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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 2022
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
 
cpri-20221001_g1.jpg
CAPRI HOLDINGS LTD
(Exact Name of Registrant as Specified in Its Charter)
British Virgin IslandsN/A
(State or other jurisdiction of
incorporation or organization)
(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 ClassTrading Symbol(s)Name of Each Exchange on which Registered
Ordinary Shares, no par valueCPRINew York Stock Exchange
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. 
YesNo
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). 
YesNo
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.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 is a shell company (as defined in Rule 12b-2 of the Act).
YesNo
As of November 2, 2022, Capri Holdings Limited had 128,793,146 ordinary shares outstanding.



TABLE OF CONTENTS
 
  Page
No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.

2



PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
(Unaudited)
October 1,
2022
April 2,
2022
Assets
Current assets
Cash and cash equivalents$215 $169 
Receivables, net441 434 
Inventories, net1,180 1,096 
Prepaid expenses and other current assets249 192 
Total current assets2,085 1,891 
Property and equipment, net470 476 
Operating lease right-of-use assets1,333 1,358 
Intangible assets, net1,634 1,847 
Goodwill1,256 1,418 
Deferred tax assets228 240 
Other assets196 250 
Total assets$7,202 $7,480 
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable$370 $555 
Accrued payroll and payroll related expenses117 165 
Accrued income taxes68 52 
Short-term operating lease liabilities396 414 
Short-term debt15 29 
Accrued expenses and other current liabilities312 351 
Total current liabilities1,278 1,566 
Long-term operating lease liabilities1,387 1,467 
Deferred tax liabilities513 432 
Long-term debt1,585 1,131 
Other long-term liabilities296 326 
Total liabilities5,059 4,922 
Commitments and contingencies
Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized; 223,706,873 shares issued and 131,088,991 outstanding at October 1, 2022; 221,967,599 shares issued and 142,806,269 outstanding at April 2, 2022
  
Treasury shares, at cost (92,617,882 shares at October 1, 2022 and 79,161,330 shares at April 2, 2022)
(4,650)(3,987)
Additional paid-in capital1,311 1,260 
Accumulated other comprehensive (loss) income(35)194 
Retained earnings5,517 5,092 
Total shareholders’ equity of Capri2,143 2,559 
Noncontrolling interest (1)
Total shareholders’ equity2,143 2,558 
Total liabilities and shareholders’ equity$7,202 $7,480 

See accompanying notes to consolidated financial statements.
3


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In millions, except share and per share data)
(Unaudited)

 Three Months EndedSix Months Ended
 October 1,
2022
September 25,
2021
October 1,
2022
September 25,
2021
Total revenue$1,412 $1,300 $2,772 $2,553 
Cost of goods sold461 416 920 813 
Gross profit
951 884 1,852 1,740 
Selling, general and administrative expenses642 599 1,264 1,144 
Depreciation and amortization43 49 88 99 
Impairment of assets11 33 11 33 
Restructuring and other charges3 8 6 11 
Total operating expenses699 689 1,369 1,287 
Income from operations252 195 483 453 
Other income, net(1)(2)(1)(2)
Interest expense (income), net5 (5)1 (4)
Foreign currency (gain) loss (11)4 (7)5 
Income before income taxes259 198 490 454 
Provision (benefit) for income taxes35 (2)63 35 
Net income224 200 427 419 
Less: Net income attributable to noncontrolling interest  2  
Net income attributable to Capri$224 $200 $425 $419 
Weighted average ordinary shares outstanding:
Basic136,037,449 151,859,760 138,975,518 151,604,916 
Diluted137,051,575 154,219,249 140,392,780 154,563,532 
Net income per ordinary share attributable to Capri:
Basic$1.64 $1.31 $3.06 $2.76 
Diluted$1.63 $1.30 $3.03 $2.71 
Statements of Comprehensive Income:
Net income$224 $200 $427 $419 
Foreign currency translation adjustments(125)23 (232)113 
Net gain on derivatives1 4 3 4 
Comprehensive income100 227 198 536 
Less: Net income attributable to noncontrolling interest  2  
Less: Foreign currency translation adjustments attributable to noncontrolling interest   (1)
Comprehensive income attributable to Capri$100 $227 $196 $537 

