Capri Holdings (CPRI) Strategy Update summary

Strategic Direction and Portfolio Update

• Capri and Tapestry mutually agreed to terminate their merger due to unlikely U.S. regulatory approval, refocusing Capri on independent growth strategies for Michael Kors, Versace, and Jimmy Choo.

• The company acknowledges disappointing results over the past 18 months, citing global luxury demand softness, especially in China, and internal missteps in brand repositioning.

• Management emphasizes the strength of its brand portfolio, global retail and digital presence, and financial resources, and remains open to strategic alternatives for any brand if it enhances shareholder value.

• Strategic initiatives are underway to stabilize revenues and return to growth, with more details to be shared at an Investor Day in February 2025.

Brand-Specific Transformation Plans

• Michael Kors is rebalancing its product mix, optimizing pricing, reducing its store fleet to about 650 with 150 renovations, and increasing marketing investments to broaden appeal.

• Versace is reintroducing aspirational products, broadening price points, leveraging celebrity-driven marketing, maintaining a flat store count at about 230, and targeting wholesale growth.

• Jimmy Choo is expanding its casual assortment, aiming for accessories to reach 30% of the mix, maintaining a stable store fleet at around 220, and focusing on campaigns and collaborations.

Financial Performance and Guidance

• Total company revenue for the first half was $2.1 billion, down 15% year-over-year, with retail sales down high single digits and wholesale down double digits.

• Gross margin declined 80 basis points to 64.4%, and operating margin fell to 2.2% from 10.6% last year, mainly due to expense deleverage on lower revenue.

• Versace and Jimmy Choo posted negative operating margins, while Michael Kors' margin dropped to 11.5%.

• Fiscal 2025 guidance is high-level, with expectations for sequential revenue improvement in the back half, continued gross margin pressure, and further operating expense reductions.