Capri Q4 2025 Earnings Report

Capri EPS Results

• Actual EPS: -$4.90
• Consensus EPS: $0.22
• Beat/Miss: Missed by -$5.12
• One Year Ago EPS: $0.42

Capri Revenue Results

• Actual Revenue: $1.04 billion
• Expected Revenue: $989.05 million
• Beat/Miss: Beat by +$45.95 million
• YoY Revenue Growth: -15.40%

Capri Announcement Details

• Quarter: Q4 2025
• Date: 5/28/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, May 28, 2025
• Conference Call Time: 8:30AM ET

Capri (NYSE:CPRI) (NYSE: CPRI) is a global fashion luxury group that designs, markets and distributes a diverse portfolio of premium lifestyle brands. The company’s principal business activities revolve around high-end apparel, footwear, handbags, jewelry and accessories. Through its three core labels—Michael Kors, Versace and Jimmy Choo—Capri Holdings offers a broad array of product lines, ranging from ready-to-wear collections and leather goods to footwear and small leather accessories. Each brand maintains its distinct identity while benefiting from the group’s centralized expertise in brand building, sourcing, distribution and retail operations.

Originally founded as Michael Kors Holdings Limited in 1981 by American designer Michael Kors, the company went public in 2011 and quickly expanded its footprint in the luxury sector. In 2017, the company acquired Jimmy Choo, the British luxury footwear and accessories house known for its craftsmanship and celebrity following. This was followed by the acquisition of the Italian heritage house Versace in 2018, further solidifying Capri’s position in the high-end fashion market. In 2019, the company rebranded as Capri Holdings Limited to reflect its evolution into a multi-brand luxury platform.

Capri Holdings operates across more than 70 countries, serving North America, Europe, the Asia-Pacific region and parts of the Middle East through a mix of directly operated stores, concessions, e-commerce platforms and wholesale partnerships. The company leverages its global distribution network to tailor product offerings and retail experiences to diverse consumer markets, emphasizing digital innovation, experiential retail and localized marketing strategies. This integrated approach has helped Capri adapt to shifting consumer trends and regional market dynamics.

Under the leadership of Chairman and Chief Executive Officer John D. Idol, Capri Holdings has pursued disciplined capital allocation and brand enrichment initiatives, focusing on enhancing product quality, expanding digital capabilities and strengthening customer engagement. The executive team, supported by experienced design directors, merchandising leaders and international operations heads, continues to drive growth through brand storytelling, strategic store placements and collaborations that resonate with luxury consumers worldwide.

Capri Q4 2025 Earnings Call Transcript

Key Takeaways

• Pending sale of Versace to Prada will allow Capri Holdings to focus on Michael Kors and Jimmy Choo, substantially reduce debt, and pave the way to reinstate a share repurchase program.
• Capri reported a 15% decline in Q4 revenue and a net loss of $581 M, driven by soft global demand, store closures, wholesale reductions, and a $545 M tax valuation allowance.
• Michael Kors delivered early Q1 recovery signs with flat retail comps, mid‐single digit full‐price AUR improvement, strong sell‐through of new accessory lines, and a 10% increase in its global consumer database.
• Jimmy Choo’s Q4 sales fell 3% but saw robust demand for new diamond and cinch bags and the fastest‐selling sneaker in its history, while its consumer database grew 11% and plans to introduce $500–$1 000 accessories aim to broaden its audience.
• Fiscal 2026 guidance calls for $3.3–$3.4 B in revenue, ~61–61.5% gross margin and $1.2–$1.4 EPS despite a ~$60 M tariff headwind, with mitigation efforts in sourcing and targeted pricing expected to drive growth back in FY27.

Presentation

[Operator]

Greetings. Welcome to Capri Holdings Limited Fourth Quarter Fiscal twenty twenty five Financial Results Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded.

[Operator]

I will now turn the conference over to Jennifer Davis, Vice President of Investor Relations. Thank you. You may begin.

