit Facility contains events of default customary for financings of this type, including, but not limited to,
payment of defaults, material inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain
indebtedness, certain events of bankruptcy or insolvency, certain events under The Employee Retirement Income Security Act,
material judgments, actual or asserted failure of any guaranty supporting the 2018 Credit Facility to be in full force and effect,
and changes of control. If such an event of default occurs, the lenders under the 2018 Credit Facility would be entitled to take
various actions, including, but not limited to, terminating the commitments and accelerating amounts outstanding under the
2018 Credit Facility, subject to “certain funds” limitations in connection with the transaction governing the 2018 Term Loan
Facility.
As of March 27, 2021, the Company had no borrowings outstanding under the Revolving Credit Facility as a result of
repaying the remaining borrowings. As of March 28, 2020, the Company had $681 million borrowings outstanding under the
Revolving Credit Facility, which were recorded within long-term debt in its consolidated balance sheets. In addition, stand-by
letters of credit of $27 million and $18 million were outstanding as of March 27, 2021 and March 28, 2020, respectively.
At March 27, 2021, the amount available for future borrowings under the Revolving Credit Facility and the 364 Day facility
were $973 million and $230 million, respectively.
As of March 27, 2021, the carrying values of borrowings outstanding under the 2018 Term Loan Facility were $865
million, net of debt issuance costs of $5 million, $97 million of which was recorded within short-term debt while $768 million
was recorded within long-term debt in the Company's consolidated balance sheets. As of March 28, 2020, the carrying values of
borrowings outstanding under the 2018 Term Loan Facility were $1.010 billion, net of debt issuance costs of $5 million, $128
million of which was recorded within short-term debt while $882 million was recorded within long-term debt in the Company's
consolidated balance sheets.
Senior Notes
On October 20, 2017, Michael Kors (USA), Inc. (the “Issuer”), the Company’s wholly owned subsidiary, completed its
offering of $450 million aggregate principal amount of 4.000% senior notes due 2024 (the “Senior Notes”) at an issue price of
99.508% of aggregate principal amount, pursuant to an exemption from registration under the Securities Act of 1933, as
amended. The Senior Notes were issued under an indenture dated October 20, 2017, among the Issuer, the Company, the
subsidiary guarantors party thereto and U.S. Bank National Association, as trustee (the “Indenture”). The Senior Notes were
issued to finance a portion of the Company’s acquisition of Jimmy Choo and certain related refinancing transactions.
As of March 27, 2021, the Senior Notes bear interest at a rate of 4.500% per year, subject to adjustments from time to
time if either Moody’s or S&P (or a substitute rating agency therefore) downgrades (or downgrades and subsequently upgrades)
the credit rating assigned to the Senior Notes. Interest on the Senior Notes is payable semi-annually on May 1 and November 1
of each year, beginning on May 1, 2018.
The Senior Notes are unsecured and are guaranteed by the Company and its existing and future subsidiaries that
guarantee or are borrowers under the 2018 Credit Facility (subject to certain exceptions, including subsidiaries organized in
China).
The Senior Notes may be redeemed at the Company’s option at any time in whole or in part at a price equal to 100% of
the principal amount, plus accrued and unpaid interest, plus a “make-whole” amount calculated at the applicable Treasury Rate
plus 30 basis points.
The Senior Notes rank equally in right of payment with all of the Issuer’s and guarantors’ existing and future senior
unsecured indebtedness, senior in right of payment to any future subordinated indebtedness, effectively subordinated in right of
payment to any of the Company’s subsidiaries’ obligations (including secured and unsecured obligations) and any of the
Company’s secured obligations, to the extent of the assets securing such obligations.
The Indenture contains covenants, including those that limit the Company’s ability to create certain liens and enter into
certain sale and leaseback transactions. In the event of a “Change of Control Triggering Event,” as defined in the Indenture, the
Issuer will be required to make an offer to repurchase the Senior Notes at a repurchase price in cash equal to 101% of the
aggregate principal amount of the Senior Notes being repurchased plus any unpaid interest. These covenants are subject to
important limitations and exceptions, as per the Indenture.
97 As of March 27, 2021 and March 28, 2020, the carrying value of the Senior Notes was $447 million and $446 million,
respectively, net of issuance costs and unamortized discount, which were recorded within long-term debt in the Company's
consolidated balance sheets.
Supplier Financing Program
During the third quarter of Fiscal 2021, the Company began offering a supplier financing program to certain suppliers as
the Company continues to identify opportunities to improve liquidity. This program enables suppliers, at their sole discretion, to
sell their receivables (i.e., the Company’s payment obligations to suppliers) to a financial institution on a non-recourse basis in
order to be paid earlier than current payment terms provide. The Company’s obligations, including the amount due and
scheduled payment dates, are not impacted by a suppliers’ decision to participate in this program. The Company does not
reimburse suppliers for any costs they incur to participate in the program and their participation is voluntary. The amount
outstanding under this program as of March 27, 2021 was $17 million and is presented as short-term debt in the Company’s
consolidated balance sheets.
Japan Credit Facility
In Fiscal 2021, the Company’s subsidiary in Japan renewed a short term credit facility (“Japan Credit Facility”) with
Mitsubishi UFJ Financial Group (“MUFJ”), which may be used to fund general working capital needs of Michael Kors Japan
K.K., subject to the bank’s discretion. The Japan Credit Facility is in effect through November 30, 2021. The Japan Credit
Facility provides Michael Kors Japan K.K. with a revolving credit line of up to ¥1.0 billion (approximately $9 million). The
Japan Credit Facility bears interest at a rate posted by the Bank plus 0.300% two business days prior to the date of borrowing or
the date of interest renewal. As of March 27, 2021 the Company had $9 million borrowings outstanding under the Japan Credit
Facility and no borrowings outstanding as of March 28, 2020, which were recorded within short-term debt in the Company's
consolidated balance sheets.
Hong Kong Credit Facility
In May 2020, the Company’s Hong Kong subsidiary, MKHKL, renewed its uncommitted credit facility (“HK Credit
Facility”) with HSBC, which may be used to fund general working capital needs of MKHKL through September 30, 2021
subject to the bank’s discretion. The HK Credit Facility provides MKHKL with a revolving line of credit of up to 100 million
Hong Kong Dollars (approximately $13 million), and may be used to support bank guarantees. Borrowings under the HK Credit
Facility must be made in increments of at least 5 million Hong Kong Dollars and bear interest at the Hong Kong Interbank
Offered Rate (“HIBOR”) plus 150 basis points. As of March 27, 2021 and March 28, 2020, there were no borrowings
outstanding under the HK Credit Facility. As of March 27, 2021, bank guarantees supported by this facility were 3 million
Hong Kong Dollars (less than $1 million). At March 27, 2021, the amount available for future borrowings under the HK Credit
Facility was 97 million Hong Kong Dollars (approximately $13 million).
China Credit Facility
In January 2019, the Company’s subsidiary in China, MKTSCL, entered into a short-term credit facility (“China Credit
Facility”) with HSBC, which may be used to fund general working capital needs, not to exceed 12 months. The China Credit
Facility is in effect through December 31, 2021. The China Credit Facility provides MKTSCL with a Revolving Loan Facility
of up to RMB 70 million (approximately $11 million), an overdraft facility with a credit line of RMB 10 million (approximately
$1 million) and a non-financial bank guarantee facility of RMB 20 million (approximately $3 million) or its equivalent in
another currency, at lender’s discretion. Borrowings under the China Credit Facility bear interest at 105% of the applicable
People’s Bank of China’s Benchmark lending rate at the time of borrowing. As of March 27, 2021 and March 28, 2020, the
Company had no borrowings outstanding under the China Credit Facility.
Versace Credit Facilities
In June 2019, the Company’s subsidiary, Versace, entered into two uncommitted short-term credit facilities, one with
Unicredit and the other with Intesa (“Versace Credit Facilities”), which may be used for general working capital needs of
Versace. The Versace Credit Facilities provide Versace with a swing line of credit of up to €32 million (approximately $38
million), with interest set by the bank on the date of borrowing. As of March 27, 2021, there were no borrowings outstanding
under the Versace Credit Facility. As of March 28, 2020, there were borrowings outstanding of €25 million (approximately $28
million), which were recorded within short-term debt in the Company's consolidated balance sheets.
98 In November 2018, Versace entered into an overdraft facility ("Versace Overdraft Facility"), which may be used for
general working capital needs of Versace. The overdraft facility provides Versace with a line of credit of up to €5 million
(approximately $6 million). As of March 27, 2021 and March 28, 2020, there were no borrowings outstanding under the
Versace Overdraft Facility.
In January 2018, Versace entered into an uncommitted short-term credit facility (“Versace Credit Facility”), which may
be used for general working capital needs of Versace. The Versace Credit Facility provides Versace with a swing line of credit
of up to €20 million (approximately $24 million), with interest set by the bank on the date of borrowing. As of March 27, 2021,
there were no borrowings outstanding under the Versace Credit Facility. As of March 28, 2020, there were borrowings
outstanding of €10 million (approximately $11 million), which were recorded within short-term debt in the Company's
consolidated balance sheets.
13. Commitments and Contingencies
Commitments
The Company has issued stand-by letters of credit to guarantee certain of its retail and corporate operating lease
commitments, aggregating $33 million at March 27, 2021, including $27 million in letters of credit issued under the Revolving
Credit Facility.
Other Commitments
As of March 27, 2021, the Company also has other contractual commitments aggregating $2.108 billion, which consist
of inventory purchase commitments of $688 million, debt obligations of $1.350 billion and other contractual obligations of $70
million, which primarily relate to the Company’s marketing and advertising obligations, information technology agreements
and supply agreements.
Long-term Employment Contract
The Company has an employment agreement with the Chief Creative Officer of the Michael Kors brand that provides for
continuous employment through the date of the officer’s death or permanent disability at an annual salary of $1 million. In
addition to salary, the agreement provides for an annual bonus and other employee related benefits. In response to the continued
global health and economic impact of the COVID-19 pandemic, the Chief Creative Officer of the Michael Kors brand
voluntarily elected to forgo his salary for Fiscal 2021.
Contingencies
In the ordinary course of business, the Company is party to various legal proceedings and claims. Although the outcome
of such items cannot be determined with certainty, the Company does not believe that the outcome of all pending legal
proceedings in the aggregate will have a material adverse effect on its cash flow, results of operations or financial position.
