Capri Holdings Limited (CPRI) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenue: $856 million, a decrease of 2.5% year-over-year (YoY) and 4.2% in constant currency.

Gross Margin: 61%, down 130 basis points YoY, primarily due to higher tariffs impacting margins by approximately 120 basis points.

Operating Income: $19.7 million, resulting in an operating margin of 2.3%, compared to 4.2% last year.

Net Income: Impacted by a higher-than-expected effective tax rate of 112%, resulting in a $24 million reduction in net income or $0.20 per share.

Inventory: $766 million, a 2.8% decline YoY.

Debt: $1.8 billion, with plans to reduce significantly following the sale of Versace.

2Strategic Updates and Business Highlights

Versace Sale: Expected to close in Q3, with proceeds aimed at debt repayment, enhancing financial flexibility.

Share Repurchase Program: Board authorized a $1 billion program to begin in fiscal '27.

Brand Focus: Emphasis on Michael Kors and Jimmy Choo, with strategic initiatives showing early signs of recovery.

Retail Performance: Positive trends in Michael Kors' full-price channel, with comp sales turning positive due to improved marketing and product strategies.

Store Renovation Plan: Ongoing renovations to enhance retail experience, with plans to renovate 50% of the store fleet over three years.

3Forward Guidance and Outlook

Full-Year Revenue Guidance: Expected between $3.375 billion and $3.45 billion.

Q3 Revenue Guidance: Anticipated between $975 million and $1 billion, with Michael Kors revenue between $825 million and $845 million.

Gross Margin Expectations: Forecasted to decline by 200 to 250 basis points in Q3 due to tariff impacts, but expected to improve in fiscal '27 as strategic initiatives take effect.

Operating Income: Projected at approximately $100 million for the full year, with Michael Kors operating margin in the high single-digit range and Jimmy Choo in the negative mid-single-digit range.

4Bad News, Challenges, or Points of Concern

Declining Revenue: Overall revenue decreased YoY, with specific declines in the outlet channel due to reduced promotional activity.

High Effective Tax Rate: The unexpected tax rate negatively impacted earnings, leading to a revision in the global tax structure.

Tariff Headwinds: Continued pressure from tariffs is expected to affect margins in the upcoming quarters.

Outlet Channel Struggles: The outlet business is facing challenges with a significant decline attributed to a strategic shift away from promotional sales and a focus on quality, which may take time to stabilize.

5Notable Q&A Insights

Consumer Engagement: Positive reception to Michael Kors' full-price retail repositioning, with strong performance in accessories driving comp growth.

Outlet Strategy: The company is strategically raising prices in the outlet channel while introducing more fashionable products to enhance consumer engagement.

Geographic Performance: Europe is performing well, while Asia shows signs of recovery, particularly in China, with improved consumer engagement.

Future Expectations: Management anticipates sequential improvement in retail trends for both Michael Kors and Jimmy Choo in the back half of fiscal '26, with a return to growth expected in fiscal '27. Overall, Capri Holdings is navigating a challenging environment with strategic initiatives aimed at stabilizing and eventually growing its core brands, while addressing headwinds from tariffs and a restructuring of its outlet business.