[Jennifer Davis, VP, IR at Capri]

Good morning, everyone, and thank you for joining us on Capri Holdings Limited fourth quarter and full year fiscal twenty twenty five conference call. With me this morning are Chairman and Chief Executive Officer, John Idol and Chief Financial and Chief Operating Officer, Tom Edwards. 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.

[Jennifer Davis, VP, IR at Capri]

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 impairment charges, restructuring and other charges, ERP implementation costs, CapRe transformation costs, and transaction related expenses. To view the corresponding GAAP measures and related reconciliation, please review our latest earnings release posted on our website earlier today at capreholdings.com. I would also like to note that given the pending sale of Versace, beginning in fiscal twenty twenty six, we will reclassify Versace as a discontinued operation, which means it will no longer be included in our non GAAP results. Therefore, comments on today's call will focus only on Michael Kors and Jimmy Choo.

[Jennifer Davis, VP, IR at Capri]

Now, I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer. John?

[John Idol, Chairman, CEO & Director at Capri]

Thank you, Jennifer, and good morning, everyone. I would like to begin today's call by discussing our recent announcement regarding the pending sale of Versace to Prada Group. After careful evaluation, we concluded that the most effective way to maximize value at Capri Holdings is to focus our resources on the compelling growth opportunities within our Michael Kors and Jimmy Choo brands. This transaction also positions us to substantially reduce our debt levels and reinstate a share repurchase program in the future. Both are important steps towards enhancing shareholder returns.

[John Idol, Chairman, CEO & Director at Capri]

Additionally, a strengthened financial foundation will enable us to more aggressively invest in reinvigorating the Michael Kors brand. With our new strategic initiatives in place, our strong balance sheet and focused senior leadership team, we are well positioned to accelerate the growth trajectory of both Michael Kors and Jimmy Choo. Entering fiscal twenty twenty six, we are optimistic about our path forward. While the macro environment has become more challenging with uncertainty around tariffs, we remain focused on executing against our strategic initiatives that are designed to improve current sales trends and position the company for future growth. Across our luxury houses, we are focused on building brand desirability through compelling storytelling, exciting fashion luxury product, and engaging omnichannel consumer experience.

[John Idol, Chairman, CEO & Director at Capri]

While our strategies are tailored uniquely for each brand, our overarching goals are similar. First, in terms of building brand desirability. Our primary objective is to engage and inspire both new and existing consumers. Second, in terms of product, we are committed to creating exciting fashion designs and further enhancing our core styles, many of which feature our iconic brand codes. Third, our retail omnichannel strategy entails leveraging our enhanced data analytics and digital capabilities to grow e commerce revenues as well as increase store sales densities.

[John Idol, Chairman, CEO & Director at Capri]

Fourth, we are focused on stabilizing and returning our wholesale business to growth. Now, turning to our fourth quarter fiscal twenty twenty five results. Overall, our business remained challenged and we were disappointed with our performance. Revenue decreased 15% during the quarter as we were impacted by the continued softening demand for fashion luxury goods globally. Our performance was further affected by store closures as well as ongoing reductions in the wholesale channel.

[John Idol, Chairman, CEO & Director at Capri]

At Michael Kors, fourth quarter revenue decreased 16% compared to prior year. Despite these results, we began to see encouraging signs of progress stemming from our new brand storytelling and product initiatives during the fourth quarter. In our own retail channel, we saw a sequential improvement in March that accelerated into the first quarter. Michael Kors is a powerful fashion luxury brand that has a strong heritage and we are eager to build on this solid foundation. Guided by the insights gained from our data analytics and consumer feedback, we believe we have the right strategies underway to return the brand to growth over time.

[John Idol, Chairman, CEO & Director at Capri]

First, we are focused on engaging new and existing consumers through a modern interpretation of our Jet Set heritage based on our brand vision of traveling the world in style. Second, we are reinforcing our iconic brand codes and creating exciting product with compelling value to drive higher full price sell throughs. Third, we are focusing on improving store productivity through our optimization program, which includes store closures and renovations. And fourth, we plan to stabilize our wholesale business and return it to modest growth in the future. In February, we launched our new Jetset storytelling, which reconnects with the heritage of the Michael Kors brand through our new brand vision of traveling the world in style.

