Image source: The Motley Fool.
CALL PARTICIPANTS
- Chairman and Chief Executive Officer — John D. Idol
- Interim Chief Financial Officer — Rajal Mehta
- Senior Vice President, Investor Relations — Jennifer Davis
TAKEAWAYS
- Total Revenue — $1.025 billion, a decline of 4% year over year on a reported basis and 5.9% in constant currency, with all figures excluding Versace as discontinued operations.
- Gross Margin — 60.8% for the quarter, down 230 basis points year over year; underlying gross margin excluding tariffs improved by 70 basis points, driven by higher full price sell-throughs and reduced promotional activity.
- Earnings Per Share (EPS) — $0.81, marking a 30% increase year over year.
- Net Debt — $80 million, a reduction from $1.6 billion at the end of the previous quarter, following the completed sale of Versace and receipt of $1.4 billion in cash proceeds.
- Michael Kors Revenue — Decreased by 5.6% year over year on a reported basis and by 7.3% in constant currency; Americas down 9%, EMEA up 6%, Asia down 1%.
- Michael Kors Retail Sales — Declined mid-single digits, with Europe up mid-single digits, and Americas and Asia down low double digits and low single digits, respectively; full price channel sales up low double digits sequentially, while outlet channel impacted by lower promotions and ongoing product transition.
- Michael Kors Gross Margin — 59.7%, down from 62.6% last year; expanded 60 basis points year over year when excluding tariffs.
- Michael Kors Operating Margin — 13.9%, down from 16.2% year over year.
- Jimmy Choo Revenue — Up 5% year over year on a reported basis and 1.9% in constant currency; Americas up 23%, EMEA up 3%, Asia down 10%.
- Jimmy Choo Retail and Wholesale — Retail sales up low single digits, with wholesale revenue up double digits; high single-digit retail growth in Americas, low single digit in Europe, and high single-digit decline in Asia; core accessory groups posted high single-digit growth in full price channel, including double-digit growth for Bonbon bag group.
- Jimmy Choo Gross Margin — 66.5%, up from 66% year over year; expanded 80 basis points year over year excluding tariffs.
- Jimmy Choo Operating Margin — 1.8%, turning positive from negative 3.8% in the prior year.
- Total Company Operating Expenses — Decreased by $32 million, yielding 80 basis points of expense leverage driven by cost reduction programs.
- Inventory — $663 million at quarter-end, down 6.5% year over year; full year-end inventory expected to be flat relative to last year, as unit declines offset higher tariff and FX rates.
- Fiscal 2026 Guidance — Revenue expected at $3.45-$3.475 billion, Michael Kors at $2.86-$2.875 billion, Jimmy Choo at $590-$600 million, gross margin ~61%, operating income ~$100 million, diluted EPS $1.30-$1.40, and effective tax rate in low to mid-teens.
- Share Repurchase — A $1 billion share repurchase program will commence in fiscal 2027, as authorized by the Board of Directors.
- Store Renovation — Renovation program targets ~50% of store fleet and key department store locations over three years, with renovated stores showing meaningful increases in foot traffic and sales versus prior year.
- Database and Engagement Growth — Michael Kors consumer database grew 8% year over year; Jimmy Choo database also up 8% year over year, both attributed to expanded influencer campaigns and social media engagement.
- Marketing Spend — Now just above 8% of sales, with Michael Kors slightly higher.
Need a quote from a Motley Fool analyst? Email [email protected]
RISKS
- Gross margin was negatively impacted by higher tariffs, as Rajal Mehta stated, “We saw a little bit of a higher than anticipated tariff of approximately 50 basis points in the quarter. And that was really due to better sales of new product that had the higher tariff rates on them.”
- Michael Kors Americas segment experienced a 9% revenue decline, with continued retail and outlet headwinds from inventory clearing, reduced Daigou sales, and ongoing off-price distribution reduction.
SUMMARY
Capri Holdings (CPRI 9.46%) reported a 4% decline in total revenue to $1.025 billion, reflecting continued transition efforts at both Michael Kors and Jimmy Choo. Proceeds from the Versace sale were used to cut net debt to $80 million and will support a $1 billion share repurchase program beginning in fiscal 2027. Executives forecast revenue and gross margin improvement in fiscal 2027, citing strategic investments in store renovations, disciplined expense management, and targeted pricing actions. Management highlighted sequential improvement in retail and online traffic for Michael Kors and sustained growth in key product categories and regions for Jimmy Choo.
- Street-level marketing tactics—including a 100% increase in influencer content for Michael Kors, and holiday campaigns at Jimmy Choo—drove nearly 300% growth in impressions and engagement for Michael Kors, and exposure to 150 million consumers for Jimmy Choo.
- Michael Kors’ product strategy featured higher average unit retail (AUR) and full price sell-throughs, specifically in accessory lines appealing to Gen Z, while Jimmy Choo’s strategy drove double-digit gains in Bonbon bag sales and increased focus on casual footwear.
- Management clarified that gross margin expansion in outlet channels is anticipated predominantly in the second half of calendar 2026, as assortment transitions further reduce legacy inventory and promotional activity.
- Future margin leverage was framed as achievable through store fleet optimization, ongoing cost controls, and strategic SG&A discipline, as noted by John Idol: “we absolutely believe that over time we could reach a 20% plus operating margin. We just want to make sure that is sustainable.”
INDUSTRY GLOSSARY
- AUR (Average Unit Retail): The average selling price per unit for a particular product or category.
- Daigou: A purchasing and resale channel where individuals buy products overseas to send or resell to buyers in another country, often China.
- Sell-through: The percentage of inventory sold out of the total available for sale within a specific time period.
- Icons (product): Refers to signature or core styles in a brand’s assortment that are marketed as enduring or emblematic of the brand’s identity.
Conference Call Transcript
Jennifer Davis: Good morning, everyone, and thank you for joining us on Capri Holdings Limited Third Quarter Fiscal 2026 Conference Call. With me this morning are Chairman and Chief Executive Officer, John Idol, and Interim Chief Financial Officer, Raj Mehta. Before we begin, let me remind you that certain statements made on today’s call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those we expect. Those risks and uncertainties are described in today’s press release and in the company’s SEC filings, which are available on the company’s website.
Investors should not assume that the statements made during this call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on today’s call. Unless otherwise noted, all financial information on today’s call will be presented on a non-GAAP basis. These non-GAAP measures exclude certain costs associated with reserve related to a wholesale customer bankruptcy, restructuring and other charges, store renovation program costs, merger and divestiture transaction-related costs, impairment charges, and Capri transformation costs. To view the core spending GAAP measures and related reconciliation, please review our latest earnings release posted to our website earlier today at capriholdings.com.
Additionally, the company has classified the results of today’s operations and cash flows from its Versace business as discontinued operations. Unless otherwise noted, all information on today’s call relates only to continuing operations. Now I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer. John?
John Idol: Thank you, Jennifer, and good morning, everyone. We were pleased with our third quarter performance, which exceeded our expectations. Across both Michael Kors and Jimmy Choo, we continue to execute on our strategic initiatives to position our iconic brands for long-term success. Our strategies remain anchored in strengthening brand desirability through delivering compelling storytelling and creating fashion luxury products that excite and inspire consumers. Together with our advanced data analytics and deep consumer insights, these initiatives are designed to strengthen consumer engagement and reinforce the long-term equity of our brands. We remain confident that these strategies will support a return to growth in fiscal 2027, as well as establish the groundwork for sustainable performance well into the future.
See More
