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Capri Holdings Ltd (CPRI)·Q1 2026 Earnings Summary
Executive Summary
- Q1 FY26 exceeded expectations on revenue and EPS as strategic repositioning at Michael Kors and Jimmy Choo drove sequential improvement; management raised FY26 revenue outlook while maintaining EPS guidance amid higher tariff headwinds .
- Reported revenue declined 6.0% YoY to $0.80B with gross margin essentially flat; adjusted EPS was $0.50 versus $0.16 last year; both revenue and EPS beat S&P Global consensus materially, driven by better full‑price sell-throughs and cost controls .
- FY26 guidance: revenue raised to $3.375–$3.45B (from $3.3–$3.4B); Michael Kors raised to $2.8–$2.875B and Jimmy Choo to $565–$575M; EPS unchanged at $1.20–$1.40 as unmitigated tariff impact estimate increased to ~$85M (from ~$60M) .
- Strategic catalysts: outlet promotional cadence down ~35%; AUR turned positive in full-price channel; store renovation program (~50% of fleet over three years) underway; Versace sale ($1.375B) expected to close in 2H CY25, with proceeds to substantially reduce debt .
What Went Well and What Went Wrong
What Went Well
- AUR inflected positive at Michael Kors full‑price for the first time in ~3 years; full‑price sell‑through improved on new groups (Layla, Nolita, Bryant), supporting margin quality despite tariff pressure .
- Marketing pivot to “Hotel Stories,” heavier influencer strategy, and data analytics expanded engagement; Michael Kors global database up 9% YoY; Jimmy Choo database up 9% YoY .
- Cost discipline: operating expenses fell $22M YoY; operating income improved YoY despite lower sales; Jimmy Choo gross margin expanded 330 bps YoY to 70.4% on mix .
What Went Wrong
- Asia remained weak: Capri Asia revenue -15% YoY; Michael Kors Asia -16%; Jimmy Choo Asia -14% .
- Wholesale remained pressured from broad-based softness and prior door reductions (Capri exited ~30% of U.S. department store doors over the past year), delaying top-line recovery in the channel .
- Tariffs increased headwinds: gross margin was negatively impacted ~30 bps in Q1; full‑year unmitigated tariff impact estimate raised to ~$85M (from ~$60M), weighing on FY26 margin outlook .
Financial Results
Headline results vs estimates and prior year (Q1 FY26)
Sequential revenue (continuing operations) and EPS context
Segment performance (Q1 FY26)
Regional revenue mix (Q1 FY26)
KPIs and balance sheet (Q1 FY26)
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “AUR trends continued to improve sequentially, turning positive in our full price channel for the first time in three years.” – John Idol .
- “We are reducing our promotional cadence, particularly in our outlet channel, down approximately 35%... to improve gross margin and AURs.” – John Idol .
- “We now estimate unmitigated impact of tariffs... approximately $85 million in fiscal 2026, up from our prior estimate of approximately $60 million.” – Rajal Mehta .
- “Following [the Versace] closures, our store rationalization program will be largely complete... renovate approximately 50% of our store fleet as well as key department store locations.” – John Idol .
- “Post the [Versace] deal closing, we expect to have minimal debt remaining on our balance sheet.” – Rajal Mehta .
Q&A Highlights
- Pricing power and AUR: Kors’ new pricing architecture at historic levels plus stronger newness drove full‑price sell‑throughs; selective modest price increases to mitigate tariffs will be slow and measured to protect brand momentum .
- Wholesale trajectory: No YoY growth embedded in FY26; first inflection expected in full‑price retail, with wholesale stabilization and potential modest growth in FY27 as assortments and shop‑in‑shop renovations roll through .
- Balance sheet post‑Versace: Proceeds prioritized to substantially reduce debt; minimal debt expected after close, enabling future share repurchases and continued investment in store renovations and analytics .
- Store program: Renovate ~50% of Kors stores over three years; early renovated locations show positive lift; closures (~75 in FY26) largely complete by year end .
- Regional and category color: Dress footwear soft; casual and active better; EMEA improving; Asia weak; Jimmy Choo accessories (Cinch, Curve) scaling within $595–$995 price tier .
Estimates Context
Consensus likely needs to move higher on FY26 revenue (company raised outlook) but EPS revisions may be constrained near-term by higher tariff headwinds; back‑half improvements and mitigation efforts are the swing factors .
Key Takeaways for Investors
- The beat was quality: better full‑price sell‑throughs and positive AUR in full‑price suggest strategy is gaining traction despite ongoing wholesale and Asia headwinds .
- FY26 revenue raised across company and brands; EPS held as tariff headwinds increased—execution on sourcing optimization and selective pricing will determine EPS upside vs guide .
- EMEA inflecting positive; Asia remains the key risk; monitoring traffic normalization and product cadence into back half crucial .
- Structural actions (store closures, reduced outlet promotions, shop‑in‑shop renovations, 50% fleet remodel) should lift productivity and margin mix through FY27 .
- Versace sale is a balance sheet catalyst (minimal debt post‑close) and supports incremental reinvestment and potential buybacks over time .
- Near‑term trading: stock sensitive to evidence that AUR strength translates into gross margin resiliency vs rising tariffs; Q2 guide aligns with consensus, keeping focus on back‑half execution .
- Medium‑term: if Kors returns to growth and Jimmy Choo accessories scale as planned, FY27 revenue and EPS expansion targets become more credible .