[John Idol, Chairman, CEO & Director at Capri]

We are amplifying our storytelling strategies around a new franchise called Hotel Stories, a series that captures and conveys the very essence of our brand. The first chapter of Hotel Stories took place in Ibiza at the Montesole Hotel featuring English actress and singer Suki Waterhouse. The story features exciting fashion moments captured in Ibiza and at the hotel while celebrating the joy of traveling the world in style. We are pleased with the consumer reception to our new Jet Set brand vision and believe it is helping us reignite brand desirability. According to our consumer insights, we have seen an inflection in brand affinity as well as a significant improvement in purchase intent.

[John Idol, Chairman, CEO & Director at Capri]

Additionally, our new storytelling is generating higher engagement across social media. We continue to believe that one of our most valuable assets and key differentiators is our founder and Chief Creative Officer, Michael Kors. As a world renowned fashion designer, his iconic runway shows cast a powerful halo over the brand. Michael's fallwinter twenty twenty five runway show channeled relaxed, chic, and a space inspired by a classic downtown New York loft. Attendees included Suki Waterhouse, Uma Thurman, Carrie Washington, and Lea Michele among others.

[John Idol, Chairman, CEO & Director at Capri]

During New York Fashion Week, Michael Kors was the second most engaged fashion brand on social media. The show generated over 170,000,000 impressions and 60,000,000 video views. The combined power of our Jet Set storytelling and data analytics capabilities helped contribute to a 10% year over year increase in Michael Kors global consumer database. Now turning to product. At its core, our strategy is centered around designing fashion products with standout style and compelling value.

[John Idol, Chairman, CEO & Director at Capri]

During the fourth quarter, we launched several new accessories groups that celebrate our iconic brand codes and are aligned with our new strategic pricing architecture. We are seeing an overwhelmingly positive response from consumers across these platforms. Our new Layla, Dakota and Bryant groups are experiencing extremely strong full price sell throughs and attracting new consumers to the brand. Additionally, we are seeing renewed momentum in our iconic core signature groups. We are pleased with the green shoots emerging within accessories and are working diligently to apply the same strategies to our footwear and apparel business.

[John Idol, Chairman, CEO & Director at Capri]

Next, I would like to discuss our store renovation plans. Retail stores are a critical pillar in driving our sales recovery, and we believe our global store renovation program will help change Michael Kors' sales trajectory. Over the next three years, we plan to renovate approximately 50% of the store fleet, as well as key department store locations. Our new store design concept reflects a modern and warm residential aesthetic. With our store renovation process now underway, we look forward to sharing our progress and results with you in the future.

[John Idol, Chairman, CEO & Director at Capri]

Now, I would like to take a few moments to address current quarter to date trends. Overall, first quarter trends to date reflect an improvement in sales momentum. We are also beginning to see improving trends in key indicators that we closely monitor, including our consumer database, store traffic and AUR. The Michael Kors customer database continues to grow both month over month and year over year, underscoring the continued strength and desirability of the brand. Additionally, we have seen even more robust growth in our VIP loyalty consumer base.

[John Idol, Chairman, CEO & Director at Capri]

In terms of store traffic trends, we have begun to see a moderation in the rate of decline. And lastly, in terms of AUR in our full price retail stores, quarter to date trends turned positive. Overall, we've been moving very quickly to execute our exciting next chapter for Michael Kors, one that is built on the strength of our heritage and guided by our consumer insights. While still in the early stages of our turnaround initiatives, we are seeing positive indicators that our strategies are beginning to work. Now moving to Jimmy Choo.

[John Idol, Chairman, CEO & Director at Capri]

Fourth quarter revenue decreased 3% compared to prior year. Jimmy Choo is an iconic globally recognized brand with a sense of glamor and a playfully daring spirit. Over its twenty nine year history Jimmy Choo has built a reputation for its dedication to time honored craftsmanship and innovative design. We have a renewed focus on Jimmy Choo and are developing strategies to realize the full potential of this highly recognized luxury brand. First, we are committed to engaging and energizing both new and loyal consumers through storytelling centered around an empowered sense of glamor.

