The following Management's Discussion and Analysis ("MD&A") of our Financial
Condition and Results of Operations should be read in conjunction with the
consolidated financial statements and notes thereto included as part of this
interim report. Forward-looking statements are prospective in nature and are not
based on historical facts, but rather on current expectations and projections of
the management of Capri Holdings Limited (the "Company") about future events,
and are therefore subject to risks and uncertainties which could cause actual
results to differ materially from the future results expressed or implied by the
forward-looking statements. All statements other than statements of historical
facts included herein, may be forward-looking statements. Without limitation,
any statements preceded or followed by or that include the words "plans",
"believes", "expects", "intends", "will", "should", "could", "would", "may",
"anticipates", "might" or similar words or phrases, are forward-looking
statements. These forward-looking statements are not guarantees of future
financial performance. Such forward-looking statements involve known and unknown
risks and uncertainties that could significantly affect expected results and are
based on certain key assumptions, which could cause actual results to differ
materially from those projected or implied in any forward-looking statements.
These risks, uncertainties and other factors include the effect of the COVID-19
pandemic and its potential material and significant impact on the Company's
future financial and operational results if retail stores are forced to close
again and the pandemic is prolonged, including that our estimates could
materially differ if the severity of the COVID-19 situation worsens, the length
and severity of such outbreak across the globe and the pace of recovery
following the COVID-19 pandemic, levels of cash flow and future availability of
credit, compliance with restrictive covenants under the Company's credit
agreement, the Company's ability to integrate successfully and to achieve
anticipated benefits of any acquisition; the risk of disruptions to the
Company's businesses; the negative effects of events on the market price of the
Company's ordinary shares and its operating results; significant transaction
costs; unknown liabilities; the risk of litigation and/or regulatory actions
related to the Company's businesses; fluctuations in demand for the Company's
products; levels of indebtedness (including the indebtedness incurred in
connection with acquisitions); the timing and scope of future share buybacks,
which may be made in open market or privately negotiated transactions, and are
subject to market conditions, applicable legal requirements, trading
restrictions under the Company's insider trading policy and other relevant
factors, and which share repurchases may be suspended or discontinued at any
time, the level of other investing activities and uses of cash; changes in
consumer traffic and retail trends; loss of market share and industry
competition; fluctuations in the capital markets; fluctuations in interest and
exchange rates; the occurrence of unforeseen epidemics and pandemics, disasters
or catastrophes; political or economic instability in principal markets; adverse
outcomes in litigation; and general, local and global economic, political,
business and market conditions, as well as those risks set forth in Item 1A.
"Risk Factors" in our Annual Report on Form 10-K for the year ended March 28,
2020, filed with the Securities and Exchange Commission on July 8, 2020.

