Executive Summary

Q3 FY2025 revenue was $1.26B (down 11.6% YoY) and adjusted EPS was $0.45; GAAP results reflected a large, non-cash impairment ($675M) driving a GAAP net loss of $(547)M or $(4.61) per share .
Segment performance: Michael Kors revenue $0.91B with 16.2% operating margin, Versace $0.19B with (10.9)% margin, Jimmy Choo $0.16B with (3.8)% margin .
Guidance: FY25 revenue ~$4.4B and adjusted operating income ~$$100M; FY26 revenue ~$4.1B and adjusted operating income ~$150M, with cost actions to reduce operating expenses by ~$200M; Q4 FY25 revenue guided to ~$0.98B and operating loss of ~$25M .
Balance sheet/liquidity: net debt fell to ~$1.12B; amended credit agreement added a $700M term loan and extended revolver and term loan maturities to July 2027, repaying near-term loans (Versace €450M and $450M DDTL) .
Stock catalysts: aggressive pricing architecture reset at Kors, Versace assortment rebalancing (Tag Bag, Galaxia sneaker), wholesale stabilization expected after a steep Q4 decline, and Investor Day on Feb 19 detailing brand strategies and margin path .

What Went Well and What Went Wrong

What Went Well

Free cash flow positive: operating cash flow $309M and FCF $278M in the quarter; inventory down 13% YoY to $892M, reflecting improved working capital management .
Michael Kors profitability remained resilient with 16.2% operating margin despite revenue declining 12% YoY; management is refocusing on heritage “Jet Set” and price architecture to restore full-price sell-throughs .
Consumer engagement: databases grew (Versace +1.1M, +15%; Jimmy Choo +0.7M, +12%; Kors +9M, +11%), indicating brand awareness underpinning future demand .
Management quote: “We expect our performance to improve throughout fiscal year 2026 positioning us to return to growth in fiscal 2027 and beyond.” – John D. Idol .

What Went Wrong

Group revenue down 11.6% YoY with broad-based regional weakness (Asia down 20% for the group; outsized decline in China) and wholesale contraction; gross margin compressed 60bps to 64.4% on lower full-price sell-throughs .
Non-cash impairments ($675M OpEx, $602M net impact or $5.08/share) drove GAAP operating loss of $(590)M and GAAP EPS of $(4.61) .
Versace and Jimmy Choo posted operating losses; missteps in Versace assortment (too few statement items, reduced entry-level luxury offerings) and elevated pricing at Kors pressured sales and AURs; management is reversing course .

Financial Results

Consolidated P&L and Margins (oldest → newest)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Billions)	$1.43	$1.08	$1.26
Gross Margin %	65.0%	64.3%	64.4%
Adjusted Operating Margin %	12.1%	3.0%	6.0%
Adjusted EPS ($)	$1.20	$0.65	$0.45
GAAP EPS ($)	$0.88	$0.20	$(4.61)

Segment Revenue and Operating Margins (oldest → newest)

Segment	Revenue Q3 2024 ($MM)	Revenue Q2 2025 ($MM)	Revenue Q3 2025 ($MM)	Op Margin Q3 2024	Op Margin Q3 2025
Versace	$227	$201	$193	(6.2)%	(10.9)%
Jimmy Choo	$166	$140	$159	2.4%	(3.8)%
Michael Kors	$1,034	$738	$909	21.2%	16.2%

KPIs and Balance Sheet

KPI	Q3 2025	Notes
Inventory ($MM)	$892	Down 13% YoY
Cash from Operations ($MM)	$309	Inflow
Free Cash Flow ($MM)	$278	Inflow
Cash & Equivalents ($MM)	$356
Total Borrowings ($MM)	$1,480
Net Debt ($MM)	$1,120	Down vs $1,600 last year
Leverage Ratio	2.77x	Per credit facility definition
Foreign Currency Loss ($MM)	$23	Q3 FX
Retail Stores (Total)	1,205	Kors 747; Versace 234; Choo 224
Impairment Charge ($MM)	$675 (OpEx)	Net impact ~$602, $5.08/share

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($B)	Q4 FY2025	None (no guidance provided due to merger)	~$0.975	Introduced
Operating Loss ($MM)	Q4 FY2025	None	~$(25)	Introduced
Gross Margin	Q4 FY2025	None	~Flat YoY	Introduced
Operating Expenses ($MM)	Q4 FY2025	None	~$(50) decline QoQ	Introduced
Versace Revenue ($B)	Q4 FY2025	None	~$0.200; FX headwind ~$7M	Introduced
Jimmy Choo Revenue ($B)	Q4 FY2025	None	~$0.125; FX headwind ~$5M	Introduced
Michael Kors Revenue ($B)	Q4 FY2025	None	~$0.650; FX headwind ~$15M	Introduced
Total Revenue ($B)	FY2025	None	~$4.4; FX ~$(0.04)	Introduced
Adjusted Operating Income ($MM)	FY2025	None	~$100	Introduced
Total Revenue ($B)	FY2026	None	~$4.1; FX ~$(0.10); store closures impact ~$0.06	Introduced
Adjusted Operating Income ($MM)	FY2026	None	~$150	Introduced
OpEx Reduction ($MM)	FY2026	None	~$(200) (includes ~$150M new cost actions)	Introduced
Versace Revenue ($B)	FY2025	None	~$0.810; FX ~$(0.01)	Introduced
Jimmy Choo Revenue ($B)	FY2025	None	~$0.600; FX ~$(0.005)	Introduced
Michael Kors Revenue ($B)	FY2025	None	~$3.0; FX ~$(0.025)	Introduced
Versace Op Margin	FY2025	None	Negative high-single-digits	Introduced
Versace Op Margin	FY2026	None	~Breakeven	Introduced
Jimmy Choo Op Margin	FY2026	None	Slightly negative	Introduced
Michael Kors Op Margin	FY2026	None	Low double-digits	Introduced