[John Idol, Chairman, CEO & Director at Capri]

Second, we are focused on growing accessories and expanding our casual footwear offering. Third, we are taking actions to enhance store productivity and elevate our retail experience. And fourth, we intend to stabilize and return our wholesale businesses to growth. During the fourth quarter, we saw strong performance in new accessory styles, including our diamond and cinch bags. The cinch group has been the fastest selling Jimmy Choo day bag in the last five years.

[John Idol, Chairman, CEO & Director at Capri]

Looking ahead, we will build upon the momentum of these successful platforms by introducing new materials and animations each season. At the same time, we will continue to reinforce our leadership in evening bags through an ongoing commitment to innovation, craftsmanship, and glamorous design. Additionally, we have significant potential to broaden Jimmy Choo's reach by expanding our pricing architecture and attracting new audiences. In the fall season, we will be introducing a wider offering of accessories, including three new collections priced between $500 and $1,000 to appeal to a broader base of luxury consumers. We believe this initiative will significantly increase sales in accessories, which in turn should strengthen the brand's positioning and increase store productivity.

[John Idol, Chairman, CEO & Director at Capri]

In footwear, we continued to see declines across the dress category, consistent with industry trends. We are focused on bringing newness to this category with innovation and animation. The recently launched Scarlet featuring our iconic drop heel is a good example of a new style that is generating excitement and strong sell throughs. We continue to believe there is a meaningful opportunity to expand our casual offering. Our sneaker business has grown to approximately 10% of our footwear sales, and we're introducing new styles to further expand this category.

[John Idol, Chairman, CEO & Director at Capri]

For example, during the fourth quarter, we launched the Diamond Flex, a new sneaker with an ultra soft construction featuring a flexible lightweight sole. Sales of the Diamond Flex far exceeded our expectations and it has been the fastest selling sneaker in Jimmy Choo's history. Turning to brand awareness and consumer engagement. Our storytelling continues to focus on glamour, igniting joy, and empowering achievement. For spring, our initiatives emphasize new seasonal styles featuring American actress and fashion icon, Chloe Sevigne.

[John Idol, Chairman, CEO & Director at Capri]

Additionally, to celebrate the opening of our new Madison Avenue flagship store, as well as debut our spring collection, we hosted a series of high impact events for influencers and clients during New York Fashion Week. These brand events generated strong engagement and broad social media amplification, driving 20,000,000 impressions across key digital platforms. Complementing these efforts, Jimmy Choo debuted exclusive campaigns around the launch of our new diamond trainer styles featuring brand ambassador Wang Yibo. We also partnered with influencers to create social media posts. These activities generated strong engagement and resulted in nearly 50,000,000 impressions across social media platforms.

[John Idol, Chairman, CEO & Director at Capri]

Our engaging consumer communication, combines storytelling with data analytics, helped contribute to an 11% year over year increase in Jimmy Choo's global consumer database. With our renewed focus on strategic initiatives, we are establishing the essential building blocks to fully harness Jimmy Choo's unique potential and expand its position within the world of fashion luxury. In conclusion, as we enter fiscal twenty twenty six, we are optimistic about our path forward. While still early, we are beginning to see positive indicators that give us confidence that our strategies are working. Looking ahead, we continue to expect trends to improve throughout fiscal twenty twenty six, positioning us to return to growth in fiscal twenty twenty seven and beyond.

[John Idol, Chairman, CEO & Director at Capri]

We are confident in our ability to grow Michael Kors to $4,000,000,000 in revenue and Jimmy Choo to $800,000,000 in revenue, while restoring operating margins to the double digit range. Before I hand the call over to Tom, as many of you know, he will be leaving CapRe on June 20. And this marks his final earnings call with us. I would like to express my deep appreciation for Tom's exceptional leadership and his many contributions over the past eight years. His impact as both CFO and COO has been significant.

[John Idol, Chairman, CEO & Director at Capri]

And I am truly grateful for his partnership throughout his time at Capri Holdings. Thank you, Tom. Now Tom will review our fourth quarter results and guidance in more detail.