14. Fair Value Measurements
Financial assets and liabilities are measured at fair value using the three-level valuation hierarchy for disclosure of fair
value measurements. The determination of the applicable level within the hierarchy of a particular asset or liability depends on
the inputs used in the valuation as of the measurement date, notably the extent to which the inputs are market-based
(observable) or internally derived (unobservable). Observable inputs are inputs that market participants would use in pricing the
asset or liability based on market data obtained from independent sources. Unobservable inputs are inputs based on a
company’s own assumptions about market participant assumptions based on the best information available in the
circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that a company has the
ability to access at the measurement date.
Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets or quoted prices for
identical assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability and
inputs derived principally from or corroborated by observable market data.
99 Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
At March 27, 2021 and March 28, 2020, the fair values of the Company’s forward foreign currency exchange contracts,
interest rate swaps and net investment hedges were determined using broker quotations, which were calculations derived from
observable market information: the applicable currency rates at the balance sheet date and those forward rates particular to the
contract at inception. The Company makes no adjustments to these broker obtained quotes or prices, but assesses the credit risk
of the counterparty and would adjust the provided valuations for counterparty credit risk when appropriate. The fair values of
the forward contracts are included in prepaid expenses and other current assets, and in accrued expenses and other current
liabilities in the consolidated balance sheets, depending on whether they represent assets or liabilities to the Company. The fair
values of net investment hedges and interest rate swaps are included in other assets, and in other long-term liabilities in the
consolidated balance sheets, depending on whether they represent assets or liabilities of the Company. See Note 15 for detail.
All contracts are measured and recorded at fair value on a recurring basis and are categorized in Level 2 of the fair value
hierarchy, as shown in the following table (in millions):
Fair value at March 27, 2021, using:
Fair value at March 28, 2020, using:
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Quoted prices
in active
markets for
identical
assets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Derivative assets:
Forward foreign currency exchange
contracts
Net investment hedges
Total derivative assets
Derivative liabilities:
Forward foreign currency exchange
contracts
Net investment hedges
Designated interest rate swaps
Total derivative liabilities
$
$
$
$
— $
—
— $
2 $
3
5 $
— $
—
—
— $
1 $
263
1
265 $
— $
—
— $
— $
—
—
— $
— $
—
— $
— $
—
—
— $
1 $
3
4 $
— $
—
—
— $
—
—
—
—
—
—
—
The Company’s long-term debt obligations are recorded in its consolidated balance sheets at carrying values, which may
differ from the related fair values. The fair value of the Company’s long-term debt is estimated using external pricing data,
including any available quoted market prices and based on other debt instruments with similar characteristics. Borrowings
under revolving credit agreements, if outstanding, are recorded at carrying value, which approximates fair value due to the
frequent nature of such borrowings and repayments. See Note 12 for detailed information related to carrying values of the
Company’s outstanding debt. The following table summarizes the carrying values and estimated fair values of the Company’s
short- and long-term debt, based on Level 2 measurements (in millions):
Senior Notes due 2024
Term Loan
Revolving Credit Facilities
March 27, 2021
March 28, 2020
Carrying Value
Estimated
Fair Value
Carrying Value
Estimated
Fair Value
$
$
$
447 $
865 $
— $
470 $
866 $
— $
446 $
1,010 $
720 $
443
957
720
The Company’s cash and cash equivalents, accounts receivable and accounts payable, are recorded at carrying value,
which approximates fair value.
100
Non-Financial Assets and Liabilities
The Company’s non-financial assets include goodwill, intangible assets, operating lease right-of-use assets and property
and equipment. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The
Company’s goodwill and its indefinite-lived intangible assets (Versace and Jimmy Choo brands) are assessed for impairment at
least annually, while its other long-lived assets, including operating lease right-of-use assets, property and equipment and
definite-lived intangible assets, are assessed for impairment whenever events or changes in circumstances indicate that the
carrying amount of any such asset may not be recoverable. The fair values of these assets were determined based on Level 3
measurements using the Company’s best estimates of the amount and timing of future discounted cash flows, based on
historical experience, market conditions, current trends and performance expectations.
The following table details the carrying values and fair values of the Company’s assets that have been impaired (in
millions):
Fiscal 2021:
Operating Lease Right-of-Use Assets
Goodwill
Brands
Property and Equipment
Total
Fiscal 2020:
Operating Lease Right-of-Use Assets
Brands
Goodwill
Property and Equipment
Total
Fiscal 2019:
Property and Equipment
Lease Rights
Total
Carrying Value
Prior to
Impairment
Fair Value
Impairment
Charge (1)
$
$
$
326 $
191 $
319
407
30
225
338
7
1,082 $
761 $
717 $
437 $
547
474
105
367
303
28
$
1,843 $
1,135 $
26
3
$
29 $
7
1
8 $
135
94
69
23
321
280
180
171
77
708
19
2
21
(1)
Includes $5 million of impairment charges that were recorded within restructuring and other charges related to the
Capri Retail Store Optimization Program during the Fiscal 2021.
In addition to the impairment charges above, the Company recorded an adjustment to reduce its March 31, 2019 opening
balance of retained earnings by $152 million, net of tax, reflecting impairments of operating lease right-of-use assets for certain
underperforming real estate locations for which the carrying value of the opening operating lease right-of-use asset exceeded its
related fair value. Property and equipment related to these underperforming locations were fully impaired due to the adoption of
ASU 2016-02. See Note 2 and Note 4 for additional information.
There were no impairment charges related to goodwill or indefinite-lived intangible assets in Fiscal 2019.
101
15. Derivative Financial Instruments
Forward Foreign Currency Exchange Contracts
The Company uses forward foreign currency exchange contracts to manage its exposure to fluctuations in foreign
currency for certain of its transactions. The Company, in its normal course of business, enters into transactions with foreign
suppliers and seeks to minimize risks related to certain forecasted inventory purchases by using forward foreign currency
exchange contracts. The Company only enters into derivative instruments with highly credit-rated counterparties. The Company
does not enter into derivative contracts for trading or speculative purposes.
On September 24, 2018, in connection with the acquisition of Versace, the Company entered into forward foreign
currency exchange contracts with a total notional amount of €1.680 billion (approximately $2.001 billion) to mitigate its foreign
currency exchange risk through the expected closing date of the acquisition. This derivative contract was not designated as an
accounting hedge and was settled on December 21, 2018 as a result of the debt issued in connection with the acquisition of
Versace (see Note 12 for further information). Changes in fair value were recorded to foreign currency (gain) loss in the
Company’s consolidated statement of operations and comprehensive (loss) income for Fiscal 2019.
Net Investment Hedges
As of March 27, 2021, the Company had multiple fixed-to-fixed cross-currency swap agreements with aggregate
notional amounts of $3 billion to hedge its net investment in Euro-denominated subsidiaries and $194 million to hedge its net
investment in Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the U.S. Dollar
and these currencies. Under the term of these contracts, the Company will exchange the semi-annual fixed rate payments on
U.S. denominated debt for fixed rate payments of 0% to 4.508% in Euros and 0% to 3.588% in Japanese Yen. Certain of these
contracts include mandatory early termination dates between November 2022 and February 2026, while the remaining contracts
have maturity dates between July 2022 and August 2027. These contracts have been designated as net investment hedges
During the fourth quarter of Fiscal 2020, the Company terminated all of its net investment hedges related to its Euro-
denominated subsidiaries. The early termination of these hedges resulted in the Company receiving $296 million in cash during
the fourth quarter of Fiscal 2020. This resulted in a pre-tax gain of $211 million being recognized in other comprehensive
income (loss) ("OCI") during the fourth quarter of Fiscal 2020.
When a cross-currency swap is used as a hedging instrument in a net investment hedge assessed under the spot method,
the cross-currency basis spread is excluded from the assessment of hedge effectiveness and is recognized as a reduction in
interest expense in the Company’s consolidated statements of operations and comprehensive (loss) income. Accordingly, the
Company recorded a reduction in interest expense of $16 million, $71 million and $17 million, respectively, during Fiscal 2021,
Fiscal 2020 and Fiscal 2019.
Interest Rate Swap
As of March 27, 2021, the Company had an interest rate swap with an initial notional amount of $500 million that will
decrease to $350 million in April 2022. The swap was designated as a cash flow hedge designed to mitigate the impact of
adverse interest rate fluctuations for a portion of the Company’s variable-rate debt equal to the notional amount of the swap.
The interest rate swap converts the one-month Adjusted LIBOR interest rate on these borrowings to a fixed interest rate of
0.237% through December 2022.
When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value
are recorded in equity as a component of accumulated other comprehensive income (loss) and are reclassified into interest
expense in the same period during which the hedged transactions affect earnings. During Fiscal 2021, the Company recorded an
immaterial amount of interest expense related to this agreement.
102 The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in
the consolidated balance sheets as of March 27, 2021 and March 28, 2020 (in millions):
Notional Amounts
Assets
Liabilities
March 27,
2021
March 28,
2020
March 27,
2021
March 28,
2020
March 27,
2021
March 28,
2020
Fair Values
Designated forward foreign currency
exchange contracts
Designated net investment hedge
Designated interest rate swap
Total designated hedges
Undesignated derivative contracts (5)
$
155 $
161 $
3,194
500
3,849
13
44
—
205
—
Total
$
3,862 $
205 $
2 (1) $
3 (3)
—
5
—
5
$
1 (1) $
3 (3)
—
4
—
4
$
1 (2) $
263 (4)
1 (4)
265
—
265
$
—
—
—
—
—
—
(1) Recorded within prepaid expenses and other current assets in the Company’s consolidated balance sheets.
(2) Recorded within accrued expenses and other current liabilities in the Company’s consolidated balance sheets.
(3) Recorded within other assets in the Company’s consolidated balance sheets.
(4) Recorded within other long-term liabilities in the Company’s consolidated balance sheets.
(5) Primarily includes undesignated hedges of inventory purchases.