Overview


Our Business
Capri Holdings Limited is a global fashion luxury group, consisting of iconic
brands that are industry leaders in design, style and craftsmanship, led by a
world-class management team and renowned designers. Our brands cover the full
spectrum of fashion luxury categories including women's and men's accessories,
footwear and ready-to-wear as well as wearable technology, watches, jewelry,
eyewear and a full line of fragrance products. Our goal is to continue to extend
the global reach of our brands while ensuring that they maintain their
independence and exclusive DNA.
Our Versace brand has long been recognized as one of the world's leading
international fashion design houses and is synonymous with Italian glamour and
style. Founded in 1978 in Milan, Versace is known for its iconic and
unmistakable style and unparalleled craftsmanship, over the past several decades
the House of Versace has grown globally from its roots in haute couture,
expanding into the design, manufacturing, distribution and retailing of
ready-to-wear, accessories, footwear, eyewear, watches, jewelry, fragrance and
home furnishings businesses. Versace's design team is led by Donatella Versace,
who has been the brand's artistic director for over 20 years. Versace
distributes its products through a worldwide distribution network, which
includes boutiques located in the world's most glamorous cities, its e-commerce
site, as well as through the most prestigious department and specialty stores
worldwide.
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Our Jimmy Choo brand offers a distinctive, glamorous and fashion-forward product
range, enabling it to develop into a leading global luxury accessories brand,
whose core product offering is women's luxury shoes, complemented by
accessories, including handbags, small leather goods, scarves and belts, as well
as a growing men's luxury shoes and accessory business. In addition, certain
categories, such as fragrances, sunglasses and eyewear are produced under
licensing agreements. Jimmy Choo's design team is led by Sandra Choi, who has
been the Creative Director for the brand since its inception in 1996. Jimmy Choo
products are unique, instinctively seductive and chic. The brand offers classic
and timeless luxury products, as well as innovative products that are intended
to set and lead fashion trends. Jimmy Choo is represented through its global
store network, its e-commerce sites, as well as through the most prestigious
department and specialty stores worldwide.
Our Michael Kors brand was launched almost 40 years ago by Michael Kors, whose
vision has taken the Company from its beginnings as an American luxury
sportswear house to a global accessories, footwear and apparel company with a
global distribution network that has presence in over 100 countries through
Company-operated retail stores and e-commerce sites, leading department stores,
specialty stores and select licensing partners. Michael Kors is a highly
recognized luxury fashion brand in the Americas and Europe with growing brand
awareness in other international markets. Michael Kors features distinctive
designs, materials and craftsmanship with a jet-set aesthetic that combines
stylish elegance and a sporty attitude. Michael Kors offers three primary
collections: the Michael Kors Collection luxury line, the MICHAEL Michael
Kors accessible luxury line and the Michael Kors Mens line. The Michael
Kors Collection establishes the aesthetic authority of the entire brand and is
carried by many of our retail stores, our e-commerce sites, as well as in the
finest luxury department stores in the world. MICHAEL Michael Kors has a strong
focus on accessories, in addition to offering footwear and apparel, and
addresses the significant demand opportunity in accessible luxury goods.We have
also been developing our men's business in recognition of the significant
opportunity afforded by the Michael Kors brand's established fashion authority
and the expanding men's market. Taken together, our Michael Kors collections
target a broad customer base while retaining our premium luxury image.
Certain Factors Affecting Financial Condition and Results of Operations
COVID-19 Pandemic. See Item 1A - "The COVID-19 pandemic could have a material
adverse effect on our business and results of operations" of our Annual Report
on Form 10-K for the fiscal year ended March 28, 2020 for additional discussion
regarding risks to our business associated with the COVID-19 pandemic.
Establishing brand identity and enhancing global presence. We intend to continue
to increase our international presence and global brand recognition by growing
our existing international operations through the formation of various joint
ventures with international partners and continuing with our international
licensing arrangements. We feel this is an efficient method for continued
penetration into the global luxury goods market, especially for markets where we
have yet to establish a substantial presence. In addition, our growth strategy
includes assuming direct control of certain licensed international operations to
better manage our growth opportunities in the related regions.
Channel shift and demand for our accessories and related merchandise. Our
performance is affected by trends in the luxury goods industry, as well as
shifts in demographics and changes in lifestyle preferences. Although overall
consumer spending for personal luxury products has increased in recent years,
consumer shopping preferences have continued to shift from physical stores to
on-line shopping. We currently expect that this trend will continue in the
foreseeable future. We continue to adjust our operating strategy to the changing
business environment. In addition, we recently announced our Capri Retail Store
Optimization Program to close approximately 170 of our retail stores over the
next two years, in order to improve the profitability of our retail store fleet.
Over this time period, we expect to incur approximately $75 million of one-time
costs associated with these store closures.
Foreign currency fluctuation. Our consolidated operations are impacted by the
relationships between our reporting currency, the U.S. dollar, and those of our
non-U.S. subsidiaries whose functional/local currency is other than the U.S.
dollar, particularly the Euro, the British Pound, the Chinese Renminbi, the
Japanese Yen, the Korean Won and the Canadian Dollar, among others. We continue
to expect volatility in the global foreign currency exchange rates, which may
have a negative impact on the reported results of certain of our non-U.S.
subsidiaries in the future, when translated to U.S. Dollars.
Disruptions in shipping and distribution. Our operations are subject to the
impact of shipping disruptions as a result of changes or damage to our
distribution infrastructure, as well as due to external factors, including the
impact of COVID-19. Any future disruptions in our shipping and distribution
network could have a negative impact on our results of operations.
                                       31
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Costs of manufacturing and tariffs. Our industry is subject to volatility in
costs related to certain raw materials used in the manufacturing of our
products. This volatility applies primarily to costs driven by commodity prices,
which can increase or decrease dramatically over a short period of time. In
addition, our costs may be impacted by sanction tariffs imposed on our products
due to changes in trade terms. On May 10, 2019, the U.S. increased the sanction
tariffs rate from 10% to 25% on $200 billion of imports of select product
categories (Tranche 3), which includes handbags and travel goods from China, and
effective February 14, 2020, a 7.5% tariff on certain additional goods from
China, including ready-to-wear, footwear and men's products, went into effect.
If additional tariffs or trade restrictions are implemented by the U.S. or other
countries, the cost of our products could increase which could adversely affect
our business. In addition, commodity prices and tariffs may have an impact on
our revenues, results of operations and cash flows. We use commercially
reasonable efforts to mitigate these effects by sourcing our products as
efficiently as possible and diversifying the countries where we produce. In
addition, manufacturing labor costs are also subject to degrees of volatility
based on local and global economic conditions. We use commercially reasonable
efforts to source from localities that suit our manufacturing standards and
result in more favorable labor driven costs to our products.
Segment Information
We operate in three reportable segments, which are as follows:
Versace
We generate revenue through the sale of Versace luxury ready-to-wear,
accessories, footwear and home furnishings through directly operated Versace
boutiques throughout North America (United States and Canada), EMEA (Europe,
Middle East and Africa) and certain parts of Asia, including Australia, 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 and eyewear.
Jimmy Choo
We generate revenue through the sale of Jimmy Choo luxury goods to end clients
through directly operated Jimmy Choo retail and outlet stores throughout the
Americas (United States, Canada and Latin America), EMEA and certain parts of
Asia, including Australia, through our e-commerce sites, as well as through
wholesale sales of luxury goods to distribution partners (including geographic
licensing arrangements that allow third parties to use the Jimmy Choo tradename
in connection with retail and/or wholesale sales of Jimmy Choo branded products
in specific geographic regions), multi-brand department stores and specialty
stores worldwide. In addition, revenue is generated through product licensing
agreements, which allow third parties to use the Jimmy Choo brand name and
trademarks in connection with the manufacturing and sale of products, including
fragrances and eyewear.
Michael Kors
We generate revenue through the sale of Michael Kors products through four
primary Michael Kors retail store formats: "Collection" stores, "Lifestyle"
stores (including concessions), outlet stores and e-commerce, through which we
sell our products, as well as licensed products bearing our name, directly to
the end consumer throughout the Americas, Europe and certain parts of Asia,
including Australia. Our Michael Kors e-commerce business includes e-commerce
sites in the U.S., Canada and certain parts of Europe and Asia. We also sell
Michael Kors products directly to department stores, primarily located across
the Americas and Europe, to specialty stores and travel retail shops in the
Americas, Europe and Asia, and to our geographic licensees in certain parts of
EMEA, Asia and Brazil. In addition, revenue is generated through product and
geographic licensing arrangements, which allow third parties to use the Michael
Kors brand name and trademarks in connection with the manufacturing and sale of
products, including watches, jewelry, fragrances and eyewear, as well as through
geographic licensing arrangements, which allow third parties to use the Michael
Kors tradename in connection with the retail and/or wholesale sales of our
Michael Kors branded products in specific geographic regions.
                                       32
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Unallocated Expenses
In addition to the reportable segments discussed above, we have certain
corporate costs that are not directly attributable to our brands and, therefore,
are not allocated to segments. Such costs primarily include certain
administrative, corporate occupancy and information systems expenses, including
ERP system implementation costs. In addition, certain other costs are not
allocated to segments, including restructuring and other charges (including
transaction and transition costs related to our acquisitions), impairment costs
and COVID-19 related charges. The segment structure is consistent with how our
chief operating decision maker plans and allocates resources, manages the
business and assesses performance. The following table presents our total
revenue and income (loss) from operations by segment for the three and six
months ended September 26, 2020 and September 28, 2019 (in millions):
                                                                  Three Months Ended                              Six Months Ended
                                                        September 26,           September 28,           September 26,           September 28,
                                                             2020                   2019                    2020                    2019
Total revenue:
                 Versace                               $      195             $          228          $          288          $          435
                 Jimmy Choo                                   122                        125                     173                     283
                 Michael Kors                                 793                      1,089                   1,100                   2,070
Total revenue                                          $    1,110