[Thomas Edwards, EVP, CFO & COO at Capri]

Thank you, John, and good morning, everyone. Starting with fourth quarter results, total company revenue of $1,000,000,000 decreased 15% versus prior year, slightly better than our expectations. We reported an operating loss of $33,000,000 slightly below our expectations. Our net loss was $581,000,000 resulting in diluted loss per share of $4.9 primarily due to a non cash tax valuation allowance that I will discuss in more detail shortly. Now turning to fourth quarter results in more detail.

[Thomas Edwards, EVP, CFO & COO at Capri]

Starting with revenue by channel, total company retail sales declined mid teens with e commerce performing slightly better than stores. The impact of our store optimization program negatively impacted retail sales in the low single digit range. In the wholesale channel, revenue declined double digits due to overall softness in the channel as well as to our prior initiatives to reduce wholesale exposure. Turning to revenue performance by geography. In The Americas, revenue decreased 13%.

[Thomas Edwards, EVP, CFO & COO at Capri]

Revenue in EMEA declined 14%, while revenue in Asia decreased 23%. Now looking at revenue performance by brand. Given the pending sale of Versace, beginning in fiscal twenty twenty six, we will reclassify Versace as a discontinued operation, which means it will no longer be included in our non GAAP results. Therefore, my comments will focus only on the Michael Kors and Jimmy Choo brands. At Michael Kors, revenue decreased 16% compared to prior year.

[Thomas Edwards, EVP, CFO & COO at Capri]

Global retail sales decreased mid teens, while wholesale declined double digits. Excluding the impact of foreign currency and store closures, retail sales declined at a similar rate in the fourth quarter versus the third quarter. By geography, sales in The Americas decreased 12%. Revenue in EMEA declined 15%, while revenue in Asia decreased 31%. At Jimmy Choo, revenue decreased 3% compared to prior year.

[Thomas Edwards, EVP, CFO & COO at Capri]

Global retail sales declined high single digits and wholesale increased high teens. By geography, total revenue in The Americas decreased 7%. Revenue in EMEA increased 9%, while revenue in Asia declined 16%. Now looking at total company margin performance. Gross margin of 61% declined 170 basis points to prior year.

[Thomas Edwards, EVP, CFO & COO at Capri]

This was below our expectations, primarily due to actions taken during the quarter to ensure we enter the year in a more current inventory position. By brand, Michael Kors gross margin of 58.6% compared to 60.8% last year. The decline versus prior year was primarily driven by lower full price sell throughs on older styles. Notably, AUR trends improved from high single digit declines in the third quarter to mid single digit declines in the fourth quarter, driven by a sequential improvement in full price sell through trends on new styles. Jimmy Choo gross margin of 66.2% compared to 70.1% last year.

[Thomas Edwards, EVP, CFO & COO at Capri]

The decline versus prior year was primarily driven by the impact of inventory actions taken to enter fiscal twenty twenty six in a better position, as well as the effect of the April 2024 acquisition of our second footwear factory. As a reminder, we acquired Footwear Factories to further align with the luxury industry's best practices and to strengthen our technical competencies while ensuring consistent future supply for Jimmy Choo. Today approximately 50% of Jimmy Choo's footwear is vertically integrated. Operating expense decreased $25,000,000 The decline versus prior year was the result of our cost reduction program. These benefits were partially offset by higher variable costs and unfavorable foreign currency translation compared to our expectations.

[Thomas Edwards, EVP, CFO & COO at Capri]

As a percent of revenue, operating expense was 64.2% compared to 56.3% last year, primarily reflecting expense deleverage on lower revenue. Total company operating margin was negative 3.2% compared to positive 6.4 last year. By brand, Michael Kors operating margin of 4.6% compared to 14.1% last year. And Jimmy Choo operating margin of negative 7.5% compared to negative 5.8% last year. Now, I would like to discuss the tax valuation allowance.

