Capri Holdings Ltd.

Company Overview

Business Model: Capri Holdings Limited is a global fashion luxury group comprising the iconic brands Versace, Jimmy Choo, and Michael Kors. The Company's core value proposition is designing exceptional, innovative products across the full spectrum of fashion luxury categories, underpinned by a commitment to glamorous style and craftsmanship. Revenue is primarily generated through a global distribution network that includes Company-operated retail stores (boutiques and outlet stores), e-commerce sites, wholesale channels (multi-brand department and specialty stores), and product and geographic licensing arrangements.

Market Position: Capri Holdings Limited operates within the global personal luxury goods industry, which has historically grown at a mid-single-digit compound annual growth rate since 1996. In 2024, the market experienced a 2% decline to an estimated €363 billion, marking the first year-over-year decrease in 15 years (excluding COVID-19 impacts), driven by a decline in volumes and a shrinking customer base. Despite this, the market is predicted to grow at a 4-6% compound annual growth rate between 2024 and 2030, reaching approximately €460-500 billion, fueled by an expanding consumer base and increasing wealth. Capri Holdings Limited leverages its three powerful fashion luxury brands, each with unique heritage and strong consumer affinity, as a key competitive strength. The Company also benefits from world-class management, renowned designers, expertise in the accessories category, an extensive retail store footprint, advanced omni-channel and CRM capabilities, and strong relationships with premier department stores. The market is highly competitive, with numerous existing and new entrants, including larger and more diversified European and American international luxury brands.

Recent Strategic Developments:

• Proposed Divestiture of Versace: On April 10, 2025, Capri Holdings Limited entered into a Stock Purchase Agreement with Prada S.p.A. for the acquisition of certain subsidiaries operating the Versace business. The aggregate purchase price is $1.375 billion in cash, subject to customary adjustments and closing conditions, including regulatory approvals.
• Termination of Tapestry Merger Agreement: On November 13, 2024, the previously proposed merger with Tapestry, Inc. was terminated following a U.S. Federal Trade Commission lawsuit and a preliminary injunction. Capri Holdings Limited received approximately $45 million in expense reimbursement from Tapestry, Inc.
• Global Optimization Plan: Approved in the fourth quarter of Fiscal 2024, this multi-year plan aims to streamline the Company’s operating model and maximize efficiency. In Fiscal 2025, 83 retail stores were closed as part of this initiative.
• ERP System Implementation: The Company is undertaking a major, multi-year Enterprise Resource Planning (ERP) system implementation to upgrade its information technology platforms and systems worldwide, with finance functionality launched in Fiscal 2023 and continuing in Fiscal 2025.
• E-commerce Platform Re-platforming: Completed in Fiscal 2025 across certain brands to expand global capabilities, though the transition presented unanticipated challenges.
• Strategic Acquisition: On May 2, 2024, Capri Holdings Limited acquired Calzaturificio Sicla S.r.l., an Italian shoe manufacturer, for $9 million in cash, to support all brands, pursue manufacturing synergies, and secure capacity.

Geographic Footprint: Capri Holdings Limited operates globally, with approximately 49% of its total revenue in Fiscal 2025 generated from operations outside the United States. The Company's products are sold through retail and wholesale channels across three principal geographic markets: the Americas (United States, Canada, and Latin America), EMEA (Europe, Middle East, and Africa), and Asia (Asia and Oceania). As of March 29, 2025, the Company operated 1,158 retail stores worldwide (728 full-price and 430 outlet stores), with significant presence in Asia (538 stores), the Americas (362 stores), and EMEA (258 stores). E-commerce sites serve key markets including the United States, Europe, China, Japan, South Korea, Australia, and other regions.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 63.6% (Fiscal 2025) vs. 64.6% (Fiscal 2024)
• Operating Margin: -16.9% (Fiscal 2025) vs. -4.7% (Fiscal 2024)
• Net Margin: -26.5% (Fiscal 2025) vs. -4.4% (Fiscal 2024)

Investment in Growth:

• R&D Expenditure: Advertising and Marketing expenses were $363 million (8.2% of revenue) in Fiscal 2025.
• Capital Expenditures: $128 million in Fiscal 2025, a decrease from $189 million in Fiscal 2024. The majority of Fiscal 2025 expenditures related to retail operations (including e-commerce), IT system enhancements, and the Capri transformation program.
• Strategic Investments: The Capri transformation program is a multi-year initiative extending through Fiscal 2026, focused on improving operating effectiveness, efficiency, and expanding digital capabilities. The Company also invested $9 million in the acquisition of Calzaturificio Sicla S.r.l. in Fiscal 2025.

