CPRI Posts Q2 Loss, Y/Y Declines in Michael Kors & Jimmy Choo Revenues

Capri Holdings (CPRI) reported an adjusted Q2 fiscal 2026 loss of $0.03 per share, missing estimates, with revenues declining 2.5% year-over-year to $856 million due to weaker sales at Michael Kors and Jimmy Choo. To address financial flexibility and shareholder value, the company plans to leverage the $1.375 billion proceeds from the pending Versace sale to Prada for debt reduction and a new $1 billion share repurchase program commencing in fiscal 2027. Management projects improving retail trends in the latter half of fiscal 2026, anticipating a return to growth in fiscal 2027, with full-year fiscal 2026 revenue guidance set at $3.375-$3.45 billion and EPS at $1.20-$1.40.

Analysis

Capri Holdings (CPRI) reported an adjusted Q2 FY26 loss of $0.03 per share, significantly missing the Zacks consensus estimate of $0.14 and declining from $0.64 in the prior year. Total revenues decreased 2.5% year-over-year to $856 million, driven by declines in both Michael Kors (down 1.8% to $725M) and Jimmy Choo (down 6.4% to $131M), although overall revenue surpassed the $830 million consensus. Gross margin contracted 130 basis points to 61% due to tariff impacts, and adjusted operating income fell to $20 million from $37 million year-over-year.

The company is executing a strategic pivot, with the $1.375 billion Versace sale to Prada expected to close in H2 calendar 2025, aiming to reduce debt and enhance financial flexibility. This capital injection will support a newly authorized $1 billion share repurchase program, commencing in fiscal 2027, signaling a commitment to shareholder returns despite a current negative shareholders' equity of $70 million and $1.75 billion in long-term debt. The negative free cash flow of $46 million in Q2 highlights immediate liquidity challenges.

Management projects improving retail trends in the second half of fiscal 2026, anticipating a return to growth in fiscal 2027, with FY26 revenue guidance of $3.375-$3.45 billion and EPS of $1.20-$1.40. Despite the Q2 loss, CPRI shares have outperformed, gaining 14% over the past three months against an industry decline of 6.2%, reflecting investor optimism around the strategic restructuring and future outlook. The company holds a Zacks Rank #2 (Buy), indicating analyst confidence in its recovery trajectory.

Key Decisions for Investors

• Monitor the successful closure of the Versace sale and the subsequent debt reduction, as this is crucial for improving CPRI's balance sheet and financial flexibility.
• Evaluate the execution of the $1 billion share repurchase program starting in fiscal 2027, which could provide support for shareholder value once operational.
• Watch for signs of improving retail trends and brand performance in Michael Kors and Jimmy Choo during H2 FY26, aligning with management's projected return to growth in fiscal 2027.