[Thomas Edwards, EVP, CFO & COO at Capri]

In light of our recent results, the future use of our deferred tax assets was reevaluated and we recorded a non cash valuation allowance of $545,000,000 1 hundred and 19 million dollars of which was related to Versace. Depending on our levels of profitability, we may be able to benefit from these deferred tax assets in the future. Taken together, our net loss was $581,000,000 resulted in diluted earnings per share of negative $4.9 Now turning to our balance sheet. Looking at inventory, we ended the quarter with $869,000,000 a 1% increase versus prior year. We received $60,000,000 worth of inventory earlier than anticipated.

[Thomas Edwards, EVP, CFO & COO at Capri]

The early receipt of inventory will provide a benefit of mitigating the tariff impact in fiscal twenty twenty six. By the end of the fiscal year, we anticipate inventory levels will be down in the mid single digit range. We ended the quarter with cash of $166,000,000 and debt of $1,500,000,000 resulting in net debt of approximately $1,300,000,000 This is higher than we originally anticipated due to the earlier timing of inventory receipts as well as the weaker U. S. Dollar which increased the dollar value of our euro denominated debt.

[Thomas Edwards, EVP, CFO & COO at Capri]

Looking at our leverage ratio, net debt to adjusted EBITDAR was 3.2 times at the end of fiscal twenty twenty five. Now turning to guidance. Compared to prior expectations, there have been a number of changes, including first, the pending sale of Versace. Second, the impact of tariffs. And third, foreign currency exchange rates.

[Thomas Edwards, EVP, CFO & COO at Capri]

I would like to take a few minutes to discuss how each is impacting our guidance. Starting with the pending sale of Versace. Since we will reclassify the business as discontinued operations beginning in fiscal twenty twenty six, our guidance now excludes Versace from our results. Additionally, upon completion of the sale, which we expect will occur in the second half of calendar twenty twenty five, we plan to use the proceeds to reduce debt. After doing so, we anticipate we will have minimal net debt remaining on our balance sheet.

[Thomas Edwards, EVP, CFO & COO at Capri]

As a result, we anticipate our interest expense will significantly decline. Turning to tariffs. The situation remains highly dynamic, but we are proactively managing the risk and remain positioned to respond. Our sourcing is broadly diversified with the majority of Michael Kors fiscal twenty twenty six production volume originating from Vietnam, Cambodia, and Indonesia. Jimmy Choo sources the vast majority of its products from Italy.

[Thomas Edwards, EVP, CFO & COO at Capri]

For Michael Kors and Jimmy Choo combined, China represents approximately 5% of U. S. Production volume. We anticipate we will begin to see the impact of current tariff rates in our fiscal first quarter when shipments of affected products commence. As the year progresses, the impacts will increase.

[Thomas Edwards, EVP, CFO & COO at Capri]

Assuming a 10% baseline tariff and a 30% tariff on imports from China, we estimate the impact of tariffs on products shipped into The United States would increase our cost of goods sold by approximately $60,000,000 in fiscal twenty twenty six on an unmitigated basis. Our global supply chain is highly agile, supported by longstanding relationships with our manufacturing partners. In fiscal twenty twenty six, we expect to begin to offset the impact of tariffs with the goal of fully mitigating their effect over time. Some of the actions we are taking include sourcing optimization to minimize tariff exposure, working with our sourcing partners to create cost efficiencies and strategically evaluating select price increases. And finally, looking at foreign currency.

[Thomas Edwards, EVP, CFO & COO at Capri]

Given the recent weakening of the U. S. Dollar based on today's exchange rates, foreign currency is now expected to modestly increase both revenue and operating expense dollars in fiscal twenty twenty six compared to fiscal twenty twenty five. Due to the uncertainty around tariffs, including the potential impact on consumer spending, as well as fluctuating foreign currency exchange rates, we are providing guidance assuming a range of outcomes. In fiscal twenty twenty six, we expect total company revenue to be between 3,300,000,000 and $3,400,000,000 By brand, we expect Michael Kors revenue between $2,750,000,000 and 2,850,000,000.00 and Jimmy Choo revenue between $540,000,000 and $550,000,000 As we think about the cadence of the year, we anticipate gradual progression as our strategic initiatives gain traction.

