Executive Summary

Q2 FY26 revenue $0.856B declined 2.5% YoY but beat consensus; adjusted operating margin 2.3% and adjusted EPS of $(0.03), with a ~$0.20 EPS hit from an unusually high 112% tax rate related to a valuation allowance; gross margin fell 130 bps (tariffs ~120 bps) . Revenue beat was aided by ~$20M Michael Kors wholesale shipment timing and better full-price retail sell-throughs .
Michael Kors full-price comps turned positive; brand gross margin impacted by tariffs (59.3% vs 61.1% LY), but operating margin held double-digit (10.1%) due to cost controls and mix; Jimmy Choo sales declined 6.4% with retail sequential improvement, but wholesale timing pushed revenue into Q3 and margin to -6.9% .
FY26 guidance maintained: revenue $3.375–$3.45B, operating income ~$100M, EPS $1.20–$1.40; Q3 guide: revenue $0.975–$1.0B, EPS $0.70–$0.80; tariff headwinds expected to intensify in H2 before mitigation drives FY27 gross margin expansion .
Strategic catalysts: Versace sale proceeds expected Q3 to repay most debt (net debt $1.64B at Q2-end) and Board authorized $1B buyback to commence FY27; management is prioritizing “quality of sale” (reduced promotions) and store renovations to sustain brand elevation .

What Went Well and What Went Wrong

What Went Well
- Positive full-price comps at Michael Kors globally, driven by modern “jet-set” storytelling, refreshed pricing architecture, and new handbag families (Hamilton Modern, Leila, Nolita) with strong full-price sell-throughs; CEO: “Our full‑price comps turned positive… consumer sentiment and brand awareness [are] increasing” .
- Revenue, gross margin and operating income exceeded internal expectations; revenue beat aided by shipment timing and retail traction; adjusted OI margin 2.3% despite tariff pressure .
- Jimmy Choo retail trends improved sequentially with strength in accessories (Bonbon, Cinch) and casual footwear (Diamond Flex, flats); pricing architecture broadened reach (Curve, Bar Hobo under $1,500) .
What Went Wrong
- Tariff headwinds pressured gross margin ~120 bps in Q2; full-year unmitigated tariff impact now ~$85M, with H2 seeing the greatest pressure before FY27 mitigation .
- Outlet channel weakness as Capri pulls back promotions and daigou activity to improve quality of sales; Americas retail remained pressured; MK EMEA strongest region, Asia mixed .
- Adjusted EPS miss vs consensus due to a 112% tax rate tied to valuation allowance timing, reducing EPS by ~$0.20; MK wholesale POS still down (improving to single-digit declines) and JC wholesale mid-teens decline on shipment shifts .

Financial Results

Metric	Q4 FY2025	Q1 FY2026	Q2 FY2026
Revenue ($USD Millions)	$1,035	$797	$856
YoY Growth %	(15.4)%	(6.0)%	(2.5)%
Gross Margin %	61.0%	63.0%	61.0%
Operating Margin % (GAAP)	(11.2)%	2.0%	(1.4)%
Operating Margin % (Adjusted)	(3.2)%	2.5%	2.3%
Diluted EPS (GAAP) – Continuing Ops	n/a	$0.47	$(0.28)
Diluted EPS (Adjusted)	$(4.90)	$0.50	$(0.03)

Note: FY25 figures include Versace; FY26 figures reflect continuing operations (Versace as discontinued) .

Q2 vs S&P Global Consensus

Metric	Q2 FY2026 Actual	Q2 FY2026 Consensus	Result
Revenue ($USD Millions)	$856	$826.6*	Beat
Adjusted Diluted EPS ($)	$(0.03)	$0.137*	Miss

Values marked with * retrieved from S&P Global.

Segment Performance

Metric	Q4 FY2025	Q1 FY2026	Q2 FY2026
Michael Kors Revenue ($M)	$694	$635	$725
Michael Kors Operating Margin %	4.6%	9.9%	10.1%
Jimmy Choo Revenue ($M)	$133	$162	$131
Jimmy Choo Operating Margin %	(7.5)%	2.5%	(6.9)%

Key KPIs and Balance Sheet

KPI	Q4 FY2025	Q1 FY2026	Q2 FY2026
Inventory ($M)	$869	$779	$766
Cash & Cash Equivalents ($M)	$166	$129	$120
Total Borrowings Outstanding ($B)	$1.5	$1.7	$1.76
Net Debt ($B)	$1.3	$1.5	$1.64
Michael Kors Stores (Count)	711	695	691
Jimmy Choo Stores (Count)	219	217	216

