Capri Holdings Ltd

Previous wording

Agreement and Plan of Merger

Current wording

Termination of the Agreement and Plan of Merger

Previous wording

On August 10, 2023, Capri entered into an Agreement and Plan of Merger with Tapestry, Inc., a Maryland corporation, and Sunrise Merger Sub, Inc., a British Virgin Islands business company limited by shares and a direct wholly owned subsidiary of Tapestry. The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Tapestry will acquire Capri in an all-cash transaction by means of a merger of Merger Sub with and into Capri, with Capri surviving the Merger as a wholly owned subsidiary of Tapestry. For additional information related to the Merger Agreement, please refer to Capri’s Definitive Proxy Statement on Schedule 14A filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 20, 2023, as well as the supplemental disclosures contained in Capri’s Current Report on Form 8-K filed with the SEC on October 17, 2023.

Current wording

As previously disclosed, on August 10, 2023, Capri entered into an Agreement and Plan of Merger with Tapestry, Inc., a Maryland corporation, and Sunrise Merger Sub, Inc., a British Virgin Islands business company limited by shares and a direct wholly owned subsidiary of Tapestry. The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Tapestry would acquire Capri in an all-cash transaction by means of a merger of Merger Sub with and into Capri, with Capri surviving the Merger as a wholly owned subsidiary of Tapestry.

Previous wording

The Merger has been approved by the boards of directors of Capri and Tapestry and by the shareholders of Capri. Completion of the Merger is subject to, among other customary conditions, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Company has received regulatory approval from all countries except for the United States. In connection with Tapestry’s proposed acquisition of Capri, on April 22, 2024, the U.S. FTC filed a lawsuit in the United States District Court for the Southern District of New York (the “District Court”) against Tapestry and the Company seeking to block the Merger, claiming that the Merger would violate Section 7 of the Clayton Act and that the Merger Agreement and the Merger constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined. The preliminary injunction hearing concluded in September 2024, and on October 24, 2024, the District Court granted the FTC's motion for a preliminary injunction to enjoin the Merger pending the completion of the FTC's in-house administrative proceeding which is currently expected to begin on December 9, 2024. On October 28, 2024, Tapestry and Capri jointly filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit. The parties may not be successful on appeal and the appeal may not be heard on a timely basis. If the Merger is unable to be consummated, there can be no assurance that any other transaction acceptable to us will be offered and our business, prospects and/or results of operations may be adversely affected.

Current wording

The Merger had been approved by the boards of directors of Capri and Tapestry and by the shareholders of Capri. Completion of the Merger was subject to, among other customary conditions, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Company received regulatory approval from all countries except for the United States. In connection with Tapestry’s proposed acquisition of Capri, on April 22, 2024, the U.S. FTC filed a lawsuit in the United States District Court for the Southern District of New York (the “District Court”) against Tapestry and the Company seeking to block the Merger, claiming that the Merger would violate Section 7 of the Clayton Act and that the Merger Agreement and the Merger constituted unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined. The preliminary injunction hearing concluded in September 2024, and on October 24, 2024, the District Court granted the FTC's motion for a preliminary injunction to enjoin the Merger pending the completion of the FTC's in-house administrative proceeding. On October 28, 2024, Tapestry and Capri jointly filed a notice of appeal to the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”).

Previous wording

Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessory brand, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, jewelry, scarves and belts, as well as men’s luxury shoes and accessories. 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, alongside innovative collections 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.

Current wording

Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product range, enabling it to develop into a leading global luxury accessory brand, whose core product offering is women’s luxury shoes, complemented by accessories, including handbags, small leather goods, jewelry, scarves and belts, as well as men’s luxury shoes and accessories. 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 chic, glamorous and instinctively seductive. The brand offers classic and timeless luxury products, alongside innovative collections 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.

Previous wording

Macroeconomic conditions and inflationary pressures. Global economic conditions and the related impact on levels of consumer spending worldwide impacted our business in the first half of Fiscal 2025, and are likely to continue to impact our business and the luxury accessories, footwear and apparel industry overall for the foreseeable future. Inflation, rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on market declines and uncertainty, home prices, credit availability and consumer debt levels, concerns of a global banking crisis, political instability due to war or other geopolitical factors, including national elections such as the U.S. presidential election, and other macroeconomic pressures and general uncertainty regarding the overall future economic environment have created a challenging retail environment, which is expected to continue in the near term. Purchases of discretionary luxury items, such as the accessories, footwear and apparel that we produce, tend to decline when disposable income is lower or when there are recessions, inflationary pressures or other economic uncertainty which could negatively affect our financial condition and results of operations.