[Thomas Edwards, EVP, CFO & COO at Capri]

For the year, we anticipate gross margin of approximately 61% to 61.5% compared to a combined Michael Kors and Jimmy Choo gross margin of 62.2% last year. We expect operating expense of approximately $2,000,000,000 reflecting the removal of Versace from our results as well as our cost reduction initiatives. As a reminder, our cost savings initiatives include store closures, global headcount reductions, office consolidation and other efficiency measures across our supply chain and back office. Given the significant weakening of the U. S.

[Thomas Edwards, EVP, CFO & COO at Capri]

Dollar, we now anticipate foreign currency will modestly increase operating expense dollars. We expect full year operating income in a range around $100,000,000 By brand, we anticipate Michael Kors operating margin in the high single digit range and Jimmy Choo operating margin in the negative mid single digit range. Turning to our expectations around certain non operating items. We expect net interest income between 85,000,000 and $90,000,000 reflecting minimal debt levels and lower interest expense in the back half of the year after the completion of the sale of Versace, as well as interest income from our net investment hedges. We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately 119,000,000 As a result, we expect to generate diluted earnings per share between $1.2 and $1.4 Now turning to capital allocation.

[Thomas Edwards, EVP, CFO & COO at Capri]

As I mentioned, we plan to use the proceeds from the sale of Versace to reduce debt. Going forward, as we think about allocating our cash flow, our first priority is to invest in the business. This includes store renovations as our retail locations are one of the quarterstones to rebuilding sales growth. As discussed during our Investor Day, we plan to renovate approximately 50% of the Michael Kors store fleet over the next three years. We anticipate these renovations will cost approximately $350,000,000 over the three year period and will be included in our store optimization program.

[Thomas Edwards, EVP, CFO & COO at Capri]

Our second priority is to maintain a strong balance sheet. And our third priority is to return cash to shareholders via share repurchases. Over time, we anticipate resuming share repurchases to create additional shareholder value. In terms of capital expenditures, we anticipate spending approximately $110,000,000 in fiscal twenty twenty six, which includes Michael Kors and Jimmy Choo store renovations, as well as IT expenditures, including investments in our digital and analytical capabilities. Now turning to first quarter guidance.

[Thomas Edwards, EVP, CFO & COO at Capri]

We expect total company revenue to be between $765,000,000 and $780,000,000 By brand, we anticipate Michael Kors revenue between $615,000,000 and $625,000,000 and Jimmy Choo revenue of approximately 150,000,000 to $155,000,000 Looking at operating margin, we expect first quarter operating margin will be approximately breakeven. In terms of operating margin by brand, we anticipate Michael Kors operating margin in the mid single digit range and Jimmy Choo operating margin of approximately breakeven. Turning to our expectations around certain non operating items, we expect first quarter net interest income of approximately $15,000,000 reflecting interest income from our net investment hedges. We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately $119,000,000 As a result, we expect to generate diluted earnings per share of approximately $0.10 to $0.15 In closing, as we enter fiscal twenty twenty six, we are encouraged by early signs that validate the effectiveness of our strategic initiatives and reinforce our confidence in our path forward. We expect underlying trends to continue improving through fiscal twenty twenty six.

[Thomas Edwards, EVP, CFO & COO at Capri]

Looking to fiscal twenty twenty seven and beyond, with our strategic initiatives gaining traction, we expect to return to revenue growth and margin expansion. Now on a personal note, as this marks my final earnings call at Capri Holdings, I would like to take a moment to thank John for his support and partnership. It has been a privilege to work together. And I would like to thank the Board of Directors, our leadership team, and all of our dedicated colleagues for your collaboration, support, and shared commitment over these past eight years. With the strength of Michael Kors and Jimmy Choo, I am confident that under your leadership, Capri Holdings is well positioned to deliver sustained revenue and earnings growth, as well as increased shareholder value in the future. Now we will open up the line for questions.

[Operator]

Thank you. We will now be conducting a question and answer session. You. Our first question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

[Simeon Siegel, Managing Director at BMO Capital Markets]

Thanks. Hey guys, good morning. Tom, it's been great working with you. Best of luck on your next chapter.