Business Segment Analysis

Versace

Financial Performance:

• Revenue: $821 million (-20.3% YoY, -19.6% YoY constant currency)
• Operating Margin: -6.6% (Fiscal 2025) vs. 2.4% (Fiscal 2024)
• Key Growth Drivers: The decline in revenue and operating margin was primarily attributable to a global slowdown in demand for fashion luxury goods and strategic initiatives that did not perform as expected. This was partially offset by lower marketing expenses and decreased store and personnel costs.
• Impairment Charges: $656 million in Fiscal 2025, primarily related to goodwill and intangible assets of the Versace Retail and Wholesale reporting units.

Product Portfolio:

• Versace offers a wide range of luxury products, including haute couture, ready-to-wear, footwear, accessories, eyewear, watches, jewelry, fragrance, and home furnishings.
• Key product lines are also produced under licensing agreements, including Versace Jeans Couture (Swinger SA), eyewear (Luxottica), fragrances (EuroItalia), watches and writing instruments (Vertime), home furnishings (Poltrona Frau), and tableware (Rosenthal).
• Retail price points generally range from $100 to $300,000 across categories.

Market Dynamics:

• Recognized as a leading fashion design house, synonymous with Italian glamour and style.
• Products are distributed through 228 retail stores (including concessions) globally, averaging approximately 2,900 gross square feet, and e-commerce sites in the United States, Europe, and China.

Jimmy Choo

Financial Performance:

• Revenue: $605 million (-2.1% YoY, -1.5% YoY constant currency)
• Operating Margin: -2.8% (Fiscal 2025) vs. 0.5% (Fiscal 2024)
• Key Growth Drivers: Revenue decline was primarily due to softening global demand for fashion luxury goods, partially offset by higher revenues in EMEA. The operating margin was negatively impacted by the Sicla Acquisition (due to lower manufacturer margins on third-party sales) and lower full-price sell-throughs.
• Impairment Charges: $91 million in Fiscal 2025, primarily related to goodwill and intangible assets of the Jimmy Choo Wholesale reporting unit.

Product Portfolio:

• Core offering is women’s luxury shoes, complemented by accessories (handbags, small leather goods, jewelry, scarves, belts), and men’s luxury shoes and accessories.
• Licensing agreements cover fragrance (Interparfums SA) and eyewear (EssilorLuxottica SA).
• Retail price points generally range from $200 to $5,000.
• The Company aims to increase women’s accessories to approximately 30% of the brand’s revenue over time.

Market Dynamics:

• Known for its distinctive, glamorous, and fashion-forward product range, with a strong red carpet presence and leading editorial coverage for women’s luxury shoes globally.
• Distributed through 219 retail stores (including concessions) worldwide, averaging approximately 1,500 gross square feet, and e-commerce sites in the United States, parts of Europe, Japan, China, Australia, and Korea.

Michael Kors

Financial Performance:

• Revenue: $3,016 million (-14.4% YoY, -13.8% YoY constant currency)
• Operating Margin: 11.3% (Fiscal 2025) vs. 18.0% (Fiscal 2024)
• Key Growth Drivers: Revenue and operating margin decreases were primarily due to softening global demand for fashion luxury goods and strategic initiatives that did not perform as expected, coupled with lower full-price sell-throughs and deleveraging of operating expenses on lower revenues.
• Impairment Charges: $50 million in Fiscal 2025.

Product Portfolio:

• Offers three primary collections: Michael Kors Collection, MICHAEL Michael Kors, and Michael Kors Mens, encompassing accessories, footwear, and apparel.
• Product licensing agreements include watches and jewelry (Fossil), eyewear (Luxottica), and fragrance (EuroItalia).
• Retail price points generally range from $50 to $10,000 across collections and categories.
• The Company's strategy is to lead with accessories while emphasizing lifestyle categories, including footwear, ready-to-wear, men’s, and licensing.

