Capri Holdings Q4 Earnings Fall Short of Estimates, Revenues Dip Y/Y

Capri Holdings (CPRI) reported a disappointing Q4 fiscal 2025 with revenues of $1.035 billion, surpassing estimates but declining 15.4% year-over-year, and an adjusted loss of $4.90 per share, significantly missing expectations. The company's performance reflects ongoing macroeconomic challenges and a strategic turnaround, highlighted by the announced sale of Versace to Prada for $1.375 billion to strengthen the balance sheet and refocus the company. Looking ahead, Capri anticipates improved performance in fiscal 2026 and a return to growth in fiscal 2027, with fiscal 2026 revenue projected between $3.3-$3.4 billion and diluted EPS of $1.20-$1.40.

Analysis

Capri Holdings Limited (CPRI) reported challenging fourth-quarter fiscal 2025 results, with total revenues of $1.035 billion, which, while surpassing the Zacks Consensus Estimate of $983 million, represented a 15.4% year-over-year decline (14.1% on a constant-currency basis). The adjusted loss per share of $4.90 was significantly wider than the consensus estimate of a $0.16 loss and a stark reversal from the 42 cents earnings per share in the prior-year quarter, primarily attributed to a non-cash tax valuation allowance charge. Gross profit fell 17.7% to $631 million, with the gross margin contracting 170 basis points to 61%. All key segments experienced year-over-year revenue declines: Versace by 21.2% to $208 million, Jimmy Choo by 2.9% to $133 million, and Michael Kors by 15.6% to $694 million, with corresponding gross margin contractions. A significant strategic development is the definitive agreement to sell Versace to Prada S.p.A. for $1.375 billion in cash, expected to close in the second half of calendar 2025, which aims to sharpen Capri's focus, improve its balance sheet, reduce debt, and potentially facilitate share repurchases. For fiscal 2026, Capri projects total revenues between $3.3-$3.4 billion, a decrease from $4.4 billion in fiscal 2025, but anticipates a return to profitability with diluted EPS of $1.20-$1.40, compared to a loss of $10 per share in fiscal 2024. However, the first quarter of fiscal 2026 is expected to see revenues of $765-$780 million, down from $1.067 billion year-over-year, with an operating margin near break-even and diluted EPS between 10 and 15 cents. The company's shares have underperformed, losing 18% in the past three months against the industry's 6% growth, reflecting the ongoing turnaround efforts amid macroeconomic headwinds.

Key Decisions for Investors

• Investors should closely monitor the execution of Capri's strategic turnaround, particularly the progress of its initiatives post-Versace sale and the performance of Michael Kors and Jimmy Choo.
• Consider the company's fiscal 2026 guidance for a return to profitability and revenue stabilization as a medium-term catalyst, but remain cautious given the projected revenue decline in Q1 FY26 and ongoing macroeconomic uncertainties.
• Evaluate the impact of the Versace divestiture on Capri's balance sheet, debt reduction, and potential for capital return to shareholders once the transaction closes.