$ 1,442 $ 1,561 $ 2,788

Income (loss) from operations:


                 Versace                               $       20             $            9          $          (21)         $            6
                 Jimmy Choo                                     -                        (10)                    (29)                      1
                 Michael Kors                                 190                        222                     142                     423
Total segment income from operations                          210                        221                      92                     430
Less:            Corporate expenses                           (30)                       (35)                    (61)                    (68)
                 Restructuring and other charges               (9)                        (7)                    (17)                    (22)
                 Impairment of assets                         (20)                      (104)                    (20)                   (201)
                 COVID-19 related charges (1)                   2                          -                      (3)                      -
Total income (loss) from operations                    $      153             $           75          $           (9)         $          139

___________________


(1)COVID-19 related charges for the three months ended September 26, 2020
primarily relate to an inventory reserve credit as a result of improved sell
through of excess inventory, partially offset by increased credit losses.
COVID-19 related charges for the six months ended September 26, 2020 primarily
relate to severance and other COVID-19 related operating expenses, partially
offset by a reduction to COVID-19 related inventory reserves.
                                       33
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The following table presents our global network of retail stores and wholesale
doors by brand:
                                                                                         As of
                                                                       September 26,              September 28,
                                                                            2020                       2019
Number of full price retail stores (including concessions):
Versace                                                                       154                        152
Jimmy Choo                                                                    179                        171
Michael Kors                                                                  548                        580
                                                                              881                        903

Number of outlet stores:
Versace                                                                        52                         46
Jimmy Choo                                                                     48                         45
Michael Kors                                                                  280                        270
                                                                              380                        361

Total number of retail stores                                               1,261                      1,264

Total number of wholesale doors
Versace                                                                       818                        819
Jimmy Choo                                                                    511                        586
Michael Kors                                                                2,840                      3,138
                                                                            4,169                      4,543

The following table presents our retail stores by geographic location:


                                                                As of                                                                          As of
                                                          September 26, 2020                                                             September 28, 2019
                                    Versace                      Jimmy Choo             Michael Kors               Versace                      Jimmy Choo             Michael Kors

Store count by region:
The Americas                             33                            45                     362                             28                            45                     386
EMEA                                     60                            76                     176                             57                            73                     181
Asia                                    113                           106                     290                            113                            98                     283
                                        206                           227                     828                            198                     216                     850

Key Consolidated Performance Indicators and Statistics We use a number of key indicators of operating results to evaluate our Company's performance, including the following (dollars in millions):


                                                         Three Months Ended                            Six Months Ended
                                                                         September 28,        September 26,        September 28,
                                               September 26, 2020             2019                 2020                 2019
Total revenue                                 $           1,110          $

1,442 $ 1,561 $ 2,788 Gross profit as a percent of total revenue

                 64.0  %              60.6  %              64.8  %              61.3  %
Income (loss) from operations                 $             153          $        75          $        (9)         $       139
Income (loss) from operations as a percent of
total revenue                                              13.8  %               5.2  %              (0.6) %               5.0  %


Seasonality
We experience certain effects of seasonality with respect to our business. We
generally experience greater sales during our third fiscal quarter, primarily
driven by holiday season sales, and the lowest sales during our first fiscal
quarter.
                                       34
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Critical Accounting Policies



The preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenue and
expenses during the reporting period. Critical accounting policies are those
that are the most important to the portrayal of our results of operations and
financial condition and that require our most difficult, subjective and complex
judgments to make estimates about the effect of matters that are inherently
uncertain. In applying such policies, we must use certain assumptions that are
based on our informed judgments, assessments of probability and best estimates.
Estimates, by their nature, are subjective and are based on analysis of
available information, including current and historical factors and the
experience and judgment of management. We evaluate our assumptions and estimates
on an ongoing basis. While our significant accounting policies are detailed in
Note 2 to the accompanying consolidated financial statements, our critical
accounting policies are disclosed in full in the MD&A section of our Annual
Report on Form 10-K for the fiscal year ended March 28, 2020. There have been no
significant changes in our critical accounting policies since March 28, 2020.

