XML 21 R9.htm IDEA: XBRL DOCUMENT v3.22.4
Revenue Recognition
 9 Months Ended
Dec. 31, 2022
Revenue from Contract with Customer [Abstract]  
Revenue Recognition 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 $15 million and $13 million as of December 31, 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 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 December 31, 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$8 
Fiscal 202431 
Fiscal 202531 
Fiscal 202628 
Fiscal 202724 
Fiscal 2028 and thereafter44 
 Total$166 
Sales Returns
The refund liability recorded as of December 31, 2022 was $64 million, and the related asset for the right to recover returned product as of December 31, 2022 was $15 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 December 31, 2022 and April 2, 2022, respectively. For the three and nine months ended December 31, 2022, the Company recognized $3 million and $11 million respectively, in revenue which related to contract liabilities that existed at April 2, 2022. For the three and nine months ended December 25, 2021, the Company recognized $1 million and $9 million, respectively, in revenue which related to contract liabilities that existed at March 27, 2021. There were no material contract assets recorded as of December 31, 2022 and April 2, 2022.
There were no changes in historical variable consideration estimates that were materially different from actual results.
Disaggregation of Revenue
The following table presents the Company’s segment revenue disaggregated by geographic location (in millions):
 Three Months EndedNine Months Ended
 December 31,
2022		December 25,
2021		December 31,
2022		December 25,
2021
Versace revenue - the Americas$85 $89 $320 $283 
Versace revenue - EMEA113 99 350 304 
Versace revenue - Asia51 63 162 186 
 Total Versace249 251 832 773 
Jimmy Choo revenue - the Americas54 51 151 127 
Jimmy Choo revenue - EMEA70 69 193 175 
Jimmy Choo revenue - Asia44 58 138 155 
Total Jimmy Choo168 178 482 457 
Michael Kors revenue - the Americas777 814 2,045 1,960 
Michael Kors revenue - EMEA212 237 616 616 
Michael Kors revenue - Asia106 129 309 356 
 Total Michael Kors1,095 1,180 2,970 2,932 
Total revenue - the Americas916 954 2,516 2,370 
Total revenue - EMEA395 405 1,159 1,095 
Total revenue - Asia201 250 609 697 
Total revenue$1,512 $1,609 $4,284 $4,162 
See Note 3 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 revenue recognition policy.