See accompanying notes to consolidated financial statements.
4


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data which is in thousands)
(Unaudited)
 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive Income (Loss)Retained
Earnings
Total Equity of CapriNon-controlling InterestTotal Equity
 SharesAmountsSharesAmounts
Balance at July 2, 2022223,504 $ $1,294 (85,547)$(4,299)$89 $5,293 $2,377 $1 $2,378 
Net income— — — — — — 224 224  224 
Other comprehensive loss— — — — — (124)— (124) (124)
Total comprehensive income— — — — — — — 100  100 
Vesting of restricted awards, net of forfeitures
199 — — — — — — — — — 
Exercise of employee share options
4 — — — — — — — — — 
Share-based compensation expense— — 16 — — — — 16 — 16 
Repurchase of ordinary shares— — — (7,071)(351)— — (351)— (351)
Other— — 1 — — — — 1 (1) 
Balance at October 1, 2022223,707 $ $1,311 (92,618)$(4,650)$(35)$5,517 $2,143 $ $2,143 


 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive Income (Loss)Retained
Earnings
Total Equity of CapriNon-controlling InterestTotal Equity
 SharesAmountsSharesAmounts
Balance at April 2, 2022
221,967 $ $1,260 (79,161)$(3,987)$194 $5,092 $2,559 $(1)$2,558 
Net income— — — — — — 425 425 2 427 
Other comprehensive loss— — — — — (229)— (229) (229)
Total comprehensive income— — — — — — — 196 2 198 
Vesting of restricted awards, net of forfeitures1,619 — — — — — — — — — 
Exercise of employee share options 121 — 6 — — — — 6 — 6 
Share-based compensation expense— — 44 — — — — 44 — 44 
Repurchase of ordinary shares— — — (13,457)(663)— — (663)— (663)
Other— — 1 — — — — 1 (1) 
Balance at October 1, 2022223,707 $ $1,311 (92,618)$(4,650)$(35)$5,517 $2,143 $ $2,143 












5



CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In millions, except share data which is in thousands)
(Unaudited)


 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestTotal Equity
 SharesAmountsSharesAmounts
Balance at June 26, 2021220,974 $ $1,201 (69,031)$(3,385)$147 $4,489 $2,452 $(2)$2,450 
Net income— — — — — — 200 200  200 
Other comprehensive income— — — — — 27 — 27  27 
Total comprehensive income— — — — — — — 227  227 
Vesting of restricted awards, net of forfeitures
199 — — — — — — — — — 
Exercise of employee share options
123 — 4 — — — — 4 — 4 
Share-based compensation expense— — 20 — — — — 20 — 20 
Repurchase of ordinary shares— — — (1,818)(101)— — (101)— (101)
Balance at September 25, 2021221,296 $ $1,225 (70,849)$(3,486)$174 $4,689 $2,602 $(2)$2,600 


 Ordinary SharesAdditional
Paid-in
Capital
Treasury SharesAccumulated Other Comprehensive IncomeRetained
Earnings
Total Equity of CapriNon-controlling InterestTotal Equity
 SharesAmountsSharesAmounts
Balance at March 27, 2021
219,223 $ $1,158 (67,943)$(3,326)$56 $4,270 $2,158 $(1)$2,157 
Net income— — — — — — 419 419  419 
Other comprehensive income (loss)— — — — — 118 118 (1)117 
Total comprehensive income (loss)— — — — — — — 537 (1)536 
Vesting of restricted awards, net of forfeitures
1,790 — — — — — — — — — 
Exercise of employee share options
283 — 11 — — — — 11 — 11 
Share-based compensation expense— — 56 — — — — 56 — 56 
Repurchase of ordinary shares— — — (2,906)(160)— — (160)— (160)
Balance at September 25, 2021221,296 $ $1,225 (70,849)$(3,486)$174 $4,689 $2,602 $(2)$2,600 