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Results of Operations
Comparison of the three months ended September 26, 2020 with the three months
ended September 28, 2019
The following table details the results of our operations for the three months
ended September 26, 2020 and September 28, 2019, and expresses the relationship
of certain line items to total revenue as a percentage (dollars in millions):
                                                                                                                                           % of Total Revenue for
                                                 Three Months Ended                                                                        the Three Months Ended
                                       September 26,           September 28,                                                     September 26,              September 28,
                                            2020                   2019                $ Change            % Change                  2020                        2019
Statements of Operations Data:
Total revenue                         $    1,110             $        1,442          $    (332)                (23.0) %
Cost of goods sold                           400                        568               (168)                (29.6) %                   36.0  %                      39.4  %
Gross profit                                 710                        874               (164)                (18.8) %                   64.0  %                      60.6  %
Selling, general and administrative
expenses                                     474                        623               (149)                (23.9) %                   42.7  %                      43.2  %
Depreciation and amortization                 54                         65                (11)                (16.9) %                    4.9  %                       4.5  %
Impairment of assets                          20                        104                (84)                (80.8) %                    1.8  %                       7.2  %
Restructuring and other charges                9                          7                  2                  28.6  %                    0.8  %                       0.5  %
Total operating expenses                     557                        799               (242)                (30.3) %                   50.2  %                      55.4  %
Income from operations                       153                         75                 78                 104.0  %                   13.8  %                       5.2  %
Other income, net                              -                         (1)                 1                (100.0) %                      -  %                      (0.1) %
Interest expense, net                         12                          3                  9                       NM                    1.1  %                       0.2  %
Foreign currency loss                          -                          4                 (4)               (100.0) %                      -  %                       0.3  %
Income before provision for income
taxes                                        141                         69                 72                 104.3  %                   12.7  %                       4.8  %
Provision for (benefit from) income
taxes                                         20                         (4)                24                       NM                    1.8  %                      (0.3) %
Net income                                   121                         73                 48                  65.8  %
Less: Net loss attributable to
noncontrolling interest                       (1)                         -                 (1)                      NM
Net income attributable to Capri      $      122             $           73          $      49                  67.1  %