The Company records and presents the fair values of all of its derivative assets and liabilities in its consolidated balance
sheets on a gross basis, as shown in the above table. However, if the Company were to offset and record the asset and liability
balances for its derivative instruments on a net basis in accordance with the terms of its master netting arrangements, which
provide for the right to set-off amounts for similar transactions denominated in the same currencies, the resulting impact as of
March 27, 2021 and March 28, 2020 would be as follows (in millions):
Forward Currency
Exchange Contracts
Net Investment
Hedges
Interest Rate Swap
March 27,
2021
March 28,
2020
March 27,
2021
March 28,
2020
March 27,
2021
March 28,
2020
Assets subject to master
netting arrangements
Liabilities subject to master
netting arrangements
Derivative assets, net
Derivative liabilities, net
$
$
$
$
2 $
1 $
3 $
3 $
— $
1 $
1 $
— $
— $
1 $
— $
263 $
3 $
263 $
— $
3 $
— $
1 $
— $
1 $
—
—
—
—
The Company’s master netting arrangements do not require cash collateral to be pledged by the Company or its
counterparties.
Changes in the fair value of the Company’s forward foreign currency exchange contracts that are designated as
accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss), and are
reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged
transactions are recognized into earnings, as a component of cost of sales within the Company’s consolidated statements of
operations and comprehensive (loss) income. The net gain or loss on net investment hedges are reported within foreign
currency translation gains and losses (“CTA”) as a component of accumulated other comprehensive income (loss) on the
Company’s consolidated balance sheets. Upon discontinuation of the hedge, such amounts remain in CTA until the related net
investment is sold or liquidated. Changes in the fair value of the Company’s interest rate swaps that are designated as
accounting hedges are recorded in equity as a component of accumulated other comprehensive income (loss) and are
reclassified from accumulated other comprehensive income (loss) into earnings when the items underlying the hedged
transactions are recognized into earnings, as a component of interest expense within the Company’s consolidated statements of
operations and comprehensive (loss) income.
103
The following table summarizes the pre-tax impact of the gains and losses on the Company's designated forward foreign
currency exchange contracts, net investment hedges and interest rate swaps (in millions):
Fiscal Year Ended
March 27, 2021
Pre-Tax Losses
Recognized in OCI
Fiscal Year Ended
March 28, 2020
Pre-Tax Gains
Recognized in OCI
Fiscal Year Ended
March 30, 2019
Pre-Tax Gains
Recognized in OCI
Designated forward foreign currency exchange
contracts
Designated net investment hedges
Designated interest rate swaps
$
$
$
(2) $
(263) $
(1) $
6 $
264 $
— $
16
47
—
The following tables summarize the impact of the gains and losses within the consolidated statements of operations and
comprehensive (loss) income related to the designated forward foreign currency exchange contracts (in millions):
Fiscal Year Ended
Pre-Tax (Gains) Losses
Reclassified from
Accumulated OCI
March 28,
2020
March 27,
2021
March 30,
2019
Location of (Gains) Losses
Recognized
Designated forward currency exchange
contracts
$
(2) $
(10) $
4
Cost of Sales
The Company expects that substantially all of the amounts recorded in accumulated other comprehensive income (loss)
for its forward foreign currency exchange contracts will be reclassified into earnings during the next 12 months, based upon the
timing of inventory purchases and turnover.
Undesignated Hedges
During Fiscal 2021 and Fiscal 2020, the Company recognized an immaterial amount of net gains and losses and during
Fiscal 2019, the Company recognized a net loss of $78 million within foreign currency (gain) loss in the Company’s
consolidated statement of operations and comprehensive (loss) income as a result of the changes in the fair value of
undesignated forward foreign currency contracts. The Fiscal 2019 amount was primarily comprised of a $77 million loss related
to the derivative contracts entered into on September 25, 2018 to mitigate foreign currency exchange risk associated with the
Versace acquisition that were settled on December 21, 2018.
16. Shareholders’ Equity
Share Repurchase Program
During the first quarter of Fiscal 2021, the Company suspended its $500 million share-repurchase program in response to
the continued impact of the COVID-19 pandemic. During Fiscal 2021, the Company did not purchase any shares through open
market transactions under the current plan. As of March 27, 2021, the remaining availability under the Company’s share
repurchase program was $400 million. Share repurchases may be made in open market or privately negotiated transactions,
subject to market conditions, applicable legal requirements, trading transactions under the Company’s insider trading policy and
other relevant factors. The program may be suspended or discontinued at any time.
The Company also has in place a “withhold to cover” repurchase program, which allows the Company to withhold
ordinary shares from certain executive officers and directors to satisfy minimum tax withholding obligations relating to the
vesting of their restricted share awards. During Fiscal 2021 and Fiscal 2020, the Company withheld 48,528 shares and 63,958
shares, respectively, with a fair value of $1 million and $2 million, respectively, in satisfaction of minimum tax withholding
obligations relating to the vesting of restricted share awards.
104
Accumulated Other Comprehensive Income (Loss)
The following table details changes in the components of accumulated other comprehensive income (loss) ("AOCI"), net
of taxes for Fiscal 2021, Fiscal 2020 and Fiscal 2019 (in millions):
Balance at April 1, 2018
Other comprehensive (loss) income before reclassifications
Less: amounts reclassified from AOCI to earnings
Other comprehensive (loss) income, net of tax
Balance at March 30, 2019
Other comprehensive income before reclassifications
Less: amounts reclassified from AOCI to earnings
Other comprehensive income (loss), net of tax
Balance at March 28, 2020
Other comprehensive loss before reclassifications
Less: amounts reclassified from AOCI to earnings
Other comprehensive loss, net of tax
Balance at March 27, 2021
Foreign
Currency
Translation
Income (Loss) (1)
$
61 $
(134)
—
(134)
(73)
145
—
145
72
(15)
—
(15)
57 $
$
Net (Loss)
Income on
Derivatives (2)
Other
Comprehensive
Income (Loss)
Attributable to
Capri
(10) $
14
(3)
17
7
5
9
(4)
3
(2)
2
(4)
(1) $
51
(120)
(3)
(117)
(66)
150
9
141
75
(17)
2
(19)
56
(1) Foreign currency translation losses for Fiscal 2021 primarily include a $199 million loss, net of taxes of $63 million,
primarily relating to the Company’s net investment hedges, a net $189 million translation gain and a net loss of $8
million, on intra-entity transactions that are of a long-term investment nature. Foreign currency translation gains for
Fiscal 2020 includes a $219 million gain, net of taxes of $45 million, relating to the Company's net investment
hedges, a $60 million translation loss relating to the Jimmy Choo business, a $10 million translation loss relating to
the Versace business and a net gain of $6 million, on intra-entity transactions that are of a long-term investment
nature.
(2) Reclassified amounts relate to the Company’s forward foreign currency exchange contracts for inventory purchases
and are recorded within cost of goods sold in the Company’s consolidated statements of operations and
comprehensive (loss) income. Other comprehensive income (loss) before reclassifications related to derivative
instruments for Fiscal 2021 was immaterial. Other comprehensive income (loss) before reclassifications related to
derivative instruments for Fiscal 2020 and Fiscal 2019 is net of a tax benefits of $0 million and $2 million,
respectively. All tax effects were not material for the periods presented.
17. Share-Based Compensation
The Company grants equity awards to certain employees and directors of the Company at the discretion of the
Company’s Compensation and Talent Committee. The Company has two equity plans which includes one stock option plan
adopted in Fiscal 2008 (as amended and restated, the “2008 Plan”), and an Omnibus Incentive Plan adopted in the third fiscal
quarter of Fiscal 2012 and amended and restated with shareholder approval in May 2015 and again in June 2020 (the “Incentive
Plan”). The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares.
As of March 27, 2021, there were no shares available to grant equity awards under the 2008 Plan. The Incentive Plan allows for
grants of share options, restricted shares and restricted stock units ("RSUs"), and other equity awards, and authorizes a total
issuance of up to 18,846,000 ordinary shares. At March 27, 2021, there were 4,998,829 ordinary shares available for future
grants of equity awards under the Incentive Plan. Option grants issued from the 2008 Plan generally expire ten years from the
date of the grant, and those issued under the Incentive Plan generally expire seven years from the date of the grant.
105
Share Options
Share options are generally exercisable at the fair market value on the date of grant and vest on a pro-rata basis over a
four year service period. The following table summarizes the share options activity during Fiscal 2021, and information about
options outstanding at March 27, 2021:
Number of
Options
Weighted
Average
Exercise price
Weighted
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
(in millions)
Outstanding at March 28, 2020
Granted
Exercised
Canceled/forfeited
Outstanding at March 27, 2021
Vested or expected to vest at March 27, 2021
Vested and exercisable at March 27, 2021
2,071,096 $
— $
(446,564) $
(474,272) $
1,150,260 $
1,150,260 $
1,014,945 $
50.66
—
6.06
61.73
63.42
63.42
64.01
1.67 $
1.67
1.37 $
4
4
There were 135,315 unvested options and 1,014,945 vested options outstanding at March 27, 2021. The total intrinsic
value of options exercised during Fiscal 2021 was $10 million and immaterial during Fiscal 2020. The cash received from
options exercised during Fiscal 2021 was $3 million and immaterial during Fiscal 2020. As of March 27, 2021, the remaining
unrecognized share-based compensation expense for unvested share options was $1 million, which is expected to be recognized
over the related weighted-average period of approximately 1.05 years.
There were no options granted during Fiscal 2021 or Fiscal 2020. The weighted average grant date fair value for options
granted during Fiscal 2019 was $24.49. The following table represents assumptions used to estimate the fair value of options
for the fiscal year ended March 30, 2019:
Expected dividend yield
Volatility factor
Weighted average risk-free interest rate
Expected life of option
Restricted Awards
March 30,
2019
0.0 %
36.9 %
2.8 %
4.85 years
The Company grants RSUs at the fair market value on the date of the grant. The expense related to RSUs is based on the
closing market price of the Company’s shares on the date of grant and is recognized ratably over the vesting period, net of
expected forfeitures.
The Company grants two types of RSUs: time-based RSUs and performance-based RSUs. Time-based RSUs generally
vest in full on the first anniversary of the date of grant for our independent directors, or in equal increments on each of the third
or fourth anniversaries of the date of grant (unless the employee is retirement-eligible). Performance-based RSUs generally vest
in full on the second or third anniversary of the date of grant, subject to the employee’s continued employment during the
vesting period and only if certain pre-established cumulative performance targets are met. Expense related to performance-
based RSUs is recognized ratably over the performance period, net of forfeitures, based on the probability of attainment of the
related performance targets. The potential number of shares that may be earned ranges from 0%, if the minimum level of
performance is not attained, to 150%, if the level of performance is at or above the predetermined maximum achievement level.
