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Capri Holdings Ltd (CPRI)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 revenue was $1.04B, down 15.4% YoY, but above S&P Global consensus; adjusted diluted EPS was a loss of $4.90 driven by a $545M non‑cash tax valuation allowance, marking a significant EPS miss versus consensus .*
  • Management announced a definitive agreement to sell Versace to Prada for $1.375B, and guided FY2026 continuing-ops revenue to $3.3–$3.4B and EPS to $1.20–$1.40; Versace will be classified as discontinued operations beginning FY2026 .
  • Gross margin compressed to 61.0% (−170 bps YoY) due to inventory actions; operating margin (adjusted) was −3.2%; Michael Kors showed early “green shoots” with improved full-price sell-throughs and AUR trends .
  • FY2026 guidance embeds tariff headwinds (~$60M to COGS on an unmitigated basis) and FX dynamics; management plans sourcing optimization, selective price actions, and store renovations to offset over time .
  • Potential catalysts: Versace sale proceeds used for debt reduction and eventual share repurchases, improved Michael Kors brand metrics, and clarity on tariffs; risks include wholesale softness and Asia demand pressure .

What Went Well and What Went Wrong

What Went Well

  • “We are seeing positive indicators that our strategies are beginning to work,” including improved Michael Kors full‑price sell-throughs in new groups (Leila, Dakota, Bryant) and quarter‑to‑date AUR turning positive .
  • Early FY2026 trends show improved sales momentum, growing consumer databases at Michael Kors and Jimmy Choo, and strong engagement from new storytelling (Hotel Stories) .
  • Q4 revenue modestly exceeded internal expectations, and management reaffirmed confidence in growing Michael Kors to $4B and Jimmy Choo to $800M over time .

What Went Wrong

  • Q4 adjusted EPS of −$4.90 was impacted by a $545M non‑cash tax valuation allowance; gross margin fell to 61.0% due to inventory actions and lower full‑price sell‑throughs on older styles .
  • Michael Kors and Jimmy Choo operating margins deteriorated YoY (MK 4.6% vs 14.1%; JC −7.5% vs −5.8%), with continued wholesale channel reductions and regional softness (Asia down 23% total company) .
  • Tariff uncertainty represents a new headwind for FY2026 (~$60M unmitigated COGS impact), likely pressuring gross margin until mitigation actions fully take hold .

Financial Results

Quarterly Results vs Prior Periods

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$1,079 $1,261 $1,035
Gross Margin %64.3% 64.4% 61.0%
Operating Margin % (GAAP)(3.5)% (46.8)% (11.2)%
Operating Margin % (Adjusted)3.0% 6.0% (3.2)%
Diluted EPS (GAAP)$0.20 $(4.61) $(5.44)
Diluted EPS (Adjusted)$0.65 $0.45 $(4.90)

Actual vs S&P Global Consensus

MetricQ2 2025Q3 2025Q4 2025
Revenue Consensus ($USD Millions)$1,173.4*$1,255.8*$989.0*
Revenue Actual ($USD Millions)$1,079 $1,261 $1,035
Primary EPS Consensus Mean ($)$0.7228*$0.6547*$0.2176*
Adjusted EPS Actual ($)$0.65 $0.45 $(4.90)

Values retrieved from S&P Global.*

Segment Revenue Breakdown

SegmentQ2 2025 ($MM)Q3 2025 ($MM)Q4 2025 ($MM)
Versace201 193 208
Jimmy Choo140 159 133
Michael Kors738 909 694
Total1,079 1,261 1,035

Segment Operating Margins (Q4 2025)

SegmentQ4 2025 Operating Margin %
Versace(6.3)%
Jimmy Choo(7.5)%
Michael Kors4.6%

KPIs

KPIQ2 2025Q3 2025Q4 2025
Inventory ($MM)$984 $892 $869
Cash & Equivalents ($MM)$182 $356 $166
Total Borrowings ($MM)$1,237 $1,480 $1,500
Net Debt ($MM)$1,053 $1,124 $1,334
Leverage Ratio (Net Debt/Adj. EBITDA)—2.77x 3.2x
Store Count (Total)1,217 1,205 1,158