___________________
NM Not meaningful
Total Revenue
Total revenue decreased $332 million, or 23.0%, to $1.110 billion for the three
months ended September 26, 2020, compared to $1.442 billion for the three months
ended September 28, 2019, which included net favorable foreign currency effects
of approximately $23 million, primarily related to the strengthening of the
Euro, Chinese Renminbi and British Pound against the U.S. Dollar during the
three months ended September 26, 2020 as compared to the same prior year period.
On a constant currency basis, our total revenue decreased $355 million, or
24.6%. The decrease is attributable to lower revenues across all three brands,
as compared to the prior year, reflecting the adverse impact of COVID-19.
Gross Profit
Gross profit decreased $164 million, or 18.8%, to $710 million for the three
months ended September 26, 2020, compared to $874 million for the three months
ended September 28, 2019, which included net favorable foreign currency effects
of $11 million. Gross profit as a percentage of total revenue increased 340
basis points to 64.0% during the three months ended September 26, 2020, compared
to 60.6% during the three months ended September 28, 2019. The increase in our
gross profit margin was primarily attributable to higher gross profit margin for
Michael Kors primarily driven by a higher average unit price and favorable
channel mix during the three months ended September 26, 2020, as compared to the
three months ended September 28, 2019.
                                       36
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Total Operating Expenses
Total operating expenses decreased $242 million, or 30.3%, to $557 million
during the three months ended September 26, 2020, compared to $799 million for
the three months ended September 28, 2019. Our operating expenses included a net
unfavorable foreign currency impact of approximately $16 million. Total
operating expenses decreased to 50.2% as a percentage of total revenue for the
three months ended September 26, 2020, compared to 55.4% for the three months
ended September 28, 2019. The components that comprise total operating expenses
are explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $149 million, or 23.9%,
to $474 million during the three months ended September 26, 2020, compared to
$623 million for the three months ended September 28, 2019, primarily due to
lower variable costs, as well as decreased costs from our cost reduction
initiatives as a result of COVID-19.
Selling, general, and administrative expenses as a percentage of total revenue
decreased to 42.7% for the three months ended September 26, 2020, compared to
43.2% for the three months ended September 28, 2019, primarily due to our cost
reduction initiatives, such as advertising expenses, as a result of COVID-19,
during the three months ended September 26, 2020, as compared to the three
months ended September 28, 2019.
Corporate unallocated expenses, which are included within selling, general and
administrative expenses discussed above, but are not directly attributable to a
reportable segment, decreased $5 million, or 14.3%, to $30 million during the
three months ended September 26, 2020 as compared to $35 million for the three
months ended September 28, 2019, primarily due to a reduction in ERP system
implementation costs, as well as our cost reduction initiatives as a result of
COVID-19.
Depreciation and Amortization
Depreciation and amortization decreased $11 million, or 16.9%, to $54 million
during the three months ended September 26, 2020, compared to $65 million for
the three months ended September 28, 2019. The decrease in depreciation and
amortization expense was primarily attributable to lower depreciation due to
previously recorded property and equipment impairment charges. Depreciation and
amortization increased to 4.9% as a percentage of total revenue during the three
months ended September 26, 2020, compared to 4.5% for the three months ended
September 28, 2019.
Impairment of Assets
During the three months ended September 26, 2020, we recognized asset impairment
charges of $20 million, primarily related to operating lease right-of-use assets
at our Michael Kors store locations (see Note 11 to the accompanying
consolidated financial statements for additional information). During the three
months ended September 28, 2019, we recognized asset impairment charges of
approximately $104 million, which primarily related to operating lease
right-of-use assets largely driven by the unfavorable operating results in Hong
Kong.
Restructuring and Other Charges
During the three months ended September 26, 2020, we recognized restructuring
and other charges of $9 million, which included other costs of $7 million
primarily related to equity awards associated with the acquisition of Versace
(see Note 8 to the accompanying consolidated financial statements for additional
information) and $2 million related to our Capri Retail Store Optimization
Program.
During the three months ended September 28, 2019, we recognized restructuring
and other charges of $7 million, which primarily included other costs of
$6 million primarily related to equity awards associated with the acquisition of
Versace.
Income from Operations
As a result, income from operations increased $78 million, to $153 million
during three months ended September 26, 2020, compared to $75 million for the
three months ended September 28, 2019. Income from operations as a percentage of
total revenue increased to 13.8% during the three months ended September 26,
2020, compared to 5.2% for the three months ended September 28, 2019.
See Segment Information above for a reconciliation of our segment operating
income to total operating income.
                                       37
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Interest Expense, net
Interest expense, net, increased $9 million to $12 million during the three
months ended September 26, 2020, compared to $3 million for the three months
ended September 28, 2019, primarily due to a decrease of interest income
attributable to lower average net investment hedges outstanding in the current
year. The decrease in interest income was largely offset by a decrease in
interest expense attributable to lower average borrowings outstanding in the
current year and the addition of an interest rate swap in the current year which
converts the one-month Adjusted LIBOR interest rate on these borrowings to a
fixed interest rate of 0.237% through December 2022 (see Note 9 and Note 12 to
the accompanying consolidated financial statements for additional information).
Foreign Currency Loss
During the three months ended September 26, 2020, we recognized an immaterial
net foreign currency loss.
During the three months ended September 28, 2019, we recognized a net foreign
currency loss of $4 million, primarily attributable to the revaluation and
settlement of certain of our accounts payable in currencies other than the
functional currency, as well as the remeasurement of dollar-denominated
intercompany loans with certain of our subsidiaries.
Provision for (Benefit from) Income Taxes
The provision for incomes taxes was $20 million during the three months ended
September 26, 2020, compared to a $4 million tax benefit for the three months
ended September 28, 2019. Our effective tax rate were 14.2% and (5.8)% for the
three months ended September 26, 2020 and September 28, 2019, respectively. The
increase in our effective tax rate was primarily related to the impact from the
realization of previously unrecognized tax benefits for the three months ended
September 28, 2019 and the tax rate change in the United Kingdom on the
Company's net deferred tax liabilities recorded for the three months ended
September 26, 2020.
Our effective tax rate may fluctuate from time to time due to the effects of
changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In
addition, factors such as the geographic mix of earnings, enacted tax
legislation and the results of various global tax strategies, may also impact
our effective tax rate in future periods.
Net Loss Attributable to Noncontrolling Interest

During the three months ended September 26, 2020, we recorded a net loss attributable to the noncontrolling interest in our joint ventures of $1 million. This loss represents the share of income that is not attributable to the Company.



Net Income Attributable to Capri
As a result of the foregoing, our net income increased $49 million to a net
income of $122 million during the three months ended September 26, 2020,
compared to net income of $73 million for the three months ended September 28,
2019.
Segment Information
Versace
                                                         Three Months Ended                                                      % Change
                                              September 26,              September 28,                                                        Constant
(dollars in millions)                             2020                       2019               $ Change             As Reported              Currency
Revenues                                     $       195                $        228          $     (33)                    (14.5) %              (18.9) %
Income from operations                                20                           9                 11                  NM
Operating margin                                    10.3   %                     3.9  %


___________________
NM Not meaningful
Revenues
Versace revenues decreased $33 million, or 14.5%, to $195 million during
the three months ended September 26, 2020, compared to $228 million for the
three months ended September 28, 2019, which included favorable foreign currency
effects of $10 million. On a constant currency basis, revenue decreased $43
million, or 18.9%, primarily reflecting the adverse impacts related to COVID-19.
                                       38
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Income from Operations
During the three months ended September 26, 2020, Versace recorded income from
operations of $20 million, compared to $9 million for the three months ended
September 28, 2019. Operating margin increased from 3.9% for the three months
ended September 28, 2019, to 10.3% during the three months ended September 26,
2020, primarily due to our cost reduction initiatives as a result of COVID-19
and favorable channel mix.
Jimmy Choo
                                    Three Months Ended                                     % Change
                          September 26,            September 28,

As Constant


 (dollars in millions)        2020                     2019           $ Change      Reported      Currency
 Revenues                $       122              $        125       $     (3)        (2.4) %       (6.4) %
 Loss from operations              -                       (10)            10          NM
 Operating margin                0.0   %                  (8.0) %