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 FY2025)	Trend
Pricing architecture (Michael Kors)	Elevated prices, lower full-price sell-throughs; retail down low-teens; wholesale down high-teens ; Kors retail down mid-single-digits; Asia down 43%	Reset to historical price points; rebuild core/signature; aim to lift full-price sell-throughs and AURs; Jet Set heritage marketing	Improving through Spring/Fall 2025 as changes flow
Wholesale channel	Q1/Q2 wholesale down double-digits/high-teens	Q4 guide: wholesale down ~30%, then moderates with partner receptivity to Fall 2025 collections	Worst in Q4, stabilizing thereafter
Asia/China demand	Asia declines at all brands Q1; Kors Asia down 43% in Q2	Group Asia down 20%; outsized China decline; recovery not imminent but sequential improvement expected	Still pressured; gradual improvement
Versace repositioning	Ongoing elevation; revenue declines YoY	Quiet luxury emphasis; missteps in statement items/entry price points; reintroducing energy (Tag Bag, Galaxia sneakers); VIC growth double-digit	Assortment recalibration in FY26
Marketing & brand narrative	Databases growing; focus on long-term growth	Kors “Jet Set” reboot; Spring campaign (Ibiza; Suki Waterhouse); strong fragrance/eyewear traction	Reengaging core consumer
Store optimization & renovations	Store count reductions across brands	Closing ~75 stores next year (mostly Kors full-price); renovate ~150 Kors stores over next 24 months	Footprint rightsizing; productivity focus
Cost actions & transformation	ERP/transformation discussed and partially paused	FY26 OpEx down ~$200M; transformation reassessment timing; workforce optimization	Cost discipline accelerating
Liquidity & capital structure	Net debt $1.53B in Q2	Net debt ~$1.12B; amended credit agreement and new $700M term loan extend maturities to July 2027; loans repaid	Reduced near-term refinancing risk

Management Commentary

Strategic reset: “We made a number of missteps… in particular, at Versace and Michael Kors… We are refocusing on the heritage of the Michael Kors brand… and rebuilding our core and signature assortments” – John D. Idol .
Pricing/AUR: “Our AUR is down… by lowering certain prices… and getting better full price sell-throughs, we think we’ll elevate AUR to flat or growth next year” – John D. Idol .
Wholesale trajectory: “The greatest impact… in Q4… wholesale… last very large decline… accelerates in Q2–Q4 next year as strategies flow” – John D. Idol .
Cost actions and margins: “We expect expenses to decline approximately $200 million… as a result, operating income of approximately $150 million in fiscal 2026” – Thomas Edwards .
Liquidity: “Cash $356M and debt $1.48B… net debt ~$1.12B; strong free cash flow generation” – Thomas Edwards .

Q&A Highlights

Pricing architecture and AUR: Management acknowledged price hikes alienated Kors’ core consumer; resetting to good-better-best, lowering certain price points to drive full-price sell-throughs and ultimately higher gross margins/AURs over time .
Wholesale normalization: Q4 will reflect the steepest wholesale decline (~30%); partners responded positively to Fall 2025 lines, with stabilization expected through FY2026 as sell-in improves .
Asset sale speculation: Company will always consider shareholder value but strategy is to build all three houses; not focused on divestitures currently .
CapEx and store actions: FY25 CapEx ~$125M; similar in FY26 supporting Kors renovations; closing ~70–75 stores next year (majority Kors full-price); investing in e-commerce and data analytics .
Debt and FCF: Ending FY25 net debt expected ~$1.2B; FY26 targeted ~$200M lower, while funding marketing, analytics, and store renovations .

Estimates Context

Wall Street consensus EPS and revenue for Q3 FY2025 via S&P Global were unavailable at time of writing due to a temporary SPGI limit. As a result, we cannot assess beats/misses versus consensus for revenue or EPS in this recap. Adjusted EPS was $0.45 and revenue was $1.26B, per company disclosures .

Key Takeaways for Investors

Q3 print was weak on revenue/margins YoY and GAAP results were distorted by large, non-cash impairment; adjusted operating margin improved sequentially to 6.0% from 3.0% in Q2, suggesting early benefits from cost actions .
Michael Kors strategic reset (heritage “Jet Set,” rebuilt signature/core, price architecture normalization) is the pivotal driver for FY26–27 margin recovery and top-line stabilization; watch full-price sell-throughs/AUR trends starting Spring/Fall .
Wholesale is the swing factor near term: expect the steepest decline in Q4 (~30%), then moderation; better sell-in indicates potential stabilization through FY26 .
Liquidity improved with extended maturities to July 2027 and net debt down to ~$1.12B; strong Q3 FCF ($278M) provides runway to fund marketing and store renovations .
Versace recalibration (more energy, entry-level luxury balance) and product launches (Tag Bag, Galaxia sneakers) target aspirational consumers; monitor mix and margin progression in FY26 .
FY25 guide is conservative (revenue ~$4.4B, adjusted OI ~~$100M); FY26 indicates expense reduction (~~$200M) and modest gross margin expansion; stock likely reacts to tangible evidence of pricing reset efficacy and wholesale stabilization at Investor Day .
Risks: continued Asia/China weakness, execution risk in assortment/pricing, and wholesale partner alignment; legal overhang from terminated Tapestry merger appears contained with reimbursement; FX headwinds embedded in guides .

Capri Holdings Ltd (CPRI)·Q3 2025 Earnings Summary