Guidance Changes

Metric	Period	Previous Guidance (Q1 FY26)	Current Guidance (Q2 FY26)	Change
Total Revenue	FY26	$3.375–$3.45B	$3.375–$3.45B	Maintained
Operating Income	FY26	~ $100M	~ $100M	Maintained
Gross Margin %	FY26	~60.5%–61%	~60.5%–61%	Maintained
OpEx	FY26	~ $2.0B	~ $2.0B	Maintained
Net Interest Income	FY26	$85–$95M	$85–$95M	Maintained
Effective Tax Rate	FY26	Mid-teens	Mid-teens	Maintained
Diluted EPS	FY26	$1.20–$1.40	$1.20–$1.40	Maintained
Capex	FY26	~$110M	~$110M	Maintained
Michael Kors Revenue	FY26	$2.8–$2.875B	$2.8–$2.875B	Maintained
Jimmy Choo Revenue	FY26	$565–$575M	$565–$575M	Maintained
Total Revenue	Q3 FY26	n/a	$975M–$1.0B	Introduced
Diluted EPS	Q3 FY26	n/a	$0.70–$0.80	Introduced
MK Revenue	Q3 FY26	n/a	$825–$845M	Introduced
JC Revenue	Q3 FY26	n/a	$150–$155M	Introduced
Buyback Authorization	Multi-year	n/a	$1.0B (begin FY27)	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY25, Q1 FY26)	Current Period (Q2 FY26)	Trend
Tariffs / Gross Margin	FY26 unmitigated impact raised to ~$85M; GM flat in Q1 with ~30 bps tariff headwind; mitigation planned for FY27	Q2 GM -130 bps; ~120 bps from tariffs; FY26 headwind peaks in H2; majority mitigated in FY27	Deteriorating near term; improving FY27
Michael Kors full‑price repositioning	Early signs: improved traffic, AUR turned positive in full-price; new storytelling/influencer strategy	Full‑price comps turned positive; accessories (Hamilton Modern/Leila/Nolita) strong; reduced sale cadence	Improving
Outlet channel & promotional reset	Plan to reduce promotions, raise AURs; introduce more fashion in outlet	Pullback in promos and daigou shrinking (>60% of outlet decline); more newness Q3/Q4; AURs rising	Near-term pressure; strategic reset
Wholesale & shop-in-shop	Door rationalization ongoing; Q1 wholesale still soft	MK wholesale POS improved to single-digit declines; $20M shipment timing into Q2; shop renovations planned	Stabilizing
Jimmy Choo product mix	Accessories and casual footwear expansion (Curve, Jelly, sneakers)	Sequential retail improvement; Bar Hobo launch; full-price sell-throughs up	Improving retail; wholesale phasing
Capital allocation & Versace sale	Versace sale to reduce debt; focus on MK/JC; invest in renovations	Use proceeds to repay majority of debt; $1B buyback authorized for FY27	Balance sheet strengthening

Management Commentary

“We are encouraged with the continued sequential improvement in trends, which resulted in revenue, gross margin, and operating income exceeding our expectations… [but] results were negatively impacted by $0.20 per share… due to a higher‑than‑anticipated effective tax rate.” — CEO, Q2 remarks .
“Gross margin of 61% declined 130 basis points. Higher tariff rates negatively impacted gross margin by approximately 120 basis points… We still expect the unmitigated tariff impact to be approximately $85 million for the full year.” — CFO .
“Comps in our full price channel turned positive in the second quarter… Consumers are responding to our modern jet‑set lifestyle marketing, standout styles, and updated pricing architecture.” — CEO .
“Upon the anticipated completion of the Versace sale, we plan to use the proceeds to significantly reduce debt… our Board… authorized a new $1 billion share repurchase program, which the company expects to begin implementing in fiscal ’27.” — CFO/CEO .

Q&A Highlights

Michael Kors full‑price momentum: Drivers were branding/storytelling and product (Leila, Nolita, Hamilton Modern); full‑price bags excluded from periodic sales without hurting sell‑throughs .
Outlet repositioning: Reduced promotions and daigou, strategic price increases, and more fashion in outlet starting Q3 (more in Q4/FY27); Gen Z is more price sensitive; North America retail likely returns to growth next year (around Q2) .
Tariffs trajectory: Q2 ~120 bps impact; expect 200–250 bps GM decline in Q3 YoY due to tariff mix; majority of tariff impact to be mitigated in FY27 via sourcing optimization, vendor cost efficiencies, and targeted price increases .
Wholesale dynamics: ~$20M MK shipments pulled into Q2; POS improved to single‑digit declines; shop-in-shop renovations planned with key partners .
Geography: MK EMEA strongest; Asia improving with China momentum; Jimmy Choo strongest in North America; continued work in Japan/China for JC .

Estimates Context

Q2 FY26 performance vs S&P Global consensus: Revenue $856M vs $826.6M* (beat), adjusted EPS $(0.03) vs $0.137* (miss). EPS miss tied to a 112% effective tax rate due to valuation allowance timing, reducing EPS by ~$0.20 .
Q3 FY26 outlook vs S&P Global consensus: Revenue guide $975M–$1.0B vs $995.8M*; EPS guide $0.70–$0.80 vs $0.7468* — broadly in line at midpoints .
Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Near-term: Revenue beat aided by MK wholesale phasing and improving full‑price retail; EPS miss was tax‑driven rather than operational, but tariff headwinds intensify in H2 — watch Q3 gross margin compression (200–250 bps YoY) .
Strategic execution: Positive full‑price comps at MK and sequential retail improvement at JC validate brand elevation and pricing resets; reduced promotions and tighter off‑price should support FY27 GM expansion .
Balance sheet/capital returns: Versace sale proceeds expected to reduce leverage materially and underpin a $1B buyback starting FY27 — potential re‑rating catalyst as execution de‑risks .
Watch points: Outlet transition and daigou pullback weigh on Americas retail near term; tariff mitigation and cost efficiencies are critical to FY27 margin recovery .
Operating leverage path: FY26 guide maintained despite higher tariffs; management targets FY27 revenue and earnings growth with GM expansion and OpEx leverage as store renovations and product initiatives scale .

Additional Detail (for reference)

Q3 FY26 guidance: Revenue $975M–$1,000M; GM down ~200–250 bps YoY; OM ~7%–8%; MK OM low‑teens; JC OM negative low‑ to mid‑single digits .
FY26 guidance unchanged: Revenue $3.375–$3.45B; OM ~ $100M; EPS $1.20–$1.40; MK rev $2.8–$2.875B; JC $565–$575M .

Press materials and prior quarters referenced: Q2 FY26 8‑K and press release ; Q2 call transcript ; Q1 FY26 8‑K and transcript ; Q4 FY25 press release .

Capri Holdings Ltd (CPRI)·Q2 2026 Earnings Summary