Current wording

Macroeconomic conditions and inflationary pressures. Global economic conditions and the related impact on levels of consumer spending worldwide impacted our business in the first nine months of Fiscal 2025, and are likely to continue to impact our business and the luxury accessories, footwear and apparel industry overall for the foreseeable future. Inflation, rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on stock market declines and uncertainty, home prices, credit availability and consumer debt levels, concerns of a global banking crisis, political instability due to war or other geopolitical factors, including the presidential change in the U.S., and other macroeconomic pressures and general uncertainty regarding the overall future economic environment have created a challenging retail environment, which is expected to continue in the near term. Purchases of discretionary luxury items, such as the accessories, footwear and apparel that we produce, tend to decline when disposable income is lower or when there are recessions, inflationary pressures or other economic uncertainty which could negatively affect our financial condition and results of operations.

Previous wording

Luxury goods trends and demand for our accessories and related merchandise. Our performance is affected by trends in the luxury goods industry, global consumer spending, macroeconomic factors, overall levels of consumer travel and spending on discretionary items as well as shifts in demographics and changes in lifestyle preferences. Future growth is expected to be driven by e-commerce, Chinese consumers and younger generations, however, growth may be limited by concerns over inflation, the possibility of a global recession, foreign currency volatility or worsening economic conditions.

Current wording

Luxury goods trends and demand for our accessories and related merchandise. Our performance is affected by trends in the luxury goods industry, global consumer spending, macroeconomic factors, overall levels of consumer travel and spending on discretionary items as well as shifts in demographics and changes in lifestyle preferences. We have experienced, and may continue to experience, material reductions in revenues across our brands and regions driven predominantly by softening demand globally for fashion luxury goods as well as Versace and Michael Kors’ brand repositioning efforts. If demand for global fashion luxury goods continues to soften and/or if we do not correctly gauge consumer needs and fashion trends and respond appropriately, our future results of operations may be materially impacted.

Previous wording

Foreign currency fluctuation. Our consolidated operations are impacted by the relationships between our reporting currency, the United States dollar, and those of our non-United States subsidiaries whose functional/local currency is other than the United States dollar, primarily 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-United States subsidiaries in the future, when translated to the United States dollar.

Current wording

Foreign currency fluctuation. Our consolidated operations are impacted by the relationships between our reporting currency, the United States dollar, and those of our non-United States subsidiaries whose functional/local currency is other than the United States dollar, primarily the Euro, the British Pound, the Chinese Renminbi and the Japanese Yen, 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-United States subsidiaries in the future, when translated to the United States dollar.

Previous wording

Costs of manufacturing, tariffs, and import regulations. 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. We rely on free trade agreements and other supply chain initiatives in order to maximize efficiencies relating to product importation. We are also subject to government import regulations, including United States 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 United States 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 of our product.

Current wording

Costs of manufacturing, tariffs and import regulations. 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. We rely on free trade agreements and other supply chain initiatives in order to maximize efficiencies relating to product importation. We are also subject to government import regulations, including United States 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 United States 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 adverse 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 of our product.

Previous wording

Implementing and updating information technology systems. During Fiscal 2024, we began implementing a new state of the art e-commerce platform across our brands which is expected to continue through Fiscal 2025. While the new platform is designed to improve the user experience and enhance consumer engagement, the transition created unanticipated challenges which negatively impacted our results of operations. The continued implementation of this platform may also negatively impact our future results of operations. 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” of our Annual Report on Form 10-K for the fiscal year ended March 30, 2024 for additional discussion.

Current wording

Implementing and updating information technology systems. During Fiscal 2024, we began implementing a new state of the art e-commerce platform across certain of our brands which was completed in Fiscal 2025. While the new platform is designed to improve the user experience and enhance consumer engagement, the transition created unanticipated challenges which negatively impacted our results of operations. The continued implementation of this platform may also negatively impact our future results of operations. 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” of our Annual Report on Form 10-K for the fiscal year ended March 30, 2024 for additional discussion.