Market Dynamics:

• A highly recognized luxury fashion brand in the Americas and Europe, with growing brand awareness in other international markets, known for its easy glamour and jet set lifestyle.
• Distributed through 711 retail stores (including concessions) globally, with various formats (Collection, Lifestyle, Outlet), and e-commerce sites across North America, China, Japan, South Korea, parts of Europe, the Middle East, Africa, Asia Pacific, and Oceania.
• Maintains strong relationships with premier department stores globally. The Company is focused on increasing retail store sales densities through product initiatives, fleet optimization, and store renovation programs.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In Fiscal 2025, the Company repurchased 117,710 shares for $4 million, solely to cover tax obligations for vested restricted share awards. No open market repurchases were made under the share repurchase program, which expired on November 9, 2024, due to restrictions under the previously terminated Merger Agreement. In Fiscal 2024, the Company repurchased 2,637,102 shares for $100 million under the program, in addition to shares withheld for tax obligations.
• Dividend Payments: Not disclosed in the provided filing.
• Future Capital Return Commitments: The previous share repurchase program expired, and no new program was mentioned.

Balance Sheet Position:

• Cash and Equivalents: $166 million as of March 29, 2025, down from $199 million as of March 30, 2024.
• Total Debt: $1,500 million as of March 29, 2025, down from $1,723 million as of March 30, 2024.
• Net Cash Position: -$1,334 million as of March 29, 2025.
• Credit Rating: Not explicitly disclosed, but debt covenants are tied to public debt ratings.
• Debt Maturity Profile: The 2025 Credit Facilities (comprising a $1.5 billion revolving credit facility and $700 million in 2025 Term Loans) mature on July 1, 2027. The 2025 Term Loans require quarterly principal payments of 1.25% of the original principal amount. The Versace Term Loan (€450 million) was repaid and terminated in Fiscal 2025, and Senior Notes due November 2024 were repaid in full. Operating lease liabilities total $1,882 million, with $420 million due in Fiscal 2026.

Cash Flow Generation:

• Operating Cash Flow: $281 million in Fiscal 2025, a decrease from $309 million in Fiscal 2024. This decrease was primarily due to lower net income after non-cash adjustments, partially offset by improved management of accounts payable and accounts receivable.
• Free Cash Flow: Approximately $153 million in Fiscal 2025 (Operating Cash Flow of $281 million minus Capital Expenditures of $128 million).
• Cash Conversion Metrics: Improved management of accounts payable and accounts receivable, and stabilization of inventory levels contributed to operating cash flow.

Operational Excellence

Production & Service Model: Capri Holdings Limited primarily contracts with independent third-party manufacturing contractors for finished goods, mainly located in Asia and Europe. For Versace, production is centrally managed, with raw materials sourced and distributed to manufacturers, predominantly in Italy, with some in other European countries, Asia, and North Africa. Jimmy Choo products are manufactured by both owned Italian ateliers and shoe manufacturers, as well as third-party contractors, primarily in Italy and other European countries, with a small portion in Asia. Michael Kors utilizes a multi-supplier strategy, with third-party contractors responsible for the entire manufacturing process, including sourcing piece goods and trim, predominantly in Asia. The Company owns two luxury footwear manufacturing facilities in Italy (Sicla Luxury Shoe Factory and Capri Luxury Shoe Factory) to support all brands, aiming for manufacturing synergies and enhanced expertise. Global production teams and buying agents closely supervise manufacturing to ensure product specifications and quality.

Supply Chain Architecture: Key Suppliers & Partners:

• Manufacturing Contractors: Independent third-party contractors in Asia and Europe. One third-party buying agent sourced approximately 15% of Michael Kors finished goods in Fiscal 2025, and Michael Kors' largest manufacturing contractor (in Asia) accounted for approximately 11% of its finished products.
• Licensing Partners: Swinger SA, Luxottica, EuroItalia, Vertime, Poltrona Frau, Rosenthal (for Versace); Interparfums SA, EssilorLuxottica SA (for Jimmy Choo); Fossil, Luxottica, EuroItalia (for Michael Kors).
• Technology Partners: Third-party vendors are relied upon for IT systems, e-commerce platforms, and ERP implementation.