See accompanying notes to consolidated financial statements.
6


CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 Six Months Ended
 October 1,
2022
September 25,
2021
Cash flows from operating activities
Net income$427 $419 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization88 99 
Share-based compensation expense44 56 
Deferred income taxes(1)(27)
Impairment of assets11 33 
Changes to lease related balances, net(54)(67)
Foreign currency loss (gain)11 (7)
Other non-cash adjustments3 (1)
Change in assets and liabilities:
Receivables, net(38)15 
Inventories, net(170)(133)
Prepaid expenses and other current assets(66)(12)
Accounts payable(151)(8)
Accrued expenses and other current liabilities(33)20 
Other long-term assets and liabilities(32)9 
Net cash provided by operating activities39 396 
Cash flows from investing activities
Capital expenditures(86)(48)
Settlement of net investment hedges409  
Net cash provided by (used in) investing activities323 (48)
Cash flows from financing activities
Debt borrowings2,797 159 
Debt repayments(2,345)(360)
Debt issuance costs(4) 
Repurchase of ordinary shares(663)(160)
Exercise of employee share options6 11 
Other financing activities  8 
Net cash used in financing activities(209)(342)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(106)(3)
 Net increase in cash, cash equivalents and restricted cash 47 3 
Beginning of period172 234 
End of period$219 $237 
Supplemental disclosures of cash flow information
Cash paid for interest$28 $22 
Net cash paid for income taxes $80 $28 
Supplemental disclosure of non-cash investing and financing activities
Accrued capital expenditures$43 $16 
See accompanying notes to consolidated financial statements.
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CAPRI HOLDINGS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Basis of Presentation
Capri Holdings Limited (“Capri”, and together with its subsidiaries, the “Company”) was incorporated in the British Virgin Islands on December 13, 2002. 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, footwear and ready-to-wear 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 16 for additional information.
The interim 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 interim consolidated financial statements as of October 1, 2022 and for the three and six months ended October 1, 2022 and September 25, 2021 are unaudited. The Company consolidates the results of its Versace business on a one-month lag, as consistent with prior periods. In addition, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, necessary for a fair presentation in conformity with U.S. GAAP. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended April 2, 2022, as filed with the Securities and Exchange Commission on June 1, 2022, in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods should not be considered indicative of results to be expected for the full fiscal year.

The Company utilizes a 52- to 53-week fiscal year and the term “Fiscal Year” or “Fiscal” refers to that 52- or 53-week period. The results for the three and six months ended October 1, 2022 and September 25, 2021 are based on 13-week and 26-week periods, respectively. The Company’s Fiscal Year 2023 is a 52-week period ending April 1, 2023.

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, credit losses, estimates of inventory net realizable value, the valuation of share-based compensation, the valuation of deferred taxes, 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.
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 October 1, 2022 and April 2, 2022 are credit card receivables of $25 million and $18 million, respectively, which generally settle within two to three business days.
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A reconciliation of cash, cash equivalents and restricted cash as of October 1, 2022 and April 2, 2022 from the consolidated balance sheets to the consolidated statements of cash flows is as follows (in millions):
 October 1,
2022
April 2,
2022
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents$215 $169 
Restricted cash included within prepaid expenses and other current assets4 3 
Total cash, cash equivalents and restricted cash shown on the consolidated statements of cash flows$219 $172 
Inventories, net
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, net, recorded on the Company’s consolidated balance sheets was $39 million and $31 million as of October 1, 2022 and April 2, 2022, respectively.
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 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 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.
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 a 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 (loss) income 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 (loss) income 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 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 the U.S. Dollars and the associated foreign currencies. The Company has elected the spot method of designating these contracts under Accounting Standards Update (“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 (loss) income on the Company’s consolidated balance sheets. Interest accruals and coupon payments are recognized directly in interest expense (income), net, in the Company’s
9


consolidated statements of operations and comprehensive income. Upon discontinuation of a hedge, all previously recognized amounts remain in CTA until the net investment is sold, diluted or liquidated.
Leases