Previous wording

We generate revenue through the sale of Versace luxury accessories, ready-to-wear and footwear through directly operated Versace boutiques throughout North America (United States and Canada), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (Asia and Oceania), 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.

Current wording

We generate revenue through the sale of Versace luxury accessories, ready-to-wear and footwear through directly operated Versace boutiques throughout North America (United States and Canada), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (Asia and Oceania), 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 the Versace Jeans Couture product line, fragrances, watches, eyewear and home furnishings.

Previous wording

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 technology systems expenses, including system implementation costs and Capri transformation program costs. In addition, certain other costs are not allocated to segments, including Merger related costs, impairment charges and restructuring and other (expense) income. 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 from operations by segment for the three and six months ended September 28, 2024 and September 30, 2023 (in millions):

Current wording

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 technology systems expenses, including system implementation costs and Capri transformation program costs. In addition, certain other costs are not allocated to segments, including Merger related expenses, impairment charges and restructuring and other income (expense). 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 from operations by segment for the three and nine months ended December 28, 2024 and December 30, 2023 (in millions):

Previous wording

(1)Impairment of assets during the three and six months ended September 28, 2024 and September 30, 2023 primarily related to operating lease right-of-use assets at certain Versace and Michael Kors store locations.

Current wording

(1)Impairment of assets during the nine months ended December 28, 2024 includes $617 million, $83 million and $18 million of impairment charges related to the Versace, Jimmy Choo and Michael Kors reportable segments, respectively. Impairment of assets during the three and nine months ended December 30, 2023 primarily related to operating lease right-of-use assets at certain Versace and Michael Kors store locations.

Previous wording

Total revenue decreased $374 million, or 14.8%, to $2.146 billion for the six months ended September 28, 2024, compared to $2.520 billion for the six months ended September 30, 2023, which included net unfavorable foreign currency effects of approximately $13 million, as a result of the strengthening of the United States dollar compared to the Japanese Yen, Chinese Renminbi and Euro for the six months ended September 28, 2024. On a constant currency basis, our total revenue decreased $361 million, or 14.3%. The decrease is primarily attributable to continuing macroeconomic headwinds resulting in softening demand globally for fashion luxury goods impacting each of our brands.

Current wording

Total revenue decreased $166 million, or 11.6%, to $1.261 billion for the three months ended December 28, 2024, compared to $1.427 billion for the three months ended December 30, 2023, which included net unfavorable foreign currency effects of approximately $4 million, as a result of the strengthening of the United States dollar compared to the Euro and Japanese Yen for the three months ended December 28, 2024. On a constant currency basis, our total revenue decreased $162 million, or 11.4%. The decrease is primarily attributable to an overall slowdown in demand for luxury fashion goods globally, as well as the result of certain strategic initiatives previously put in place at Versace and Michael Kors that did not perform as expected.

Previous wording

•Versace revenues decreased $79 million, or 28.2%, to $201 million on both a reported and constant currency basis for the three months ended September 28, 2024, compared to $280 million for the three months ended September 30, 2023, primarily due to softening demand globally for fashion luxury goods.

Current wording

•Versace revenues decreased $34 million, or 15.0%, to $193 million on both a reported and constant currency basis for the three months ended December 28, 2024, compared to $227 million for the three months ended

Previous wording

Gross profit decreased $138 million, or 16.6%, to $694 million for the three months ended September 28, 2024, compared to $832 million for the three months ended September 30, 2023. Gross profit as a percentage of total revenue was 64.3% and 64.4% for the three months ended September 28, 2024 and September 30, 2023, respectively. The gross profit margin decrease was primarily related to lower full price sell-throughs offset by favorable channel mix for the three months ended September 28, 2024, as compared to the three months ended September 30, 2023.

Current wording

Gross profit decreased $116 million, or 12.5%, to $812 million for the three months ended December 28, 2024, compared to $928 million for the three months ended December 30, 2023, which included net unfavorable foreign currency effects of $2 million. Gross profit as a percentage of total revenue was 64.4% and 65.0% for the three months ended December 28, 2024 and December 30, 2023, respectively. The gross profit margin decrease was primarily related to lower full price sell-throughs for the three months ended December 28, 2024, as compared to the three months ended December 30, 2023.