Facility Network:

• Manufacturing: Owned luxury footwear factories in Arezzo and Pistoia, Italy. Versace production is vast majority in Italy. Jimmy Choo production is mostly in Italy and other European countries. Michael Kors production is nearly all in Asia.
• Research & Development: Jimmy Choo has a product development facility in Florence, Italy.
• Distribution:
  • Versace: Central warehouse in Novara, Italy (third-party managed global hub), leased warehouse near Novara, and regional third-party operated warehouses in the United States, Hong Kong, South Korea, Mainland China, and Japan. U.S. e-commerce distribution is handled by a third-party in New Jersey.
  • Jimmy Choo: Company-owned and operated distribution facility in the Netherlands (primary), with regional third-party operated warehouses in the United States, Canada, Mainland China, Hong Kong, South Korea, Japan, and United Arab Emirates.
  • Michael Kors: Leased primary distribution facility in Whittier, California (directly operated), Company-owned and operated European distribution facility in the Netherlands, and regional distribution centers (leased or third-party operated) in Canada, the United States, Mainland China, Hong Kong, Japan, South Korea, and Taiwan.
• Corporate Offices: Significant corporate presence in New York, NY; London, England; Milan, Italy; Montreal, Quebec; Shanghai, China; East Rutherford, NJ; and Manno, Switzerland.

Operational Metrics:

• The Company utilizes omni-channel order fulfillment, including fulfilling online orders through retail stores and offering click-and-collect services.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Company-operated full-price retail stores (boutiques and concessions), outlet stores, and brand-specific e-commerce platforms.
• Channel Partners:
  • Wholesale: Sales to major department stores (e.g., Bloomingdale’s, Macy’s, Harrods), specialty stores, and travel retail shops globally.
  • Geographic Licensees: Partnerships allowing third-parties to distribute and sell branded products in specific regions (e.g., Brazil, Middle East, Eastern Europe, South Africa, parts of Asia).
  • Product Licensees: Agreements with third-parties for manufacturing and sale of specific product categories (e.g., watches, jewelry, fragrances, eyewear, home furnishings) under the Company's trademarks.
• Digital Platforms: Continuous improvement of e-commerce site functionalities and features, and engagement through digital and social media platforms.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Strong relationships with leading wholesale customers such as Bloomingdale’s, Dillard’s, Macy’s, Saks Fifth Avenue in North America, and Galeries Lafayette, Harrods, Harvey Nichols, Printemps, Selfridges in Europe.
• Customer Concentration: No individual customer accounted for 10% or more of total revenues in Fiscal 2025, Fiscal 2024, or Fiscal 2023, indicating a diversified customer base.

Geographic Revenue Distribution:

• The Americas: $2,479 million (55.8% of total revenue) in Fiscal 2025.
• EMEA: $1,296 million (29.2% of total revenue) in Fiscal 2025.
• Asia: $667 million (15.0% of total revenue) in Fiscal 2025.
• Growth Markets: The Company pursues selective international expansion in various countries and channels.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The global personal luxury goods industry is characterized by its sensitivity to macroeconomic cycles and rapidly changing fashion trends. After a 2% decline in 2024 (to €363 billion), the market is projected to grow at a 4-6% compound annual growth rate through 2030. Competition is intense, with numerous producers and retailers, including larger, more diversified European and American international luxury brands. The general availability of manufacturing contractors facilitates market entry for new competitors.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Capri Holdings Limited faces intense competition from other accessories, footwear, and apparel producers and retailers, particularly established European and American international luxury brands. Competition also arises from third-party distribution channels, including e-commerce platforms, department stores, and specialty stores. Some competitors possess significantly greater financial, technological, manufacturing, sales, marketing, and distribution resources.

Emerging Competitive Threats: The ease of market access for new entrants due to the general availability of manufacturing contractors poses a continuous competitive threat. The Company also faces risks from disruptive technologies and the need to continuously adapt to evolving consumer preferences and digital trends.

Competitive Response Strategy: The Company's strategy focuses on maximizing the potential of its three distinct luxury houses by building brand desirability through engaging consumers, designing innovative products, and delivering exceptional consumer experiences. It aims to leverage group expertise in accessories and footwear, prioritize e-commerce and omni-channel development, and create operational synergies across supply chain, information systems, back office support, and manufacturing. Specific brand strategies include reinforcing Jimmy Choo's glamorous DNA and expanding its accessories and footwear, and returning Michael Kors to growth by modernizing its jet set lifestyle interpretation, creating compelling product value, and optimizing retail store sales densities.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The Company is highly susceptible to macroeconomic cycles, including inflation, rising interest rates, and geopolitical instability (e.g., war in Ukraine), which can depress consumer spending on discretionary luxury items. Rapidly changing fashion trends and consumer preferences pose a risk, as missteps in product design or brand image can materially impact results. Intense competition from larger, more diversified players and new market entrants can lead to pricing pressure and margin erosion. Reductions in the wholesale channel, including consolidations or financial difficulties of partners, could negatively affect revenues. Declining consumer traffic to retail stores due to economic conditions, travel concerns, or shifts to online shopping could lead to underperformance and impairment charges. Misjudging product demand can result in excess inventory and reliance on markdowns.