106
The following table summarizes the RSU activity during Fiscal 2021:
Unvested at March 28, 2020
Granted
Change due to performance conditions
Vested
Canceled/forfeited
Unvested at March 27, 2021
Service-based
Performance-based
Number of
Restricted
Stock Units
Weighted
Average Grant
Date Fair Value
Number of
Restricted
Stock Units
Weighted
Average Grant
Date Fair Value
4,311,683 $
2,349,594 $
— $
(1,354,285) $
(411,475) $
4,895,517 $
40.34
19.21
—
41.46
40.18
29.91
772,172 $
12,318 $
43,661 $
(102,078) $
(144,414) $
581,659 $
49.13
39.43
57.70
34.68
61.07
49.17
The total fair value of service-based RSUs vested during Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $56 million, $56
million and $47 million, respectively. The total fair value of performance-based RSUs vested during Fiscal 2021, Fiscal 2020
and Fiscal 2019 was $6 million, $3 million and $7 million, respectively. As of March 27, 2021, the remaining unrecognized
share-based compensation expense for unvested service-based and performance-based RSU grants was $86 million and $4
million, respectively, which is expected to be recognized over the related weighted-average periods of approximately 2.32 years
and 1.15 years, respectively.
There were no restricted shares vested during Fiscal 2021 or Fiscal 2020. The total fair value of restricted shares vested
was $4 million during Fiscal 2019.
Share-Based Compensation Expense
The following table summarizes compensation expense attributable to share-based compensation for Fiscal 2021, Fiscal
2020 and Fiscal 2019 (in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
Share-based compensation expense
Tax benefits related to share-based compensation expense
$
$
70 $
12 $
70 $
7 $
60
11
Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates. The Company estimates forfeitures based on its historical forfeiture rates. The estimated value of future
forfeitures for equity awards as of March 27, 2021 is $13 million.
107
18. Taxes
The Company is a United Kingdom tax resident and is incorporated in the British Virgin Islands. Capri’s subsidiaries are
subject to taxation in the U.S. and various other foreign jurisdictions, which are aggregated in the “Non-U.S.” information
captioned below.
Income (loss) before provision for income taxes consisted of the following (in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
U.S.
Non-U.S.
Total income (loss) before provision for income taxes
$
$
(56) $
59
3 $
(28) $
(187)
(215) $
191
430
621
The provision for income taxes was as follows (in millions):
$
Current
U.S. Federal
U.S. State
Non-U.S.
Total current
Deferred
U.S. Federal
U.S. State
Non-U.S.
Total deferred
Total provision for income taxes
$
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
35
20
81
136
(37)
(4)
(29)
(70)
66
$
$
4 (2) $
19
60
83
(22)
(3)
(48)
(73)
10
$
82 (1)
24
44
150
(34) (1)
(4)
(33)
(71)
79
(1)
(2)
Includes a $25 million current tax provision and deferred tax benefit related to the U.S. Tax Act impact to business
interest disallowance provisions.
Includes a $35 million current tax benefit due to a release of income tax reserves in the U.S.
108
The Company’s provision for income taxes for the years ended March 27, 2021, March 28, 2020 and March 30, 2019
was different from the amount computed by applying the statutory U.K. income tax rates to the underlying income (loss) from
operations before income taxes as a result of the following (amounts in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
Amount
% (1)
Amount
% (1)
Amount
% (1)
Provision for income taxes at the U.K.
statutory tax rate
Effects of global financing arrangements
Effect of changes in valuation allowances
on deferred tax assets
Non-deductible goodwill impairment
Differences in tax effects on foreign
income
Liability for uncertain tax positions
Tax rate change impact on deferred items
Share based compensation
State and local income taxes, net of
federal benefit
Withholding tax
$
1
19.0 %
$
(24)
(953.4) %
(41)
(41)
19.0 %
21.7 % (4)
24
18
13
11
9
6
5
4
955.7 %
700.2 % (6)
522.4 %
414.2 %
351.3 %
247.7 %
201.5 %
165.0 %
67
32
(7)
(12)
—
9
4
3
—
(4)
10
(30.9) % (5)
(15.1) % (6)
1.2 %
5.7 %
— %
(4.2) %
(1.9) %
(1.6) %
— %
1.4 %
$ 118
(50)
11
—
19.0 %
(8.1) %
2.8 % (3)
— %
(15)
8
(1.8) % (2)
1.3 %
—
— %
(12)
(2.6) %
6
3
9
1
0.9 %
0.6 %
1.5 %
(0.9) %
12.7 %
$
66
2,590.5 %
$
(4.7) %
$
79
Transaction cost
Other
—
(1)
— %
(33.1) % (7)
(1) Tax rates are calculated using unrounded numbers.
(2) Mainly attributable to the United States statutory federal income tax rate change from a blended rate for Fiscal 2018
of 31.54% to 21% in Fiscal 2019.
(3)
Includes an $11 million provision related to a United Kingdom capital loss.
(4) Mainly attributable to pre-tax loss position in Fiscal 2020.
(5) Mainly attributable to valuation allowances established on a portion of non-U.S. deferred tax assets.
(6) Attributable to goodwill impairment charges related to Jimmy Choo reporting units in Fiscal 2021 and Fiscal 2020.
(7) Primarily relates to individually immaterial U.S. and foreign permanent adjustments.
109
Significant components of the Company’s deferred tax assets (liabilities) consist of the following (in millions):
Deferred tax assets
Operating lease liabilities
Net operating loss carryforwards
Depreciation
Sales allowances
Accrued Interest
Derivative Financial Instruments
Inventories
Stock compensation
Payroll related accruals
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Goodwill and intangibles
Operating lease right-of-use-assets
Other
Total deferred tax liabilities
Net deferred tax liabilities
Fiscal Years Ended
March 27,
2021
March 28,
2020
501
139
54
50
44
32
25
12
3
42
902
(159)
743
(495)
(367)
—
(862)
(119) $
521
109
33
37
40
—
34
13
3
—
790
(134)
656
(481)
(401)
(14)
(896)
(240)
$
The Company maintains valuation allowances on deferred tax assets applicable to subsidiaries in jurisdictions for which
separate income tax returns are filed and where realization of the related deferred tax assets from future profitable operations is
not reasonably assured. The valuation allowance increased $24 million, $94 million and $26 million in Fiscal 2021, Fiscal 2020
and Fiscal 2019, respectively. In certain jurisdictions, the Company increased the valuation allowance by $56 million,
$113 million and $29 million and released valuation allowances of $32 million, $19 million and $3 million in Fiscal 2021,
Fiscal 2020 and Fiscal 2019, respectively.
At March 27, 2021, the Company had non-U.S. and U.S. net operating loss carryforwards of $667 million, a portion of
which will begin to expire in Fiscal 2022.
As of March 27, 2021 and March 28, 2020, the Company had liabilities related to its uncertain tax positions, including
accrued interest, of $121 million and $109 million, respectively, which are included in other long-term liabilities in the
Company’s consolidated balance sheets.
110
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $92 million,
$82 million and $112 million as of March 27, 2021, March 28, 2020 and March 30, 2019, respectively. A reconciliation of the
beginning and ending amounts of unrecognized tax benefits, excluding accrued interest, for Fiscal 2021, Fiscal 2020 and Fiscal
2019, are presented below (in millions):
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
Unrecognized tax benefits beginning balance
Additions related to prior period tax positions
Additions related to current period tax positions
Decreases in prior period positions due to lapses in statute of
limitations
Decreases related to prior period tax positions
Decreases related to audit settlements
Unrecognized tax benefits ending balance
$
$
99
12
9
(4)
(3)
(6)
107
$
$
$
192
29
4
(3)
(99) (2)
(24) (3)
99
$
101
81 (1)
21
(1)
(3)
(7)
192
(1) Primarily relates to the Versace acquisition.
(2) Primarily relates to releases of North American and European tax reserves.
(3) Primarily relates to the effective settlement of a U.S. audit.
The Company classifies interest and penalties related to unrecognized tax benefits as components of the provision for
income taxes. Interest expense recognized in the consolidated statements of operations and comprehensive (loss) income for
Fiscal 2021, Fiscal 2020 and Fiscal 2019 was $15 million, $11 million and $11 million, respectively.
The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on
future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable
statutes of limitations. The Company anticipates that the balance of gross unrecognized tax benefits, excluding interest and
penalties, will be reduced by $31 million during the next 12 months, primarily due to the anticipated settlement of tax
examinations as well as statute of limitation expirations. However, the outcomes and timing of such events are highly uncertain
and changes in the occurrence, expected outcomes and timing of such events could cause the Company’s current estimate to
change materially in the future.
The Company files income tax returns in the United States and in various foreign, state and local jurisdictions. Most
examinations have been completed by tax authorities or the statute of limitations has expired for United States federal, foreign,
state and local income tax returns filed by the Company for years through Fiscal 2015 (March 28, 2015).
Prior to the enactment of the Tax Cuts and Jobs Act, the Company's undistributed foreign earnings were considered
permanently reinvested and, as such, United States federal and state income taxes were not previously recorded on these
earnings. As a result of the Tax Act, substantially all of the Company’s earnings in foreign subsidiaries generated prior to the
enactment of the Tax Act were deemed to have been repatriated. It remains the Company's intent to either reinvest indefinitely
substantially all of its foreign earnings outside of the United States or repatriate them tax neutrally. However, if future earnings
are repatriated, the potential exists that the Company may be required to accrue and pay additional taxes, including any
applicable foreign withholding tax and income taxes. It is not practicable to estimate the amount of tax that might be payable if
these earnings were repatriated due to the complexities associated with the hypothetical calculation.
Cares Act
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in
response to the COVID-19 pandemic. The CARES Act contains numerous income tax provisions, such as refundable payroll
tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, modifications to net interest
deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES
Act require the Company to make significant judgments and estimates in the interpretation of the law and in the calculation of
the provision for income taxes. However, additional guidance may be issued by the Internal Revenue Service (“IRS”), the
Department of the Treasury or other governing body that may significantly differ from our interpretation of the law, which may
result in a material effect on our business, cash flow, results of operations, or financial conditions.