___________________
NM Not meaningful
Revenues
Jimmy Choo revenues decreased $3 million, or 2.4%, to $122 million during
the three months ended September 26, 2020, compared to $125 million for the
three months ended September 28, 2019, which included favorable foreign currency
effects of $5 million. On a constant currency basis, revenue decreased $8
million, or 6.4%, primarily reflecting the adverse impacts related to COVID-19.
Loss from Operations
During the three months ended September 26, 2020, Jimmy Choo recorded immaterial
income from operations, compared to loss from operations of $10 million for the
three months ended September 28, 2019. Operating margin improved to 0.0% from
(8.0)% for the three months ended September 28, 2019 due to our costs reduction
initiatives as a result of COVID-19 and reduction in expense as our strategic
investments have normalized.
Michael Kors
                                    Three Months Ended                                   % Change
                             September 26,      September 28,                       As          Constant
   (dollars in millions)         2020               2019           $ Change       Reported      Currency
   Revenues                 $       793        $      1,089       $

(296) (27.2) % (27.9) %


   Income from operations           190                 222             (32)       (14.4) %
   Operating margin                24.0   %            20.4  %


Revenues
Michael Kors revenues decreased $296 million, or 27.2%, to $793 million during
the three months ended September 26, 2020, compared to $1.089 billion for the
three months ended September 28, 2019, which included favorable foreign currency
effects of $8 million. On a constant currency basis, revenue decreased $304
million, or 27.9%, primarily reflecting the adverse impacts related to COVID-19.
Income from Operations
During the three months ended September 26, 2020, Michael Kors recorded income
from operations of $190 million, compared to $222 million for the three months
ended September 28, 2019. Operating margin increased from 20.4% for the three
months ended September 28, 2019, to 24.0% during the three months ended
September 26, 2020, primarily due to a higher average unit price and favorable
channel mix.

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Results of Operations
Comparison of the six months ended September 26, 2020 with the six months ended
September 28, 2019
The following table details the results of our operations for the six months
ended September 26, 2020 and September 28, 2019, and expresses the relationship
of certain line items to total revenue as a percentage (dollars in millions):
                                                                                                                                         % of Total Revenue for
                                                  Six Months Ended                                                                        the Six Months Ended
                                        September 26,           September 28,
                                            2020                    2019               $ Change            % Change           September 26, 2020        September 28, 2019
Statements of Operations Data:
Total revenue                         $        1,561          $        2,788          $ (1,227)                (44.0) %
Cost of goods sold                               549                   1,080              (531)                (49.2) %                   35.2  %                  38.7  %
Gross profit                                   1,012                   1,708              (696)                (40.7) %                   64.8  %                  61.3  %
Selling, general and administrative
expenses                                         876                   1,221              (345)                (28.3) %                   56.1  %                  43.8  %
Depreciation and amortization                    108                     125               (17)                (13.6) %                    6.9  %                   4.5  %
Impairment of assets                              20                     201              (181)                (90.0) %                    1.3  %                   7.2  %
Restructuring and other charges                   17                      22                (5)                (22.7) %                    1.1  %                   0.8  %
Total operating expenses                       1,021                   1,569              (548)                (34.9) %                   65.4  %                  56.3  %
(Loss) income from operations                     (9)                    139              (148)               (106.5) %                   (0.6) %                   5.0  %
Other income, net                                 (1)                     (3)                2                 (66.7) %                   (0.1) %                  (0.1) %
Interest expense, net                             29                      16                13                  81.3  %                    1.9  %                   0.6  %
Foreign currency (gain) loss                      (3)                      6                (9)                      NM                   (0.2) %                   0.2  %
(Loss) income before provision for
income taxes                                     (34)                    120              (154)                      NM                   (2.2) %                   4.3  %
Provision for income taxes                        25                       2                23                       NM                    1.6  %                   0.1  %
Net (loss) income                                (59)                    118              (177)                      NM
Less: Net loss attributable to
noncontrolling interest                           (1)                      -                (1)                      NM
Net (loss) income attributable to
Capri                                 $          (58)         $          118          $   (176)                      NM