• Technology Disruption: Dependence on IT systems for sales, supply chain, and operations makes the Company vulnerable to failures, disruptions, or challenges in upgrading systems (e.g., ERP implementation). The success of its e-commerce business relies on providing a reliable digital experience, and failure to keep pace with technology trends or manage third-party digital partners could harm reputation and operating results.
• Customer Concentration: While no single customer accounts for 10% or more of revenue, the Company's reliance on premier department stores for its wholesale business exposes it to risks associated with their financial health and promotional activities.

Operational & Execution Risks

Supply Chain Vulnerabilities: Global sourcing activities expose the Company to risks such as political/labor instability, disruptions or delays in manufacturing/shipments (e.g., port congestion), increased freight costs, raw material price volatility, and compliance with ethical business practices by third-party contractors. The Company's reliance on a limited number of distribution facilities means operational difficulties or inoperability could lead to substantial inventory loss and delivery disruptions. Dependence on third-party service providers for outsourced functions also presents risks if they fail to deliver expected services.

• Capacity Constraints: While not explicitly detailed as a current constraint, the Company's global sourcing activities are subject to risks related to the availability of production capacity.

Financial & Regulatory Risks

Market & Financial Risks: The Company faces significant risk of goodwill and/or intangible asset impairment charges, as evidenced by $797 million in charges in Fiscal 2025 and $575 million in Fiscal 2024, driven by declining operating results and market conditions. Substantial long-term, non-cancelable operating lease obligations ($1.882 billion total future minimum payments) represent a significant fixed cost. The Company's substantial indebtedness ($1.5 billion as of March 29, 2025) could restrict financial flexibility and ability to fund growth. Failure to meet financial covenants in debt agreements could trigger an event of default. Exposure to counterparty default risk from financial institutions for derivative contracts and cash deposits could lead to losses or liquidity issues.

• Regulatory & Compliance Risks: Compliance with diverse labor laws, collective bargaining agreements, and ethical business practices in the supply chain is critical. Inability to protect trademarks, copyrights, and other intellectual property from infringement, or allegations of infringement by others, could be costly. Fluctuations in tax obligations and changes in tax laws (e.g., Inflation Reduction Act, Pillar Two GloBE Rules) can materially impact effective tax rates. The Company recorded a full valuation allowance against its deferred tax assets in Fiscal 2025 due to cumulative losses, posing a risk to future realization.
• Legal Proceedings: The Company is subject to various legal proceedings, including shareholder litigation related to the terminated Tapestry, Inc. merger, which could result in substantial costs and liabilities.

Geopolitical & External Risks

Geopolitical Exposure: Operating globally exposes the Company to political or civil unrest, economic instability, and unsettled regional/global conflicts (e.g., war in Ukraine).

• Trade Relations: The imposition or threat of new duties, tariffs, or trade restrictions (e.g., U.S. tariffs in April 2025 on imports from key manufacturing countries) could increase costs, limit sourcing options, and impact profitability. Compliance with government regulations on importation activities, including withhold release orders, is crucial.
• Sanctions & Export Controls: Compliance with international sanctions and export controls is required, which can limit business activities in certain regions or with specific entities.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: The Company's core focus is on designing exceptional and innovative products across its luxury fashion categories. This includes reinforcing brand DNA, creating exciting products with compelling value, and embracing iconic brand codes in modern ways.

• Innovation Pipeline:
  • Michael Kors: Product strategy centers on driving full-price sell-throughs and higher Average Unit Retail (AUR) through a balanced product mix of fashion and core items, and a balanced pricing architecture.
  • Jimmy Choo: Product strategy focuses on reinforcing brand codes (JC, crystal, pearl) and expanding women’s accessories and fashion active/casual footwear offerings.
• Technology Development: Significant investment in a multi-year ERP implementation to upgrade IT platforms and systems, and the recent re-platforming of e-commerce sites to enhance global capabilities and consumer engagement.