111
19. Retirement Plans
The Company maintains defined contribution plans for employees, who generally become eligible to participate after
three months of service. Features of these plans allow participants to contribute to a plan a percentage of their compensation, up
to statutory limits depending upon the country in which a plan operates, and provide for mandatory and/or discretionary
matching contributions by the Company, which vary by country. During Fiscal 2021, Fiscal 2020, and Fiscal 2019, the
Company recognized expenses of approximately $20 million, $12 million and $14 million, respectively, related to these
retirement plans.
20. Segment Information
The Company operates its business through three operating segments—Versace, Jimmy Choo and Michael Kors, which
are based on its business activities and organization. The reportable segments are segments of the Company for which separate
financial information is available and for which operating results are evaluated regularly by the Company’s chief operating
decision maker (“CODM”) in deciding how to allocate resources, as well as in assessing performance. The primary key
performance indicators are revenue and operating income for each segment. The Company’s reportable segments represent
components of the business that offer similar merchandise, customer experience and sales/marketing strategies.
The Company’s three reportable segments are as follows:
•
•
Versace — segment includes revenue generated through the sale of Versace luxury ready-to-wear, accessories and
footwear through directly operated Versace boutiques throughout North America (United States and Canada), EMEA
and certain parts of Asia, as well as through Versace outlet stores and e-commerce sites. In addition, revenue is
generated through wholesale sales to distribution partners (including geographic licensing arrangements that allow
third parties to use the Versace trademarks in connection with retail and/or wholesale sales of Versace branded
products in specific geographic regions), multi-brand department stores and specialty stores worldwide, as well as
through product license agreements in connection with the manufacturing and sale of jeans, fragrances, watches,
jewelry, eyewear and home furnishings.
Jimmy Choo — segment includes revenue generated through the sale of Jimmy Choo luxury footwear, handbags and
small leather goods through directly operated Jimmy Choo retail and outlet stores throughout the Americas, EMEA
and certain parts of Asia, through its e-commerce sites, as well as through wholesale sales of luxury goods to
distribution partners (including geographic licensing arrangements that allow third parties to use the Jimmy Choo
trademarks in connection with retail and/or wholesale sales of Jimmy Choo branded products in specific geographic
regions), multi-brand department stores and specialty stores worldwide. In addition, revenue is generated through
product licensing agreements, which allow third parties to use the Jimmy Choo brand name and trademarks in
connection with the manufacturing and sale of fragrances and eyewear.
• Michael Kors — segment includes revenue generated through the sale of Michael Kors products through four primary
Michael Kors retail store formats: “Collection” stores, “Lifestyle” stores (including concessions), outlet stores and e-
commerce sites, through which the Company sells Michael Kors products, as well as licensed products bearing the
Michael Kors name, directly to consumers throughout the Americas, Europe and certain parts of Asia. The Company
also sells Michael Kors products directly to department stores, primarily located across the Americas and Europe, to
specialty stores and travel retail shops, and to its geographic licensees. In addition, revenue is generated through
product and geographic licensing arrangements, which allow third parties to use the Michael Kors brand name and
trademarks in connection with the manufacturing and sale of products, including watches, jewelry, fragrances and
eyewear.
In addition to these reportable segments, the Company has certain corporate costs that are not directly attributable to its
brands and, therefore, are not allocated to its segments. Such costs primarily include certain administrative, corporate
occupancy, shared service and information systems expenses, including enterprise resource planning system implementation
costs. In addition, certain other costs are not allocated to segments, including restructuring and other charges (including
transition costs related to the Company’s recent acquisitions), impairment costs and COVID-19 related charges. The segment
structure is consistent with how the Company’s CODM plans and allocates resources, manages the business and assesses
performance. All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment
performance.
112 The following table presents the key performance information of the Company’s reportable segments (in millions):
Total revenue:
Versace
Jimmy Choo
Michael Kors
Total revenue
Income (loss) from operations:
Versace
Jimmy Choo
Michael Kors
Total segment income from operations
Less: Corporate expenses
Impairment of assets (1)
COVID-19 related charges (2)
Restructuring and other charges
Total income (loss) from operations
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
$
$
$
718 $
418
2,924
4,060 $
21 $
(55)
595
561
(152)
(316)
(42)
(32)
19 $
843 $
555
4,153
5,551 $
(8) $
(13)
850
829
(152)
(708)
(119)
(42)
(192) $
137
590
4,511
5,238
(11)
20
964
973
(93)
(21)
—
(124)
735
(1)
Impairment of assets during Fiscal 2021 includes $191 million, $91 million and $34 million of impairment charges
related to the Jimmy Choo, Michael Kors and Versace reportable segments, respectively. Impairment of assets
during Fiscal 2020 includes $434 million, $187 million and $87 million of impairment charges related to the Jimmy
Choo, Michael Kors and Versace reportable segments, respectively. The impairment charges during Fiscal 2019
were primarily related to the Michael Kors reportable segment.
(2) COVID-19 related charges during Fiscal 2021 primarily include net incremental inventory reserves and severance
expense of $10 million and $24 million, respectively, recorded within costs of goods sold and selling, general and
administrative expenses in the consolidated statements of operations and comprehensive (loss) income. COVID-19
related charges during Fiscal 2020, primarily include additional inventory reserves and credit losses of $92 million
and $25 million, respectively, recorded within costs of goods sold and selling, general and administrative expenses
in the consolidated statements of operations and comprehensive (loss) income.
Depreciation and amortization expense for each segment are as follows (in millions):
Depreciation and amortization (1):
Versace
Jimmy Choo
Michael Kors
Total depreciation and amortization
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
$
$
54 $
61 $
31
127
33
155
212 $
249 $
9
34
182
225
(1) Excluded from the above table are impairment charges, which are detailed in the below table and in Note 8, Note 9
and Note 14.
See Note 9 to the accompanying consolidated financial statements for the Company’s goodwill by reportable segment.
113
Total revenue (based on country of origin) and long-lived assets by geographic location are as follows (in millions):
Revenue:
The Americas (U.S., Canada and Latin America) (1)
EMEA
Asia
Total revenue
Long-lived assets: (2)
The Americas (U.S., Canada and Latin America) (1)
EMEA
Asia
Total long-lived assets:
March 27,
2021
Fiscal Years Ended
March 28,
2020
March 30,
2019
2,172 $
1,029
859
4,060 $
3,115 $
1,523
913
5,551 $
3,182
1,279
777
5,238
March 27,
2021
As of
March 28,
2020
March 30,
2019
1,001 $
2,384
596
3,981 $
1,132 $
2,432
608
4,172 $
319
2,123
466
2,908
$
$
$
$
(1) Net revenues earned in the U.S. during Fiscal 2021, Fiscal 2020, and Fiscal 2019 were $2.016 billion, $2.898 billion
and $2.972 billion, respectively. Long-lived assets located in the U.S. as of March 27, 2021 and March 28, 2020
were $942 million and $1.060 billion, respectively.
(2) Long-lived assets as of March 27, 2021 and March 28, 2020 include property and equipment, net, intangible assets,
net and operating lease right-of-use assets resulting from the Company’s adoption of ASU 2016-02. See Note 4 for
additional information.
As of March 27, 2021, the Company's total long-lived assets on its consolidated balance sheet were $3.981 billion, of
which, $1.729 billion related to Versace, $1.515 billion related to Michael Kors and $737 million related to Jimmy Choo.
Total revenue by major product category are as follows (in millions):
March 27,
2021
$
$
2,158
796
720
185
155
46
4,060
% of
Total
53.2%
19.6%
17.7%
4.6%
3.8%
1.1%
Fiscal Years Ended
% of
Total
March 28,
2020
March 30,
2019
% of
Total
$
$
2,933
1,100
1,069
222
201
26
5,551
52.8 % $
19.8 %
19.3 %
4.0 %
3.6 %
0.5 %
$
3,139
1,023
698
218
156
4
5,238
59.9 %
19.5 %
13.3 %
4.2 %
3.0 %
0.1 %
Accessories
Footwear
Apparel
Licensed product
Licensing revenue
Other
Total revenue
21. Non-cash Investing Activities
Significant non-cash investing activities for Fiscal 2019 included non-cash allocations of the fair values of the net assets
acquired in connection with the Company’s acquisition of Versace. In addition, non-cash investing activities for Fiscal 2019
included an investment of 2.4 million of the Company’s ordinary shares made by the Versace family at acquisition date, which
was valued at $91 million. See Note 5 for additional information.
There were no other significant non-cash investing or financing activities during the fiscal periods presented.
114
22. Subsequent Events
Termination of 364 Day Facility and Reinstatement of Leverage Ratio Covenant
As noted in Note 12, on June 25, 2020, the Company entered into an amendment (the "Amendment") to its third
amended and restated senior secured credit facility with among others, JPMorgan Chase Bank, N.A., as administrative agent, to,
among other things, add a $230 million revolving line of credit ("364 Day Facility") that matures on June 24, 2021.
On May 20, 2021, the Company determined it no longer desires to maintain this additional line of credit and
consequently delivered a notice to the administrative agent terminating the 364 Day Facility, and the 364 Day Facility
terminated on May 25, 2021. The remainder of the 2018 Credit Facility remains in full force and effect.
As previously disclosed, the Amendment, among other things, also temporarily suspended the quarterly maximum
leverage ratio covenant and imposed a minimum liquidity test during the period from June 25, 2020 until the earlier of (x) the
date on which the Company delivers its financial statements for the fiscal quarter ending June 26, 2021 and (y) the date on
which the Company certifies that its net leverage ratio as of the last day of the most recently ended fiscal quarter was no greater
than 4.00 to 1.00 (the “Applicable Period”). During the Applicable Period, applicable margins and commitment fees under the
Credit Facility are increased and certain covenant baskets for restricted payments, the incurrence of indebtedness, acquisitions
and other investments made by the Company are more restrictive.
On May 26, 2021 (the “Election Date”), the Company delivered to the Administrative Agent the certificate required to
terminate the Applicable Period. Effective as of the Election Date, the Company will be required to comply with the quarterly
maximum net leverage ratio test of 4.00 to 1.00, and the applicable margins, commitment fees and covenant baskets will revert
to the levels in effect prior to the effective date of the Amendment.