Previous wording

Total operating expenses were $732 million for both the three months ended September 28, 2024 and the three months ended September 30, 2023, respectively. Our operating expenses included a net unfavorable foreign currency impact of approximately $1 million. Total operating expenses increased to 67.8% as a percentage of total revenue for the three months ended September 28, 2024, compared to 56.7% for the three months ended September 30, 2023. The components that comprise total operating expenses are explained below.

Current wording

Total operating expenses increased $596 million, or 73.9%, to $1.402 billion for the three months ended December 28, 2024, compared to $806 million for the three months ended December 30, 2023. Our operating expenses included a net favorable foreign currency impact of approximately $1 million. Total operating expenses increased to 111.2% as a percentage of total revenue for the three months ended December 28, 2024, compared to 56.5% for the three months ended December 30, 2023. The components that comprise total operating expenses are explained below.

Previous wording

Selling, general and administrative expenses decreased $25 million, or 3.8%, to $639 million for the three months ended September 28, 2024, compared to $664 million for the three months ended September 30, 2023, primarily due to decreased retail store costs, marketing spend and unallocated corporate expenses for the three months ended September 28, 2024.

Current wording

Selling, general and administrative expenses decreased $69 million, or 9.2%, to $680 million for the three months ended December 28, 2024, compared to $749 million for the three months ended December 30, 2023, primarily due to decreased retail store costs, marketing spend and unallocated corporate expenses for the three months ended December 28, 2024.

Previous wording

As a percentage of total revenue, selling, general and administrative expenses increased to 59.2% for the three months ended September 28, 2024, compared to 51.4% for the three months ended September 30, 2023, primarily due to deleveraging of expenses on lower revenues for the three months ended September 28, 2024.

Current wording

As a percentage of total revenue, selling, general and administrative expenses increased to 53.9% for the three months ended December 28, 2024, compared to 52.5% for the three months ended December 30, 2023, primarily due to deleveraging of expenses on lower revenues for the three months ended December 28, 2024.

Previous wording

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $8 million, or 11.3%, to $63 million for the three months ended September 28, 2024 as compared to $71 million for the three months ended September 30, 2023, primarily due to a decrease in professional fees and information technology costs related to certain Capri transformation projects which are now complete.

Current wording

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $17 million, or 25.0%, to $51 million for the three months ended December 28, 2024 as compared to $68 million for the three months ended December 30, 2023, primarily due to a decrease in professional fees and information technology costs related to certain Capri transformation projects which are now complete.

Previous wording

For the six months ended September 28, 2024, we recognized asset impairment charges of $43 million primarily related to operating lease right-of-use assets at certain Versace and Michael Kors store locations. For the six months ended September 30, 2023, we recognized asset impairment charges of $20 million primarily related to operating lease right-of-use assets at certain Versace and Michael Kors store locations. See Note 12 to the accompanying consolidated financial statements for additional information.

Current wording

For the three months ended December 28, 2024, we recognized asset impairment charges of $675 million primarily related to the impairment of the Jimmy Choo Wholesale and Versace Retail and Wholesale reporting units’ goodwill and Versace and Jimmy Choo brand intangible assets. For the three months ended December 30, 2023, we recognized asset impairment charges of $6 million primarily related to operating lease right-of-use assets at certain Versace and Michael Kors store locations. See Note 12 to the accompanying consolidated financial statements for additional information.

Previous wording

During the three months ended September 28, 2024, we recorded expenses of $1 million primarily related to lease termination and store closure costs. During the three months ended September 30, 2023, we recorded no net restructuring and other expense which was the result of gains on the termination of leases fully offset by expenses primarily related to equity awards associated with the acquisition of Versace. See Note 9 to the accompanying consolidated financial statements for additional information.

Current wording

During the three months ended December 28, 2024, we recorded income of $2 million primarily related to gains on lease terminations partially offset by severance and store closure costs. During the three months ended December 30, 2023, we recorded expenses of $5 million primarily related to equity awards associated with the acquisition of Versace. See Note 9 to the accompanying consolidated financial statements for additional information.