Intellectual Property Portfolio:

• Patent Strategy: Capri Holdings Limited owns and aggressively polices its VERSACE, JIMMY CHOO, and MICHAEL KORS trademarks, along with other material copyrights, design, and patent rights globally. The Company strategically registers its intellectual property in key countries and actively pursues infringers and counterfeiters through various channels and partnerships with law enforcement.
• Licensing Programs: The Company generates revenue through product and geographic licensing agreements, which allow third-parties to use its brand names and trademarks for manufacturing and sales in specialized categories or regions.
• IP Litigation: The Company is involved in opposition and cancellation proceedings related to trademarks and other intellectual property, and faces the risk of litigation concerning infringement allegations.

Technology Partnerships: The Company relies on third-party vendors for the design, programming, maintenance, and servicing of its ERP implementation program and e-commerce platforms.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Company depends on the services and management experience of its executive officers and key design/marketing employees. The departure of key personnel or failure to attract and retain qualified talent could adversely affect the business.

Board Composition: The Board of Directors oversees human capital management through its Compensation and Talent Committee and ESG activities through the Governance, Nominating and CSR Committee. The Audit Committee provides primary oversight of enterprise risk management, business continuity planning, and cybersecurity risk, with regular reports to the full Board. The Compensation and Talent Committee considers ESG goals in executive compensation decisions.

Human Capital Strategy

Workforce Composition: As of March 29, 2025, Capri Holdings Limited had approximately 14,200 total employees (down from 15,500 in Fiscal 2023), consisting of 9,700 full-time and 4,500 part-time employees. Approximately 10,200 employees were in retail selling and administrative roles. Around 3,100 employees in certain European countries are covered by collective bargaining agreements, with relations considered good.

Talent Management: Acquisition & Retention: The Company offers comprehensive benefit and compensation packages, including medical, dental, vision, life insurance, disability, retirement plans with matching contributions, paid parental leave, and a wellness program. Employees receive paid time off, including for volunteering, and merchandise discounts. Talent management includes personalized development plans, individualized feedback, and targeted skill-building programs for all career stages, as well as global training in compliance, ethics, cybersecurity, and supply chain transparency. Diversity & Development: Capri Holdings Limited fosters an inclusive environment, supported by three pillars: Capri Culture (inclusive space), Capri Talent (diverse workforce), and Capri Community (championing inclusion). The Company utilizes employee resource groups (ERGs), global listening sessions, and mentorship programs (including reverse mentorship). Through The Capri Holdings Foundation for the Advancement of Diversity in Fashion, it partners with educational institutions like Parsons School of Design and The Heritage Crafts Association to create opportunities for underrepresented communities. The Company has received recognitions such as "Best Workplace for Development™" (Michael Kors, UK), "Parity.Org 2024 Best Companies for Equal Advancement Opportunity," and inclusion in "Seramount’s Best Companies for Multicultural Women List." Culture & Engagement: Enhancing employee experience is an integral part of the Company's strategy, supported by its inclusive culture and community initiatives.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Capri Holdings Limited is committed to improving its environmental impact and has set science-based targets for greenhouse gas (GHG) emissions reductions (Scope 1, 2, and 3). The Company aims to operate responsibly to lower its impact on the planet and promote industry-wide environmental change, including through renewable energy adoption and sourcing strategies. Supply Chain Sustainability: The Company integrates sustainability into its supply chain by engaging suppliers on ESG requirements, promoting supplier diversity, and ensuring responsible sourcing of materials, including compliance with conflict minerals regulations. Social Impact Initiatives:

• Community Investment: Giving back is embedded in Capri Holdings Limited's culture, with a commitment to philanthropic partners and local community support.
• Corporate Social Responsibility (CSR) Strategy: The Company's CSR strategy is built on four foundational pillars: Our Governance, Our World, Our Community, and Our Philanthropy, aligning with the United Nations Sustainable Development Goals (SDGs).
• Sustainability Governance: The Board's Governance, Nominating and CSR Committee oversees ESG activities, with annual review and approval of sustainability goals and quarterly progress updates. The Audit Committee assesses ESG risks, and the Compensation and Talent Committee considers ESG goals in executive compensation.
• Materiality Assessments: The Company conducts regular materiality assessments (most recent group-wide in 2022) and is undertaking a double materiality assessment to guide its CSR journey and prepare for evolving ESG regulatory landscapes.
• Supply Chain Empowerment: The Company supports supply chain workers through its Code of Conduct for Business Partners and compliance program, and actively participates in initiatives like RISE: Reimagining Industry to Support Equality and partners with Empower Co. to scale women's empowerment.