Share Repurchase Authorization
The Company also announced that its previously suspended share-repurchase program will be reinstated. The
availability under this program remains at $400 million. Share repurchases may be made in open market or privately negotiated
transactions, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider
trading policy, and other relevant factors. The program may be suspended or discontinued at any time.
Net Investment Hedges
During the first quarter of Fiscal 2022, the Company restructured approximately $2.9 billion of its net investment
hedges by terminating these hedges and entered into multiple fixed-to-fixed cross currency swap agreements with an aggregate
notional amount of approximately $2.9 billion to hedge the Company's net investment in Euro-denominated subsidiaries against
future volatility in the exchange rates between the U.S. Dollar and the Euro. These contracts have been designated as net
investment hedges.
115 Exhibit 10.16
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this “Agreement”) between Capri Holdings
Limited (“Capri”), Michael Kors (USA), Inc. (the “Company”) and Daniel Purefoy
(“Executive”).
WHEREAS, the parties desire to enter into this Agreement to reflect their
mutual agreements with respect to the employment of Executive by the Company.
NOW, THEREFORE, in consideration of the mutual covenants, warranties
and undertakings herein contained, the parties hereto agree as follows:
1.
Term. Executive shall assume his new duties and position with the
Company as set forth in paragraph 2 below as of March 30, 2020 (the “Promotion
Date”), and his employment shall continue in that capacity through March 31, 2024 (the
“Initial Term”), subject to the terms and provisions of this Agreement. After the expiration
of the Initial Term, this Agreement shall be automatically renewed for additional one-year
terms (each, a “Renewal Term”) unless either the Company or Executive gives written
notice to the other of the termination of this Agreement at least ninety (90) days in
advance of the next successive one-year term. Any election by the Company or
Executive not to renew such employment at the end of the Initial Term or any Renewal
Term shall be at the sole, absolute discretion of the Company or Executive, respectively.
The period Executive is actually employed hereunder during the Initial Term and any
such Renewal Terms is referred to herein as the “Term”.
2.
Position and Duties. Executive shall be employed during the Term
as Senior Vice President, Supply Chain (the “Position”). Executive acknowledges and
agrees that the Company will be his sole employer under this Agreement and the
Company will provide all payments and benefits to Executive under this Agreement.
Executive shall report directly to the Executive Vice President, Chief Financial Officer
and Chief Operating Officer of Capri (the “CFO/COO”). Executive shall perform such
duties and services as are commensurate with Executive’s position and such other
duties and services as are from time to time reasonably assigned to Executive by the
Chief Executive Officer of Capri, CFO/COO of Capri or the Board of Directors of Capri.
Except for vacation, holiday, personal and sick days in accordance with this Agreement
and the Company’s policies for comparable senior executives, Executive shall devote
his full business time during the Term to providing services to the Company and its
affiliates. Executive shall be permitted to perform his duties on a remote or work-from-
home basis; provided, that Executive acknowledges that his role will require travel for
business purposes (both internationally and domestically), including, but not limited to,
to the Company’s office in New York and/or New Jersey on an as needed basis.
1
3.
Compensation.
(a)
Base Salary. Executive’s base salary (the “Base
Salary”) shall be at the rate of $400,000 per year. The Base Salary shall be payable in
substantially equal installments on a semi-monthly basis in accordance with the normal
payroll practices of the Company.
(b)
Periodic Review of Compensation. On an annual
basis during the Term, but without any obligation to increase or otherwise change the
compensation provisions of this Agreement, the Company agrees to undertake a review
of the performance by Executive of his duties under this Agreement and of the efforts
that he has undertaken for and on behalf of the Company.
(c)
Annual Cash Incentive. With respect to each full fiscal year
of the Company during the Term, Executive shall be eligible to participate in the Capri
Annual Cash Incentive Plan (as the same may be amended, modified, replaced or
terminated, the “Cash Plan”) (which is a component of the Capri Amended and Restated
Omnibus Incentive Plan (as the same may be amended, modified, replaced or
terminated, the “Incentive Plan” and, together with the Cash Plan, the “Plans”). Annual
cash incentives will be based on a fixed percentage of Executive’s base salary with the
incentive levels set at 50% target – 100% maximum. Executive’s actual annual cash
incentive may range from 0% of base salary for performance below established
thresholds to 100% of salary for maximum performance (interpolated based on the
actual level of attainment) with performance components, measures and target values
established by the Capri Board of Directors (or appropriate committee thereof). All
annual cash incentive payments are subject to the terms and conditions of the Cash
Plan, as the same may be amended, modified, replaced or terminated from time to time,
including, unless otherwise expressly stated in the Cash Plan, that you be employed by
the Company on the date the annual cash incentive is actually paid to similarly situated
executives.
i.Benefits. During the Term, Executive shall be entitled to participate
in the benefit plans and programs, including, without limitation, medical, dental, life
insurance, disability insurance and 401(k), that the Company provides generally to
comparable senior executives in accordance with, and subject to, the terms and
conditions of such plans and programs (including, without limitation, any eligibility
limitations) as they may be modified by the Company from time to time in its sole
discretion.
ii.Travel/Expense Reimbursement. The Company shall reimburse
Executive for the ordinary and necessary business expenses incurred by him in the
performance of his duties in accordance with the Company’s policies and procedures.
To the extent Executive travels in connection with his duties hereunder, the Company
agrees to pay the cost of such travel or to reimburse Executive if he has incurred any
such costs, it being understood and agreed that (i) all air travel shall be in (A) coach
class for domestic travel other than coast-to-coast, which shall be business class, and
2
(B) business class for international travel, and (ii) such costs shall otherwise be incurred
in accordance with the Company’s policies and procedures. The Company shall
reimburse Executive for all other ordinary and necessary business expenses incurred by
him in the performance of his duties in accordance with the Company’s policies and
procedures.
iii.Equity-Based Compensation.
a.
Equity-Based Awards. In accordance with the Capri
annual performance review cycle, on an annual basis at the same time and on the same
terms as awarded to other senior executives similarly situated, Executive shall be
eligible to receive a discretionary long-term incentive award under the Incentive Plan in
form and amount, if any, to be determined in Capri’s sole discretion in accordance with,
and subject to the terms and conditions of, such Incentive Plan. Such award may be in
the form of share options, time-based restricted share units (“RSUs”), performance-
based restricted share units (“RSUs”), other share-based awards or any combination of
the foregoing as determined by the Capri Board of Directors (or appropriate committee
thereof). In addition, on the first business day of the month following the Promotion
Date, Executive shall receive an equity grant valued at approximately $1,000,000 based
on the closing price of CPRI ordinary shares on the New York Stock Exchange on the
date of grant in accordance with, and subject to, the terms and conditions of the
Incentive Plan, and the applicable award agreement. Such equity grant shall be
comprised 100% of time-based RSUs that will vest in equal installments over four (4)
years on each anniversary of the grant date.
b.
Effect of Termination. Except in the case of the
termination of Executive for Cause (as defined in Section 4(b) below), in which case any
equity incentive awards granted to Executive under the Incentive Plan shall be forfeited
and immediately terminated (whether or not vested and/or exercisable), any such equity
incentive awards that have become vested and/or exercisable prior to the last day
Executive is employed by the Company (the “Termination Date”) shall remain vested
and/or exercisable after the Termination Date in accordance with the terms and
conditions of the Incentive Plan and the applicable award agreement.
iv.Taxes. All payments to be made to and on behalf of Executive
under this Agreement will be subject to required withholding of federal, state and local
income and employment taxes, and to related reporting requirements.
v.Vacations. Executive shall be entitled to a total of four (4) weeks
(or twenty (20) days) of paid vacation during each calendar year during the Term (which
shall accrue in accordance with the Company's vacation policy); provided, however, that
such vacations shall be taken by Executive at such times as will not interfere with the
performance by Executive of his duties hereunder.
3
4.
Termination of Employment.
vi.Death and Disability.
this
Agreement shall terminate automatically upon his death. The Company may terminate
Executive’s employment under this Agreement if Executive is unable to perform
substantially all of the duties required hereunder due to illness or incapacity for a period
of at least ninety (90) days (whether or not consecutive) in any period of three hundred
and sixty five (365) consecutive days.
Executive’s employment under
vii.Cause. The Company may terminate Executive’s employment
under this Agreement at any time with Cause. For purposes of this Agreement, “Cause”
means the occurrence of any of the following events: (i) a material breach by Executive
of his obligations under this Agreement that Executive has failed to cure (as determined
by the Company acting in good faith) within thirty (30) days following written notice of
such breach from Capri to Executive; (ii) insubordination or a refusal by Executive to
perform his duties under this Agreement that continues for at least five (5) days after
written notice from Capri to Executive; (iii) Executive’s gross negligence, willful
misconduct or dishonesty in performing his duties hereunder or with respect to Capri or
any of its affiliates or licensees, or any of their respective businesses, assets or
employees; (iv) the commission by Executive of a fraud or theft against Capri or any of
its affiliates or licensees or his conviction for the commission of, or aiding or abetting, a
felony or of a fraud or a crime involving moral turpitude or a business crime; or (v) the
possession or use by Executive of illegal drugs or prohibited substances, the excessive
drinking of alcoholic beverages on a recurring basis which impairs Executive’s ability to
perform his duties under this Agreement, or the appearance during hours of
employment on a recurring basis of being under the influence of such drugs, substances
or alcohol.
viii.Executive Termination Without Good Reason. Executive agrees
that he shall not terminate his employment for any reason other than Good Reason (as
defined in Section 5(a)) without giving Capri at least two (2) month’s prior written notice
of the effective date of such termination. Executive acknowledges that Capri retains the
right to waive the notice requirement, in whole or in part, and accelerate the effective
date of Executive’s termination. If Capri elects to waive the notice requirement, in whole
or in part, neither Capri nor the Company shall have no further obligations to Executive
under this Agreement other than to make the payments specified in Section 5(a). After
Executive provides a notice of termination, Capri may, but shall not be obligated to,
provide Executive with work to do and Capri may, in its discretion, in respect of all or
part of an unexpired notice period, (i) require Executive to comply with such conditions
as it may specify in relation to attending at, or remaining away from, Capri’s places of
business, or (ii) withdraw any powers vested in, or duties assigned to, Executive. For
purposes of a notice of termination given pursuant to this Section 4(c), the Termination
Date shall be the last day of the two (2) month notice period, unless Capri elects to
waive the notice requirement as set forth herein.