Previous wording

Restructuring and other expense is not evaluated as part of our reportable segments’ results (see Segment Information above for additional information).

Current wording

Restructuring and other (income) expense is not evaluated as part of our reportable segments’ results (See Segment Information above for additional information).

Previous wording

As a result of the foregoing, loss from operations was $38 million for three months ended September 28, 2024, compared to income from operations of $100 million for the three months ended September 30, 2023. Loss from operations as a percentage of total revenue was 3.5% for the three months ended September 28, 2024, compared to income from operations of 7.7% for the three months ended September 30, 2023. See Segment Information above for a reconciliation of our segment operating income to total operating (loss) income.

Current wording

As a result, loss from operations was $590 million for three months ended December 28, 2024, compared to income from operations of $122 million for the three months ended December 30, 2023. Loss from operations as a percentage of total revenue was 46.8% for the three months ended December 28, 2024, compared to income from operations of 8.5% for the three months ended December 30, 2023. See Segment Information above for a reconciliation of our segment operating income to total operating (loss) income.

Previous wording

•Jimmy Choo recorded a loss from operations of $5 million for the three months ended September 28, 2024, compared to $9 million for the three months ended September 30, 2023. Operating margin improved from a loss of 6.8% for the three months ended September 30, 2023 to an operating loss of 3.6% for the three months ended September 28, 2024, primarily due to leveraging of operating expenses on higher revenues and lower marketing expenses compared to the prior year.

Current wording

•Versace recorded a loss from operations of $21 million for the three months ended December 28, 2024, compared to $14 million for the three months ended December 30, 2023. Operating margin decreased from a loss of 6.2% for the three months ended December 30, 2023, to an operating loss of 10.9% for the three months ended December 28, 2024, primarily due to deleveraging of operating expenses on lower revenues compared to the prior year, partially offset by lower marketing expenses.

Previous wording

•Michael Kors recorded income from operations of $87 million for the three months ended September 28, 2024, compared to $169 million for the three months ended September 30, 2023. Operating margin decreased from 19.2% for the three months ended September 30, 2023, to 11.8% for the three months ended September 28, 2024, primarily due to deleveraging of operating expenses on lower revenues compared to the prior year.

Current wording

•Michael Kors recorded income from operations of $147 million for the three months ended December 28, 2024, compared to $219 million for the three months ended December 30, 2023. Operating margin decreased from 21.2% for the three months ended December 30, 2023, to 16.2% for the three months ended December 28, 2024, primarily due to deleveraging of operating expenses on lower revenues compared to the prior year.

Previous wording

For the three months ended September 28, 2024, we recognized $10 million of interest income compared to $3 million of interest expense for the three months ended September 30, 2023. The $13 million improvement in interest (income) expense, net, is primarily due to lower average borrowings and effective interest rates on our outstanding debt and higher interest income from our net investment hedges (see Note 10 and Note 13 to the accompanying consolidated financial statements for additional information).

Current wording

For the three months ended December 28, 2024, we recognized $8 million of interest income compared to $1 million of interest expense for the three months ended December 30, 2023. The $9 million improvement in interest (income) expense, net, is primarily due to higher interest income from our net investment hedges and lower average borrowings and effective interest rates on our outstanding debt (see Note 10 and Note 13 to the accompanying consolidated financial statements for additional information).

Previous wording

For the six months ended September 28, 2024, we recognized a net foreign currency gain of $12 million, primarily attributable to the remeasurement of intercompany transactions with certain of our subsidiaries. For the six months ended September 30, 2023, we recognized a net foreign currency loss of $18 million, primarily attributable to the remeasurement of intercompany transactions with certain of our subsidiaries.

Current wording

For the three months ended December 28, 2024, we recognized a net foreign currency loss of $23 million compared to a gain of $2 million for the three months ended December 30, 2023, primarily attributable to the remeasurement of intercompany transactions with certain of our subsidiaries.