Business Cyclicality & Seasonality

Demand Patterns: The Company experiences seasonal trends, with generally greater sales during its third fiscal quarter, primarily driven by holiday season sales, and the lowest sales during its first fiscal quarter. Demand for its discretionary luxury items is sensitive to general macroeconomic cycles, including recessions, inflationary pressures, and other economic uncertainties, which can lead to declines in consumer spending. The global personal luxury goods industry itself is subject to cycles, experiencing a decline in 2024 but projected for future growth.

Planning & Forecasting: The Company's planning and forecasting processes consider these seasonal and cyclical patterns to manage inventory, capacity, and marketing initiatives.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: The Company is subject to various government regulations, including those related to product labeling, testing, and safety. Virtually all imported products are subject to duties, and the Company faces risks from new or additional tariffs (e.g., U.S. tariffs announced in April 2025 on imports from key manufacturing countries) and trade restrictions, which could impact costs and profitability. A global customs and product compliance organization is maintained to manage these risks. International Compliance: The Company is subject to international compliance requirements, including those related to United States Customs and Border Protection (CBP) withhold release orders, which could detain shipments. Trade & Export Controls: Compliance with trade restrictions, sanctions, and export controls is required, which can limit business operations. Data Privacy: The Company is subject to evolving data privacy and protection laws globally, including GDPR in the EU and UK, and various consumer privacy acts in the United States and China. Compliance requires significant investment in security measures and can lead to increased costs. Legal Proceedings: The Company is involved in routine legal proceedings and claims. Materially, it is subject to shareholder litigation related to the terminated merger with Tapestry, Inc., alleging federal securities law violations, which could incur substantial defense costs and potential liability.

Tax Strategy & Considerations

Tax Profile: The Company's effective tax rate was -62.2% in Fiscal 2025, compared to 19.0% in Fiscal 2024, with the Fiscal 2025 rate not being a meaningful metric due to a significant pre-tax loss. The effective tax rate is influenced by the geographic mix of earnings, enacted tax legislation, and global tax strategies.

• Geographic Tax Planning: The Company engages in intercompany transactions, which are subject to scrutiny by local tax authorities regarding transfer pricing.
• Tax Reform Impact: The Inflation Reduction Act of 2022 (15% corporate alternative minimum tax, 1% excise tax on share repurchases) and the OECD's Pillar Two Global Anti-Base Erosion (GloBE) Rules (15% global minimum tax) became effective in Fiscal 2024 and Fiscal 2025, respectively, but are not expected to have a material impact on the Company's effective tax rate. New U.S. Treasury and IRS regulations on dual consolidated losses and disregarded payment losses, effective Fiscal 2027, are being evaluated for potential impact.
• Deferred Tax Assets: The Company has significant deferred tax assets, but recorded a full valuation allowance in Fiscal 2025 due to a three-year cumulative loss at a consolidated level, indicating uncertainty in their future realization.
• Uncertain Tax Positions: As of March 29, 2025, liabilities related to uncertain tax positions, including accrued interest, totaled $117 million. The Company anticipates a $16 million reduction in gross unrecognized tax benefits over the next 12 months due to audit settlements and statute of limitations expirations.
• Foreign Earnings: The Company intends to either indefinitely reinvest substantially all foreign earnings outside the United States or repatriate them tax neutrally.

Insurance & Risk Transfer

Risk Management Framework: The Company employs a combination of third-party insurance and self-insurance programs, including a wholly-owned captive insurance entity, to mitigate potential liabilities across various risks such as employee health-care, workers’ compensation, general liability, property damage, cyber risk, and business interruption. Stop-loss coverage is maintained to limit exposure from certain claims.

• Risk Transfer Mechanisms: To manage market risks from foreign currency exchange rate fluctuations and interest rate changes, the Company utilizes derivative financial instruments, including foreign currency forward contracts, net investment hedges, and interest rate swaps. These derivatives are used for hedging purposes, not for trading or speculation.
• Counterparty Credit Risk: The Company mitigates counterparty credit risk by engaging only with carefully selected, highly credit-rated financial institutions and adhering to established limits for credit exposure.