4
5.
Consequences of Termination or Breach.
ix.Death or Disability; Termination for Cause or Without Good Reason.
If Executive’s employment under this Agreement is terminated under Section 4(a) or
4(b) or as a result of Capri or Executive giving a non-renewal notice pursuant to Section
1, or Executive terminates his employment for any reason other than for Good Reason
(as defined below), Executive shall not thereafter be entitled to receive any
compensation or benefits under this Agreement, other than (i) Base Salary earned but
not yet paid prior to the Termination Date, (ii) reimbursement of any expenses pursuant
to Section 3(e) incurred prior to the Termination Date and (iii) vested equity in
accordance with Section 3(f)(ii). For purposes of this Agreement, “Good Reason”
means (x) the significant reduction of Executive’s duties or responsibilities relating to the
Position, except with respect to any action initiated or recommended by Executive and
approved by Capri, or (y) a material breach by the Company of its obligations under this
Agreement, in each case, that it has failed to cure (as determined by Capri acting in
good faith) within thirty (30) days following written notice of such diminution of duties or
material breach from Executive to Capri.
x.Termination Without Cause or With Good Reason. If Executive’s
employment under this Agreement is terminated by the Company without Cause (which
Capri and the Company shall have the right to do with or without Cause at any time
during the Term) and other than under Section 4(a) or as a result of the Company giving
a non-renewal notice pursuant to Section 1, or Executive terminates his employment for
Good Reason, the sole obligations of Capri and the Company to Executive shall be (i) to
make the payments described in clauses (i) through (iii) (inclusive) of Section 5(a), and
(ii) subject to Executive providing the Company with the release and separation
agreement described below, to provide continuation of Executive’s then current Base
Salary and medical, dental and insurance benefits by the Company for a one (1) year
period commencing with the Termination Date, which amount shall be payable in
substantially equal installments in accordance with the normal payroll practices of the
Company and shall be offset by any compensation and benefits that Executive receives
from other employment (including self-employment) during such payment period.
Executive agrees to promptly notify Capri upon his obtaining other employment or
commencing self-employment during the severance period and to provide Capri with
complete information regarding his compensation thereunder. Capri and the Company’s
obligation to provide the payments referred to in this Section 5(b) shall be contingent
upon (A) Executive having delivered to Capri a fully executed separation agreement and
release (that is not subject to revocation) of claims against Capri and its affiliates and
their respective directors, officers, employees, agents and representatives satisfactory
in form and content to Capri’s counsel, and (B) Executive’s continued compliance with
his obligations under Section 6 of this Agreement. Executive acknowledges and agrees
that in the event the Company terminates Executive’s employment without Cause or
Executive terminates his employment for Good Reason, (1) Executive’s sole remedy
against Capri and the Company shall be to receive the payments specified in this
5
Section 5(b) and (2) if Executive does not execute the separation agreement and
release described above, Executive shall have no remedy with respect to such
termination.
6.
Certain Covenants and Representations.
xi.Confidentiality. Executive acknowledges that in the course of his
employment by the Company, Executive will receive and or be in possession of
confidential information of Capri and its affiliates, including, but not limited to,
information relating to their financial affairs, business methods, strategic plans,
marketing plans, product and styling development plans, pricing, products, vendors,
suppliers, manufacturers, licensees, computer programs and software, and personal
information regarding personnel of Capri and its subsidiaries (collectively, “Confidential
Information”). Confidential Information shall not include information that is: (i) generally
known or available to the public; (ii) independently known, obtained, conceived or
developed by Executive without access to or knowledge of related information provided
by Capri or its subsidiaries or obtained in connection with Executive’s efforts on behalf
of Capri, (iii) used or disclosed with the prior written approval of Capri or (iv) made
available by Capri to the public. Executive agrees that he will not, without the prior
written consent of Capri, during the Term or thereafter, disclose or make use of any
Confidential Information, except as may be required by law or in the course of
Executive’s employment hereunder or in order to enforce his rights under this
Agreement. Executive agrees that all tangible materials containing Confidential
Information, whether created by Executive or others which shall come into Executive’s
custody or possession during Executive’s employment shall be and is the exclusive
property of the Company. Upon termination of Executive’s employment for any reason
whatsoever, Executive shall immediately surrender to Capri all Confidential Information
and property of Capri and its affiliates in Executive’s possession.
xii.No Hiring. During the two-year period immediately following the
Termination Date, Executive shall not employ or retain (or participate in or arrange for
the employment or retention of) any person who was employed or retained by Capri or
any of its affiliates within the one (1) year period immediately preceding such
employment or retention.
xiii.Non-Disparagement. During the Term and thereafter, Executive
agrees not to disparage Capri or any of its affiliates or any of their respective directors,
officers, employees, agents, representatives or licensees and not to publish or make
any statement that is reasonably foreseeable to become public with respect to any of
such entities or persons.
xiv.Copyrights, Inventions, etc. Any interest in patents, patent
applications, inventions, technological innovations, copyrights, copyrightable works,
developments, discoveries, designs, concepts, ideas and processes (“Such Inventions”)
that Executive now or hereafter during the Term may own, acquire or develop either
6
individually or with others relating to the fields in which Capri or any of its affiliates may
then be engaged or contemplate being engaged shall belong to Capri or such affiliate
and forthwith upon request of Capri, Executive shall execute all such assignments and
other documents (including applications for patents, copyrights, trademarks and
assignments thereof) and take all such other action as Capri may reasonably request in
order to assign to and vest in Capri or its affiliates all of Executive’s right, title and
interest (including, without limitation, waivers to moral rights) in and to Such Inventions
throughout the world, free and clear of liens, mortgages, security interests, pledges,
charges and encumbrances. Executive acknowledges and agrees that (i) all
copyrightable works created by Executive as an employee will be “works made for hire”
on behalf of the Capri and its affiliates and that Capri and its affiliates shall have all
rights therein in perpetuity throughout the world and (ii) to the extent that any such
works do not qualify as works made for hire, Executive irrevocably assigns and transfers
to Capri and its affiliates all worldwide right, title and interest in and to such works.
Executive hereby appoints any officer of the Company as Executive’s duly authorized
attorney-in-fact to execute, file, prosecute and protect Such Inventions before any
governmental agency, court or authority. If for any reason Capri or its affiliates do not
own any Such Invention, Capri and its affiliates shall have the exclusive and royalty-free
right to use in their businesses, and to make products therefrom, Such Invention as well
as any improvements or know-how related thereto.
xv.Remedy for Breach and Modification. Executive acknowledges that
the foregoing provisions of this Section 6 are reasonable and necessary for the
protection of Capri and its affiliates, and that they will be materially and irrevocably
damaged if these provisions are not specifically enforced. Accordingly, Executive
agrees that, in addition to any other relief or remedies available to Capri and its
affiliates, they shall be entitled to seek an appropriate injunctive or other equitable
remedy for the purposes of restraining Executive from any actual or threatened breach
of or otherwise enforcing these provisions and no bond or security will be required in
connection therewith. If any provision of this Section 6 is deemed invalid or
unenforceable, such provision shall be deemed modified and limited to the extent
necessary to make it valid and enforceable.
7. Miscellaneous.
xvi.Representations.
the Company and Executive each
Capri,
represents and warrants that (i) it has full power and authority to execute and deliver
this Agreement and to perform its respective obligations hereunder and (ii) this
Agreement constitutes the legal, valid and binding obligation of such party and is
enforceable against it in accordance with its terms. In addition, Executive represents
and warrants that the entering into and performance of this Agreement by him will not be
in violation of any other agreement to which Executive is a party.
xvii.Notices. Any notice or other communication made or given in
connection with this Agreement shall be in writing and shall be deemed to have been
7
duly given when delivered by hand, by facsimile transmission, by email, by a nationally
recognized overnight delivery service or mailed by certified mail, return receipt
requested, to Executive or to the Company at the addresses set forth below or at such
other address as Executive or the Company may specify by notice to the other:
To Capri and/or the Company:
One Meadowlands Plaza
East Rutherford, New Jersey 07073
Attention: EVP, Chief Financial Officer and Chief Operating Officer
With a copy to:
Capri Holdings Limited / Michael Kors (USA), Inc.
11 West 42nd Street
New York, New York 10036
Attention: SVP, General Counsel
such other address as may be provided by such notice.
To Executive: at his home address on file with the Company or to
xviii.Entire Agreement; Amendment. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter, except that this
Agreement does not cancel or supersede the Plans (or the applicable long-term
incentive award agreements). This Agreement is intended (with any documents referred
to herein) as a complete and exclusive statement of the terms of the agreement
between the parties with respect thereto and may be amended only by a writing signed
by both parties hereto.
xix.Waiver. The failure of any party to insist upon strict adherence to
any term or condition of this Agreement on any occasion shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict adherence to that
term or any other term of this Agreement. Any waiver must be in a writing signed by the
party to be charged with such waiver.
xx.Assignment. Except as otherwise provided in this Section 7(e), this
Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, representatives, successors and assigns. This Agreement shall not be
assignable by Executive and shall be assignable by Capri and the Company only to its
affiliates; provided, however, that any assignment by the Company shall not, without the
written consent of Executive, relieve Capri or the Company of its obligations hereunder.
xxi.Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be considered an original, but all of which together
shall constitute the same instrument.
8
reference only and shall not be given any effect in the interpretation of the Agreement.
xxii.Captions. The captions in this Agreement are for convenience of
xxiii.Governing Law. This Agreement shall be governed by the laws of
the State of New York applicable to agreements made and to be performed in that State,
without regard to its conflict of laws principles.
xxiv.Arbitration. Any dispute or claim between the parties hereto arising
out of, or, in connection with this Agreement, shall, upon written request of either party,
become a matter for arbitration; provided, however, that Executive acknowledges that in
the event of any violation of Section 6 hereof, Capri and the Company shall be entitled
to obtain from any court in the State of New York, temporary, preliminary or permanent
injunctive relief as well as damages, which rights shall be in addition to any other rights
or remedies to which it may be entitled. The arbitration shall be before a neutral
arbitrator in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and take place in New York City. Each party shall bear its own
fees, costs and disbursements in such proceeding. The decision or award of the
arbitrator shall be final and binding upon the parties hereto. The parties shall abide by
all awards recorded in such arbitration proceedings, and all such awards may be
entered and executed upon in any court having jurisdiction over the party against whom
or which enforcement of such award is sought.
xxv.Section 409A. It is intended that this Agreement will comply with
Internal Revenue Code Section 409A and any regulations and guidelines issued
thereunder (collectively “Section 409A”) to the extent this Agreement is subject thereto.