Previous wording

The benefit for income taxes was $34 million on a pre-tax loss of $11 million for the three months ended September 28, 2024, compared to a provision of $11 million on pre-tax income of $101 million for the three months ended September 30, 2023. Our effective tax rate for the three months ended September 28, 2024 compared to our effective tax rate for the three months ended September 30, 2023 is not a meaningful metric due to the pre-tax loss in the current year and pre-tax income for the prior year. Our effective tax rate differs from the United Kingdom (“U.K.”) federal statutory rate of 25% primarily related to the release of $29 million of an uncertain tax provision related to Italian share-based compensation tax deductions as a result of a recently issued, favorable tax ruling.

Current wording

The benefit for income taxes was $59 million on a pre-tax loss of $605 million for the three months ended December 28, 2024, compared to a provision of $18 million on pre-tax income of $123 million for the three months ended December 30, 2023. Our effective tax rate for the three months ended December 28, 2024 compared to our effective tax rate for the three months ended December 30, 2023 is not a meaningful metric due to the pre-tax loss in the current year and pre-tax income for the prior year. Our effective tax rate differs from the United Kingdom (“U.K.”) federal statutory rate of 25% primarily related to the impact of the non-deductible goodwill impairment charges recorded partially offset by unfavorable geographic mix of earnings and the unfavorable impact of global financing activities due to a net loss for the three months ended December 28, 2024.

Previous wording

On August 6, 2024, the United States Treasury and the Internal Revenue Service (“IRS”) released proposed regulations that address several long-standing issues related to dual consolidated losses and introduce new rules for disregarded payment losses. If finalized as proposed, the changes related to disregarded payment losses could impact how we utilize certain deductions and losses to offset our U.S. income as part of our global financing activities. As a result, this could increase our effective tax rate in Fiscal 2026 and beyond. We will continue to evaluate its impact as further information becomes available.

Current wording

On January 10, 2025, the United States Treasury and the Internal Revenue Service (“IRS”) issued final regulations that address several long-standing issues related to dual consolidated losses and introduce new rules for disregarded payment losses. The changes related to disregarded payment losses could impact how we utilize certain deductions and losses to offset our U.S. income as part of our global financing activities beginning in Fiscal 2027. We will continue to evaluate its impact as further information becomes available.

Previous wording

Net Income Attributable to Capri

Current wording

Net (Loss) Income Attributable to Capri

Previous wording

As a result of the foregoing, our net income decreased $66 million to $24 million for the three months ended September 28, 2024, compared to $90 million for the three months ended September 30, 2023.

Current wording

As a result of the foregoing, our net loss was $547 million for the three months ended December 28, 2024, compared to net income of $105 million for the three months ended December 30, 2023.

Previous wording

Comparison of the six months ended September 28, 2024 with the six months ended September 30, 2023

Current wording

Comparison of the nine months ended December 28, 2024 with the nine months ended December 30, 2023

Previous wording

The following table details the results of our operations for the six months ended September 28, 2024 and September 30, 2023, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Current wording

The following table details the results of our operations for the nine months ended December 28, 2024 and December 30, 2023, and expresses the relationship of certain line items to total revenue as a percentage (dollars in millions):

Previous wording

•Versace revenues decreased $119 million, or 22.1%, to $420 million for the six months ended September 28, 2024, compared to $539 million for the six months ended September 30, 2023, which included unfavorable foreign currency effects of $3 million. On a constant currency basis, revenue decreased $116 million, or 21.5%, primarily due to softening demand globally for fashion luxury goods.

Current wording

•Versace revenues decreased $153 million, or 20.0%, to $613 million for the nine months ended December 28, 2024, compared to $766 million for the nine months ended December 30, 2023, which included unfavorable foreign currency effects of $3 million. On a constant currency basis, revenue decreased $150 million, or 19.6%, primarily due to softening demand globally for fashion luxury goods along with Versace’s recent efforts to reposition the brand to place a greater emphasis on luxury and craftsmanship.

Previous wording

•Jimmy Choo revenues decreased $2 million, or 0.6%, to $313 million for the six months ended September 28, 2024, compared to $315 million for the six months ended September 30, 2023, which included unfavorable foreign currency effects of $2 million. On a constant currency basis, revenue was flat, primarily attributable to higher revenues in EMEA offset by lower revenues in Asia.