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 September 2026. The Company acts as sublessor in certain leasing arrangements, primarily related to closed stores from previous restructuring activities. 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. 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 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 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, material restrictions or covenants.
The following table presents the Company’s supplemental cash flow information related to leases (in millions):
Six Months Ended
October 1,
2022
September 25, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used in operating leases (1)
$248 $257 
(1)Operating cash flows used in operating leases for the six months ended September 25, 2021 excluded $5 million of deferred rent payments due to the COVID-19 pandemic.
During the three and six months ended October 1, 2022, the Company recorded sublease income of $3 million and $5 million, respectively, within selling, general and administrative expenses. During the three and six months ended September 25, 2021, the Company recorded $2 million and $4 million, respectively, within restructuring and other charges for stores relating to our restructuring plan and selling, general and administrative expenses for all other locations. During the three and six months ended October 1, 2022, the Company recorded $3 million and $5 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract. During the three and six months ended September 25, 2021, the Company recorded $3 million and $10 million, respectively, of rent concessions negotiated in connection with the impact of COVID-19 as if it were contemplated as part of the existing contract.
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The aforementioned rent concessions were recorded as a reduction to variable lease expense within selling, general and administrative expenses.
Net Income per Share
The Company’s basic net income per ordinary share is calculated by dividing net income by the weighted average number of ordinary shares outstanding during the period. Diluted net 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 restricted share units (“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 as 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 income per ordinary share and diluted net income per ordinary share are as follows (in millions, except share and per share data):
 Three Months EndedSix Months Ended
October 1,
2022
September 25,
2021
October 1,
2022
September 25,
2021
Numerator:
Net income attributable to Capri$224 $200 $425 $419 
Denominator:
Basic weighted average shares136,037,449 151,859,760 138,975,518 151,604,916 
Weighted average dilutive share equivalents:
Share options and restricted shares/units, and performance restricted share units
1,014,126 2,359,489 1,417,262 2,958,616 
Diluted weighted average shares137,051,575 154,219,249 140,392,780 154,563,532 
Basic net income per share (1)
$1.64 $1.31 $3.06 $2.76 
Diluted net income per share (1)
$1.63 $1.30 $3.03 $2.71 
(1)Basic and diluted net income per share are calculated using unrounded numbers.
During the three and six months ended October 1, 2022, share equivalents of 794,933 shares and 726,136 shares, respectively, have been excluded from the above calculations due to their anti-dilutive effect. Share equivalents of 415,331 shares and 513,088 shares have been excluded from the above calculations for the three and six months ended September 25, 2021, respectively, due to their anti-dilutive effect.
See Note 2 in the Company’s Annual Report on Form 10-K for the fiscal year ended April 2, 2022 for a complete disclosure of the Company’s significant accounting policies.
Recently Issued Accounting Pronouncements
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 allowed companies to adopt the amendments on a prospective basis through December 31, 2022. The Company does not expect the adoption of this standard to have a material impact on the Company’s results of operations, financial condition or cash flows based on current information.
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Supplier Finance Programs
In September 2022, the FASB issued ASU 2022-04, “Disclosure of Supplier Finance Program Obligations” which makes a number of changes. The amendments require a buyer in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the Company's disclosures.
The Company has considered all new accounting pronouncements and has 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.

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 collectibility 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 trademarks.
Retail
The Company generates sales through directly operated stores and e-commerce sites throughout the Americas (United States, Canada and Latin America), certain parts of EMEA (Europe, Middle East and Africa) and certain parts of Asia (Asia and Oceania).
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 contract liability related to gift cards, net of estimated “breakage”, of $14 million and $13 million as of October 1, 2022 and April 2, 2022, respectively, is included within accrued expenses and other current liabilities in the Company’s consolidated balance sheet.
Loyalty Program. The Company offers a loyalty program, which allows its Michael Kors United States 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.
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 geographic licensing arrangements, third party
12


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. Generally, the Company’s guaranteed minimum royalty amounts due from licensees relate to contractual periods that do not exceed 12 months, however, certain guaranteed minimums for Versace are multi-year based.
As of October 1, 2022, contractually guaranteed minimum fees from the Company’s license agreements expected to be recognized as revenue during future periods were as follows (in millions):
Contractually Guaranteed Minimum Fees
Remainder of Fiscal 2023$15 
Fiscal 202430 
Fiscal 202530 
Fiscal 202627 
Fiscal 202723 
Fiscal 2028 and thereafter42 
 Total$167 
Sales Returns
The refund liability recorded as of October 1, 2022 was $45 million, and the related asset for the right to recover returned product as of October 1, 2022 was $11 million. The refund liability recorded as of April 2, 2022 was $52 million, and the related asset for the right to recover returned product as of April 2, 2022 was $15 million.
Contract Balances
Total contract liabilities were $20 million and $30 million as of October 1, 2022 and April 2, 2022, respectively. For the three and six months ended October 1, 2022, the Company recognized $3 million and $8 million respectively, in revenue which related to contract liabilities that existed at April 2, 2022. For the three and six months ended September 25, 2021, the Company recognized $2 million and $8 million, respectively, in revenue which related to contract liabilities that existed at March 27, 2021. There were no material contract assets recorded as of October 1, 2022 and April 2, 2022.
There were no changes in historical variable consideration estimates that were materially different from actual results.
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Disaggregation of Revenue
The following table presents the Company’s segment revenue disaggregated by geographic location (in millions):
 Three Months EndedSix Months Ended
 October 1,
2022
September 25,
2021
October 1,
2022
September 25,
2021
Versace revenue - the Americas$120 $107 $235