___________________
NM Not meaningful
Total Revenue
Total revenue decreased $1.227 billion, or 44.0%, to $1.561 billion for the six
months ended September 26, 2020, compared to $2.788 billion for the six months
ended September 28, 2019, which included net favorable foreign currency effects
of approximately $19 million, primarily related to the strengthening of the Euro
and British Pound against the U.S. Dollar during the six months ended
September 26, 2020 as compared to the same prior year period. On a constant
currency basis, our total revenue decreased $1.246 billion, or 44.7%. The
decrease is attributable to lower revenues across all three brands, as compared
to the prior year, reflecting the adverse impact of COVID-19.
Gross Profit
Gross profit decreased $696 million, or 40.7%, to $1.012 billion for the six
months ended September 26, 2020, compared to $1.708 billion for the six months
ended September 28, 2019, which included net favorable foreign currency effects
of $8 million. Gross profit as a percentage of total revenue increased 350 basis
points to 64.8% during the six months ended September 26, 2020, compared to
61.3% during the six months ended September 28, 2019. The increase in gross
profit margin was primarily attributable to higher gross profit margin for
Michael Kors driven by a higher average unit price and favorable channel mix
during the six months ended September 26, 2020, as compared to the six months
ended September 28, 2019.
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Total Operating Expenses
Total operating expenses decreased $548 million, or 34.9%, to $1.021 billion
during the six months ended September 26, 2020, compared to $1.569 billion for
the six months ended September 28, 2019. Our operating expenses included a net
unfavorable foreign currency impact of approximately $14 million. Total
operating expenses increased to 65.4% as a percentage of total revenue for the
six months ended September 26, 2020, compared to 56.3% for the six months ended
September 28, 2019. The components that comprise total operating expenses are
explained below.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased $345 million, or 28.3%,
to $876 million during the six months ended September 26, 2020, compared to
$1.221 billion for the six months ended September 28, 2019, primarily due to
lower variable costs, as well as decreases from our cost reduction initiatives
as a result of COVID-19.
Selling, general and administrative expenses as a percentage of total revenue
increased to 56.1% during the six months ended September 26, 2020, compared to
43.8% for the six months ended September 28, 2019, primarily due to the adverse
impacts of COVID-19 and increased retail store and e-commerce related costs as a
percentage of total revenue during the six months ended September 26, 2020, as
compared to the six months ended September 28, 2019.
Corporate unallocated expenses, which are included within selling, general and
administrative expenses discussed above, but are not directly attributable to a
reportable segment, decreased $7 million, or 10.3%, to $61 million during the
six months ended September 26, 2020 as compared to $68 million for the six
months ended September 28, 2019, primarily due to a reduction in ERP system
implementation costs, as well as our cost reduction initiatives as a result of
COVID-19.
Depreciation and Amortization
Depreciation and amortization decreased $17 million, or 13.6%, to $108 million
during the six months ended September 26, 2020, compared to $125 million for the
six months ended September 28, 2019. The decrease in depreciation and
amortization expense was primarily attributable to lower depreciation due to
previously recorded property and equipment impairment charges. Depreciation and
amortization increased to 6.9% as a percentage of total revenue during the six
months ended September 26, 2020, compared to 4.5% for the six months ended
September 28, 2019 primarily due to lower revenues during the six months ended
September 26, 2020 as a result of COVID-19.
Impairment of Assets
During the six months ended September 26, 2020, we recognized asset impairment
charges of $20 million, which primarily related to operating lease right-of-use
assets at our Michael Kors store locations (see Note 11 to the accompanying
consolidated financial statements for additional information). During the six
months ended September 28, 2019, we recognized asset impairment charges of
approximately $201 million, which primarily related to operating lease
right-of-use assets.
Restructuring and Other Charges
During the six months ended September 26, 2020, we recognized restructuring and
other charges of $17 million, which included other costs of $12 million
primarily related to equity awards associated with the acquisition of Versace
(see Note 8 to the accompanying consolidated financial statements for additional
information) and $5 million related to our Capri Retail Store Optimization
Program.
During the six months ended September 28, 2019, we recognized restructuring and
other charges of $22 million, which were primarily comprised of $18 million of
other costs and restructuring charges of $4 million primarily related to Jimmy
Choo lease-related charges and our previous Michael Kors Retail Fleet
Optimization Plan. The other costs recorded during the six months ended
September 28, 2019 included $13 million, primarily related to equity awards
associated with the acquisition of Versace and $5 million, primarily related to
equity awards associated with the acquisition of Jimmy Choo. Restructuring and
other charges are not evaluated as part of our reportable segments' results
(See Segment Information above for additional information).
                                       41
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(Loss) Income from Operations
As a result of the foregoing, income from operations decreased $148 million or
106.5%, to a net loss from operations of $9 million during the six months ended
September 26, 2020, compared to income from operations of $139 million for the
six months ended September 28, 2019. (Loss) income from operations as a
percentage of total revenue decreased to (0.6)% during the six months ended
September 26, 2020, compared to 5.0% for the six months ended September 28, 2019
(see Segment Information above for a reconciliation of our segment operating
income to total operating income).
Interest Expense,net
Interest expense, net, increased $13 million to $29 million during the six
months ended September 26, 2020, compared to $16 million for the six months
ended September 28, 2019, primarily due to a decrease to interest income
attributable to lower average net investment hedges outstanding in the current
year. The decrease to interest income was largely offset by a decrease in
interest expense attributable to lower average borrowings outstanding in the
current year and the addition of an interest rate swap in the current year which
converts the one-month Adjusted LIBOR interest rate on these borrowings to a
fixed interest rate of 0.237% through December 2022 (see Note 9 and Note 12 to
the accompanying consolidated financial statements for additional information).
Foreign Currency (Gain) Loss
During the six months ended September 26, 2020, we recognized a net foreign
currency gain of $3 million, primarily attributable to the revaluation and
settlement of certain of our accounts payable in currencies other than the
functional currency, as well as the remeasurement of dollar-denominated
intercompany loans with certain of our subsidiaries.
During the six months ended September 28, 2019, we recognized a net foreign
currency loss of $6 million, primarily attributable to the revaluation and
settlement of certain of our accounts payable in currencies other than the
functional currency, as well as the remeasurement of dollar-denominated
intercompany loans with certain of our subsidiaries.
Provision for Income Taxes
We recognized $25 million of income tax expense during the six months ended
September 26, 2020, compared to $2 million of income tax expense for the six
months ended September 28, 2019. Our effective tax rates were (73.5)% and 1.7%
for the six months ended September 26, 2020 and September 28, 2019,
respectively. The change in our effective tax rate was primarily related to the
impact of a valuation allowance on a portion of our consolidated pre-tax loss, a
tax detriment related to share based compensation and the impact of the tax rate
change in the United Kingdom on the Company's net deferred tax liabilities
recorded for the six months ended September 26, 2020, compared to six months
ended September 28, 2019. These impacts were partially offset by the effects
related to global financing activities on our consolidated pre-tax loss.
Our effective tax rate may fluctuate from time to time due to the effects of
changes in U.S. state and local taxes and tax rates in foreign jurisdictions. In
addition, factors such as the geographic mix of earnings, enacted tax
legislation and the results of various global tax strategies, may also impact
our effective tax rate in future periods.
Net Loss Attributable to Noncontrolling Interest
During the six months ended September 26, 2020, we recorded a net loss
attributable to the noncontrolling interest in our joint ventures of $1 million
. This loss represents the share of income that is not attributable to the
Company.
Net (Loss) Income Attributable to Capri
As a result of the foregoing, our net income decreased $176 million to a net
loss of $58 million during the six months ended September 26, 2020, compared to
net income of $118 million for the six months ended September 28, 2019.
                                       42
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Segment Information
Versace
                                                      Six Months Ended                                              % Change
                                             September 26,         September 28,                           As                   Constant
(dollars in millions)                            2020                  2019               $ Change       Reported               Currency
Revenues                                    $       288           $        435          $    (147)           (33.8) %               (35.6) %
(Loss) income from operations                       (21)                     6                (27)                 NM
Operating margin                                   (7.3)  %                1.4  %