Current wording

•Jimmy Choo revenues decreased $9 million, or 1.9%, to $472 million for the nine months ended December 28, 2024, compared to $481 million for the nine months ended December 30, 2023, which included unfavorable foreign currency effects of $2 million. On a constant currency basis, revenue decreased $7 million, or 1.5%, primarily attributable to lower revenues in Asia and the Americas partially offset by higher revenues in EMEA.

Previous wording

Gross profit decreased $261 million, or 15.9%, to $1.383 billion for the six months ended September 28, 2024, compared to $1.644 billion for the six months ended September 30, 2023, which included net unfavorable foreign currency effects of $6 million. Gross profit as a percentage of total revenue was 64.4% for the six months ended September 28, 2024, compared to 65.2% for the six months ended September 30, 2023. The decrease in gross profit margin primarily related to lower full price sell-throughs partially offset by favorable channel mix for the six months ended September 28, 2024, as compared to the six months ended September 30, 2023.

Current wording

Gross profit decreased $377 million, or 14.7%, to $2.195 billion for the nine months ended December 28, 2024, compared to $2.572 billion for the nine months ended December 30, 2023, which included net unfavorable foreign currency effects of $7 million. Gross profit as a percentage of total revenue was 64.4% for the nine months ended December 28, 2024, compared to 65.2% for the nine months ended December 30, 2023. The decrease in gross profit margin primarily related to lower full price sell-throughs partially offset by favorable channel mix for the nine months ended December 28, 2024, as compared to the nine months ended December 30, 2023.

Previous wording

Total operating expenses decreased $35 million, or 2.4%, to $1.429 billion for the six months ended September 28, 2024, compared to $1.464 billion for the six months ended September 30, 2023. Our operating expenses included a net favorable foreign currency impact of approximately $7 million. Total operating expenses increased to 66.6% as a percentage of total revenue for the six months ended September 28, 2024, compared to 58.1% for the six months ended September 30, 2023. The components that comprise total operating expenses are explained below.

Current wording

Total operating expenses increased $561 million, or 24.7%, to $2.831 billion for the nine months ended December 28, 2024, compared to $2.270 billion for the nine months ended December 30, 2023. Our operating expenses included a net favorable foreign currency impact of approximately $6 million. Total operating expenses increased to 83.1% as a percentage of total revenue for the nine months ended December 28, 2024, compared to 57.5% for the nine months ended December 30, 2023. The components that comprise total operating expenses are explained below.

Previous wording

Selling, general and administrative expenses decreased $65 million, or 4.8%, to $1.288 billion for the six months ended September 28, 2024, compared to $1.353 billion for the six months ended September 30, 2023, primarily due to the timing of marketing spend in the prior year, particularly related to the timing of the Versace fall fashion show, decreased retail store costs and decreased unallocated corporate expenses.

Current wording

Selling, general and administrative expenses decreased $134 million, or 6.4%, to $1.968 billion for the nine months ended December 28, 2024, compared to $2.102 billion for the nine months ended December 30, 2023, primarily due to the timing of marketing spend in the prior year, particularly related to the timing of the Versace fall fashion show, decreased retail store costs and decreased unallocated corporate expenses.

Previous wording

As a percentage of total revenue, selling, general and administrative expenses increased to 60.0% for the six months ended September 28, 2024, compared to 53.7% for the six months ended September 30, 2023, primarily due to deleveraging of expenses on lower revenues for the six months ended September 28, 2024.

Current wording

As a percentage of total revenue, selling, general and administrative expenses increased to 57.8% for the nine months ended December 28, 2024, compared to 53.3% for the nine months ended December 30, 2023, primarily due to deleveraging of expenses on lower revenues for the nine months ended December 28, 2024.

Previous wording

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $15 million, or 10.6%, to $127 million for the six months ended September 28, 2024 as compared to $142 million for the six months ended September 30, 2023, primarily due to a decrease in professional fees and information technology costs related to certain Capri transformation projects which are now complete.

Current wording

Unallocated corporate expenses, which are included within selling, general and administrative expenses discussed above, but are not directly attributable to a reportable segment, decreased $32 million, or 15.2%, to $178 million for the nine months ended December 28, 2024 as compared to $210 million for the nine months ended December 30, 2023, primarily due to a decrease in professional fees and information technology costs related to certain Capri transformation projects which are now complete.