Guidance Changes

MetricPeriodPrevious Guidance (Q3 FY2025)Current Guidance (Q4 FY2025)Change
Capri Total RevenueFY2026~$4.1B incl. ~$100M FX headwind; included Versace $3.3–$3.4B (continuing ops; Versace discontinued) Lowered (scope changed)
Operating IncomeFY2026~$150M ~ $100M incl. tariff impact Lowered
Michael Kors RevenueFY2026~$2.75B ~$2.75–$2.85B Maintained/Raised high end
Jimmy Choo RevenueFY2026~$550M ~$540–$550M Maintained/Lowered low end
Versace RevenueFY2026~$800M Discontinued ops from FY2026 Excluded
Gross MarginFY2026Modest expansion ~61–61.5% (MK+JC combined) Lowered vs prior due to tariffs
OpExFY2026Down ~$200M; new cost initiatives ~$2.0B (removal of Versace + cost reductions) Rebased
Net Interest IncomeFY2026Not specified~$85–$90M New
Effective Tax RateFY2026Not specified~15% New
Diluted EPSFY2026Not specified~$1.20–$1.40 New
CapexFY2026Same as FY2025 ($125M) ~$110M Lowered
Capri Total RevenueQ1 FY2026Not given~$765–$780M New
Diluted EPSQ1 FY2026Not given~$0.10–$0.15 New
Operating MarginQ1 FY2026Not given~Break-even New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
Brand storytelling & marketingLimited; merger constraints; focus on equity Refocus to Jet Set; spring campaign with Suki Waterhouse; database growth Hotel Stories franchise; higher social engagement; MK AUR turned positive Improving brand heat
Product performanceMK pricing reset and signature rebuild outlined MK missteps acknowledged; reset underway; Versace Tag Bag; Choo accessories MK Leila/Dakota/Bryant strong sell-through; JC Diamond Flex fastest sneaker; Versace mix Positive “green shoots”
Supply chain & tariffsFX headwinds, no tariff detail Guidance for FY2026 with cost reduction plans Tariff impact ~$60M COGS; diversified sourcing (VN/Cambodia/Indonesia; China ~5% US vol.) New headwind; mitigation plans
Wholesale channelDouble-digit declines across brands Largest decline in Q4 expected; stabilize in FY2026 Partners reengaging; declines to moderate; Amazon launch performing well Stabilizing late FY2026
Regional trendsAsia down sharply for MK; Americas/EMEA down Americas −11%, EMEA −9%, Asia −20% total company Americas −13%, EMEA −14%, Asia −23% total company Continued Asia pressure
Regulatory/portfolioFTC injunction on Tapestry merger Strategy independent of merger; portfolio questioned Versace sale to Prada for $1.375B; discontinued ops FY2026 Portfolio simplification

Management Commentary

  • “We are optimistic about our path forward...we are seeing positive indicators that our strategies are beginning to work.” — John Idol .
  • “Assuming a 10% baseline tariff and a 30% tariff on imports from China, we estimate the impact...would increase our cost of goods sold by approximately $60 million in fiscal 2026 on an unmitigated basis.” — Tom Edwards .
  • “We are confident in our ability to grow Michael Kors to $4 billion in revenue and Jimmy Choo to $800 million...while restoring operating margins to the double-digit range.” — John Idol .
  • “We plan to renovate approximately 50% of the Michael Kors store fleet over the next three years…estimated cost approximately $350 million over the three-year period.” — Tom Edwards .
  • “Upon completion of the [Versace] sale...we anticipate we will have minimal net debt remaining.” — Tom Edwards .

Q&A Highlights

  • Revenue trajectory: MK retail comp improved from −15% last quarter to nearly flat two months into Q1; wholesale declines to moderate after FY2026 H1 as partners reengage (including strong Amazon launch) .
  • Margins: Gross margin pressured by tariffs (~150 bps overlay) and inventory actions; mitigation via sourcing optimization and selective pricing, with brand momentum prioritized .
  • Pricing architecture: MK moving back to historical price points ($200–$400 core bags) to drive full-price sell-throughs; outlet promotional activity reduced; steady-state expected by fall season .
  • Store actions: ~75 store closures in FY2026 (predominantly MK) and ~50M revenue impact not to anniversary in FY2027; ~50% fleet renovations over three years to lift productivity .
  • Capital allocation: Versace proceeds to reduce debt materially, then resume share repurchases over time; FY2026 capex ~$110M focused on store renovations and IT/data capabilities .

Estimates Context

  • Revenue beat in Q4: Actual $1,035M vs S&P consensus $989M (positive surprise); adjusted EPS miss: Actual −$4.90 vs consensus $0.22, primarily due to non‑cash tax valuation allowance .*
  • Q3 slight revenue beat ($1,261M vs $1,255.8M) but EPS miss ($0.45 vs $0.6547), reflecting deleverage and inventory actions .*
  • Q2 revenue miss ($1,079M vs $1,173.4M) and EPS miss ($0.65 vs $0.7228), highlighting demand softness and wholesale reductions .*
  • Forward EPS estimates likely require downward revision to reflect tariff overlay, discontinued Versace classification, and the shift to continuing-ops base; revenue ranges reset accordingly .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Versace sale is a major strategic pivot: expect deleveraging to “minimal net debt,” lower interest expense, and potential share repurchases post-close (2H CY2025) .
  • Near-term margin headwinds from tariffs (~$60M COGS impact) will pressure FY2026 gross margin; watch for evidence of mitigation via sourcing, pricing, and inventory discipline through the year .
  • Michael Kors turnaround KPIs improving (full-price sell-throughs, positive AUR in full-price, growing database); sustained progress is critical for returning to growth in FY2027 .
  • Wholesale channel stabilization is a 2H FY2026 story; monitor partner commitments, Amazon performance, and outlet rationalization to gauge trajectory .
  • FY2026 guidance reset to continuing ops with EPS $1.20–$1.40 and revenue $3.3–$3.4B; track delivery vs quarterly cadence (Q1 revenue $765–$780M, break-even OM) .
  • Inventory is current and declining; expect mid-single-digit reduction by year-end FY2026, supporting margin normalization and tariff mitigation .
  • Trading lens: Stock likely sensitive to tariff policy developments, Versace sale timing/close, MK brand metrics (AUR, comp, sell-through), and signs of wholesale stabilization .