___________________
NM Not meaningful
Revenues
Versace revenues decreased $147 million, or 33.8%, to $288 million during
the six months ended September 26, 2020, compared to $435 million for the six
months ended September 28, 2019, which included favorable foreign currency
effects of $8 million. On a constant currency basis, revenue decreased $155
million, or 35.6%, primarily reflecting the adverse impacts related to COVID-19.
(Loss) Income from Operations
During the six months ended September 26, 2020, Versace recorded a loss from
operations of $21 million, compared to income from operations of $6 million for
the six months ended September 28, 2019. Operating margin declined from 1.4% for
the six months ended September 28, 2019, to (7.3)% during the six months ended
September 26, 2020, primarily due to the adverse impacts related to COVID-19.
Jimmy Choo
                                                    Six Months Ended                                                    % Change
                                           September 26,         September 28,                                 As                   Constant
(dollars in millions)                          2020                  2019               $ Change             Reported               Currency
Revenues                                  $       173           $        283          $    (110)                 (38.9) %               (40.6) %
(Loss) income from operations                     (29)                     1                (30)                       NM
Operating margin                                (16.8)  %                0.4  %


___________________
NM Not meaningful
Revenues
Revenue from Jimmy Choo decreased $110 million, or 38.9%, to $173 million during
the six months ended September 26, 2020, compared to $283 million for the six
months ended September 28, 2019, which included favorable foreign currency
effects of $5 million. On a constant currency basis, revenue decreased $115
million, or 40.6%, primarily reflecting the adverse impacts related to COVID-19.
(Loss) income from Operations
During the six months ended September 26, 2020, Jimmy Choo recorded a loss from
operations of $29 million, compared to income from operations of $1 million for
the six months ended September 28, 2019. Operating margin declined from 0.4% for
the six months ended September 28, 2019, to (16.8)% during the six months ended
September 26, 2020, primarily due to the adverse impacts related to COVID-19.
                                       43
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Michael Kors


                                  Six Months Ended

% Change


                          September 26,      September 28,                       As          Constant
(dollars in millions)         2020               2019           $ Change       Reported      Currency
Revenues                 $      1,100       $      2,070       $    (970)       (46.9) %      (47.1) %
Income from operations            142                423            (281)       (66.4) %
Operating margin                 12.9  %            20.4  %



Revenues
Michael Kors revenues decreased $970 million, or 46.9%, to $1.100 billion during
the six months ended September 26, 2020, compared to $2.070 billion for the six
months ended September 28, 2019, which included favorable foreign currency
effects of $6 million. On a constant currency basis, revenue decreased $976
million, or 47.1%, primarily due to the adverse impacts related to COVID-19.
Income from Operations

During the six months ended September 26, 2020, Michael Kors recorded income
from operations of $142 million, compared to $423 million for the six months
ended September 28, 2019. Operating margin declined from 20.4% for the six
months ended September 28, 2019, to 12.9% during the six months ended
September 26, 2020, primarily due to adverse impacts related to COVID-19,
partially offset by higher gross profit margins related to a higher average unit
price and favorable channel mix.

Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are the cash flows generated from our
operations, along with borrowings available under our credit facilities and
available cash and cash equivalents. Our primary use of this liquidity is to
fund our ongoing cash requirements, including working capital requirements,
acquisitions, debt repayments, investment in information systems infrastructure,
global retail store construction, expansion and renovation, distribution and
corporate facilities, construction and renovation of shop-in-shops, share
repurchases and other corporate activities. We believe that the cash generated
from our operations, together with borrowings available under our revolving
credit facility and available cash and cash equivalents, will be sufficient to
meet our working capital needs for the next 12 months, including investments
made and expenses incurred in connection with our store growth plans,
shop-in-shop growth, investments in corporate and distribution facilities,
continued systems development, e-commerce and marketing initiatives. We spent
$59 million on capital expenditures during the six months ended September 26,
2020.
The following table sets forth key indicators of our liquidity and capital
resources (in millions):
                                                        As of
                                            September 26,       March 28,
                                                 2020              2020
               Balance Sheet Data:
               Cash and cash equivalents   $          238      $      592
               Working capital             $           53      $      493
               Total assets                $        7,803      $    7,946
               Short-term debt             $          200      $      167
               Long-term debt              $        1,581      $    2,012



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