It is the Parties’ good faith belief that any payments or benefits provided to Executive
pursuant to this Agreement fall within an exception to Section 409A. To the extent that
this Agreement provides for any payments to be made in installments, each such
installment shall be deemed to be a separate payment for purposes of Section 409A. If
an amendment to this Agreement is necessary in order for it to comply with
Section 409A, the Parties agree to negotiate in good faith to amend this Agreement in a
manner that preserves the original intent of the Parties to the extent reasonably
possible.
[Intentionally left blank]
9
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of March 30, 2020.
CAPRI HOLDINGS LIMITED
By: /s/ Thomas J. Edwards, Jr.
Name: Thomas J. Edwards, Jr.
Title: EVP, Chief Financial Officer and Chief Operating Officer
MICHAEL KORS (USA), INC.
By: /s/ Thomas J. Edwards, Jr.
Name: Thomas J. Edwards, Jr.
Title: EVP, Chief Financial Officer and Chief Operating Officer
/s/ Daniel Purefoy
Daniel Purefoy
10 LIST OF SUBSIDIARIES OF CAPRI HOLDINGS LIMITED
Exhibit 21.1
Entity Name
Alberto Gozzi S.r.l.
Aruba MK Retail N.V.
Capri (Australia) Pty Ltd
Capri Finance Hong Kong Limited
Capri Finance Malta Limited
Capri (Hungary) Holdings Kft
Capri Insurance Guernsey Limited
Capri Operations Limited
Capri (Switzerland) GmbH
Capri (Switzerland) Holdings GmbH
Capri USA Holdings LLC
Capri USA Intermediate LLC
Choo Luxury Holdings Limited
Choo USD Finance Limited
Creek Apartments Limited
FRANCHOO S.A.S
Gianni Versace S.r.l.
GIVI Holding S.r.l.
G. Versace Hellas S.A.
ITACHOO S.r.l.
JC Gulf Trading LLC
J. Choo (Asia) Limited
J. Choo (Austria) GmbH
J. Choo (Belgium) BVBA
J. Choo Canada Inc.
J. Choo Czech, s.r.o.
J. Choo Denmark ApS
J Choo Florida, Inc.
J Choo Germany GmbH
J. Choo Hungary Kft
J. Choo Japan JV Limited
J. Choo Limited
J. Choo (Macau) Co., Limited
J. Choo Netherlands B.V.
J. Choo Norway AS
J. Choo Portugal, Unipessoal LDA
J. Choo RUS L.L.C.
J. Choo Russia JV Limited
J. Choo Sweden AB
J Choo (Switzerland) AG
J. Choo (Thailand) Co., Ltd.
J Choo USA, Inc.
JC ME Trading DWC L.L.C.
JC Services ME DMCC L.L.C.
Jimmy Choo Florence S.r.l.
Jimmy Choo Group Limited
Jimmy Choo Hong Kong Limited
Jimmy Choo Korea Limited
Jimmy Choo (Malaysia) Sdn. Bhd
Jimmy Choo (Shanghai) Trading Co. Limited
Jurisdiction of Formation
Italy
Aruba
Australia
Hong Kong, China
Malta
Hungary
Guernsey
British Virgin Islands
Switzerland
Switzerland
Delaware
Delaware
United Kingdom
United Kingdom
U.A.E.
France
Italy
Italy
Greece
Italy
U.A.E.
Hong Kong, China
Austria
Belgium
Canada
Czech Republic
Denmark
Delaware
Germany
Hungary
United Kingdom
United Kingdom
Macau, China
Netherlands
Norway
Portugal
Russia
United Kingdom
Sweden
Switzerland
Thailand
Delaware
U.A.E. free zone
U.A.E. free zone
Italy
United Kingdom
Hong Kong, China
South Korea
Malaysia
China
Entity Name
Jimmy Choo (Singapore) Pte. Limited
JIMMY CHOO SPAIN S.L.U.
Jimmy Choo Tokyo K.K.
Michael Kors (Austria) GmbH
Michael Kors Aviation, L.L.C.
Michael Kors Belgium BV
Michael Kors (Bucharest Store) S.R.L.
Michael Kors (Canada) Co.
Michael Kors (Canada) Holdings Ltd.
Michael Kors (Czech Republic) s.r.o.
Michael Kors (Denmark) ApS
Michael Kors Do Brasil Comercio De Accesorios E Vestuario Ltda.
Michael Kors (Europe) B.V.
Michael Kors (France) SAS
Michael Kors (Germany) GmbH
Michael Kors (HK) Limited
Michael Kors (Hungary) Kft.
Michael Kors (Ireland) Limited
Michael Kors Italy S.R.L. Con Socio Unico
Michael Kors Japan, LLC
Michael Kors Korea Yuhan Hoesa
Michael Kors (Latvia) SIA
Michael Kors Limited
Michael Kors, L.L.C.
Michael Kors (Luxembourg) Retail S.à r.l.
Michael Kors (Netherlands) B.V.
Michael Kors (Panama) Holdings, Inc.
Michael Kors (Poland) Sp. z o.o.
Michael Kors (Portugal) Lda.
Michael Kors Retail, Inc.
Michael Kors Spain, S.L.U.
Michael Kors Stores (California), LLC
Michael Kors Stores, L.L.C.
Michael Kors (Sweden) AB
Michael Kors (Switzerland) GmbH
Michael Kors (Switzerland) Holdings GmbH
Michael Kors (Switzerland) International GmbH
Michael Kors (Switzerland) Retail GmbH
Michael Kors Trading (Shanghai) Company Limited
Michael Kors (UK) Intermediate Ltd.
Michael Kors (UK) International Limited
Michael Kors (UK) Limited
Michael Kors (USA) Holdings, Inc.
Michael Kors (USA), Inc.
Michael Kors Virginia, L.L.C.
MK Chile SpA
MK Holetown (Barbados) Inc.
MKJC Limited
MK Operations E-zone Curacao N.V.
MK (Panama) Operations, Inc.
MK Panama Retail, S.A.
MK Retail Operation CR S.A.
MK Retail (SXM) N.V.
MK (Shanghai) Commercial Trading Company Limited
Jurisdiction of Formation
Singapore
Spain
Japan
Austria
Delaware
Belgium
Romania
Canada
Canada
Czech Republic
Denmark
Brazil
Netherlands
France
Germany
Hong Kong, China
Hungary
Ireland
Italy
Japan
South Korea
Latvia
Hong Kong, China
Delaware
Luxembourg
Netherlands
Panama
Poland
Portugal
Delaware
Spain
Delaware
New York
Sweden
Switzerland
Switzerland
Switzerland
Switzerland
China
United Kingdom
United Kingdom
United Kingdom
Delaware
Delaware
Virginia
Chile
Barbados
British Virgin Islands
Curaçao
Panama
Panama
Costa Rica
St. Maarten
China
Entity Name
UAB Michael Kors (Lithuania)
Versace Asia Pacific Limited
Versace Australia Pty Limited
Versace Austria GmbH
Versace Belgique SA
Versace Canada, Inc.
Versace China Limited
Versace Czech s.r.o.
Versace Deutschland GmbH
Versace Do Brasil Importação e Distribuição de Produtos de Vestuário e Acessórios Ltda.
Versace España, S.A.U.
Versace France S.A.
Versace Japan Co., Ltd.
Versace Korea Co., Ltd.
Versace Macau Limited
Versace Malaysia Sdn. Bhd.
Versace Monte-Carlo S.A.M.
Versace Shangai Limited
Versace Singapore Pte. Ltd.
Versace Suisse SA
Versace Taiwan Co., Limited
Versace (Thailand) Co., Ltd.
Versace U.K. PLC
Versace USA, Inc.
Jurisdiction of Formation
Lithuania
Hong Kong, China
Australia
Austria
Belgium
Canada
China
Czech Republic
Germany
Brazil
Spain
France
Japan
South Korea
Macau, China
Malaysia
Principality of Monaco
China
Singapore
Switzerland
Taiwan, China
Thailand
United Kingdom
New York
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-178486, 333-249023
and 333-234699) pertaining to the Amended and Restated Omnibus Incentive Plan, Second Amended and Restated Omnibus
Incentive Plan and the Deferred Compensation Plan of Capri Holdings Limited and subsidiaries of our reports dated May 26,
2021 with respect to the consolidated financial statements and the effectiveness of internal control over financial reporting of
Capri Holdings Limited and subsidiaries, included in this Annual Report (Form 10-K) for the year ended March 27, 2021.
Exhibit 23.2
/s/ ERNST & YOUNG LLP
New York, New York
May 26, 2021
Exhibit 31.1
CERTIFICATIONS
I, John D. Idol, certify that:
1.
I have reviewed this Form 10-K of Capri Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent function):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: May 26, 2021
By:
/s/ John D. Idol
John D. Idol
Chief Executive Officer
Exhibit 31.2
CERTIFICATIONS
I, Thomas J. Edwards, Jr., certify that:
1.
I have reviewed this Form 10-K of Capri Holdings Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent function):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: May 26, 2021
By:
/s/ Thomas J. Edwards, Jr.
Thomas J. Edwards, Jr
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this annual report on Form 10-K of Capri Holdings Limited (the “Company”) for the year ended March 27,
2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John D. Idol, Chief Executive
Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(i) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of Capri Holdings Limited.
Date: May 26, 2021
/s/ John D. Idol
John D. Idol
Chief Executive Officer
(Principal Executive Officer)
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of this
Report.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this annual report on Form 10-K of Capri Holdings Limited (the “Company”) for the year ended March 27,
2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. Edwards, Jr., Chief
Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(i) The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934, as amended; and
(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of Capri Holdings Limited.
Date: May 26, 2021
/S/ Thomas J. Edwards, Jr.
Thomas J. Edwards, Jr.
Chief Financial Officer
(Principal Financial Officer)
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of this
Report.
[This page intentionally left blank]
[This page intentionally left blank]
[This page intentionally left blank]
BRG1890L-0521-10KW