[Thomas Edwards, EVP, CFO & COO at Capri]

Thank you, Simeon.

[Simeon Siegel, Managing Director at BMO Capital Markets]

So great to see this light revenue raise at Michael Kors and the discussion around returning to growth in '27. I guess on the other hand, the margins look lower. So can you guys speak to a little bit what gives you comfort in the troughing revenue expectations? And then maybe a little bit more color on the drivers you're baking into the margin degradation? I guess just especially in light of what looks like healthier full price sell through. Thanks.

[John Idol, Chairman, CEO & Director at Capri]

Good morning, Simeon. I'll take the revenue part and I'll pass the gross margin part on to Tom because I think there's a little more color to that in terms of its actual TY, LY and how the tariffs are impacting that. Number one on the revenue side, we are optimistic given what we see happening right now for us in Q1. We are two months into the quarter. And the first number I will give you is we were down approximately 15% comp in Michael Kors retail last quarter, and we are almost flat at this point.

[John Idol, Chairman, CEO & Director at Capri]

So there has been a significant step change in the performance of Michael Kors at retail, led by our full price business, which is really nice to see because we have three groups that we talked about in our prepared remarks. That's Leila, Nolita, Bryant, and then a further one called Dakota, all of which are having excellent full price sell throughs. They're all in the $200 to $400 range. So those are back to our historical kind of price ranges where we were very successful in the past. And between the great work that Michael and the design teams have done, as well as the great price value relationship that's been put into the product, we're seeing very, very strong green shoots.

[John Idol, Chairman, CEO & Director at Capri]

I should also mention that our Jetset storytelling, which is around traveling the world in style is really resonating with the consumers. And we're seeing that in some of the existing data analytics in terms of the sales and the consumers that are shopping with us, as well as some of the forward looking analysis that we've done with consumers on intent to purchase. And that has gone up again sequentially very significantly. So we believe, at least initially, that we're seeing results from the changes that we started to implement really in the beginning of the fourth quarter. So it's nice to see that happening.

[John Idol, Chairman, CEO & Director at Capri]

We've got more work to in the outlet channel to bring some of that excitement level to that channel. And we're going to be doing that starting in the back half of the year. So that's what gives us some good feeling about where the revenue projections are that we've just given you, as well as how we see a step change into next year. I would like to also add that we will be through most of the store closure program. We've got about 75 stores to close this year.

[John Idol, Chairman, CEO & Director at Capri]

Predominantly, those will be Michael Kors. And that would have about a 50 plus million revenue impact that we will not have to anniversary next year. And additionally, we'll have about another $50,000,000 in wholesale door closures that were planned by us. That again, that program really ends at the end of this fall season. So we'll really be looking at comp doors.

[John Idol, Chairman, CEO & Director at Capri]

So that's almost $100,000,000 impact that we won't be anniversarying next year. So I think that's between our storytelling around our heritage jetset, really the of the core of this company, number one. Number two, the product and our standout style with compelling value. Number three, the store closure program will be behind us. And then on a very positive and exciting note as well, we're going to begin, we've already started a store renovation program where we're going to renovate about 50% of our fleet over the next three years.

[John Idol, Chairman, CEO & Director at Capri]

And we think that's also going to have a significant impact and inflection on our store productivity. So we're feeling, very confident around what we see happening at Michael Kors. Regarding Jimmy Choo, I think we know we have some issues around the dress shoe category. We've seen ups and downs there. It came out of COVID, it was very strong and things went back to casual again, more from a fashion styling standpoint.

[John Idol, Chairman, CEO & Director at Capri]

We are doing a better job with casual, but we think we can do even more in that category, which obviously is our core category. But we're very excited about the announcement that we made about the three new groups coming for fall season in accessories. We think we've got a very big opportunity as we're in the luxury consumers closet already, to be able to take our accessories and put them at more compelling price points, in particular for the aspirational luxury consumer. And we think that's a big opportunity for us. I think we've said that we are very engaged with Jimmy Choo and we think that the brand has great opportunity to grow and develop.

[John Idol, Chairman, CEO & Director at Capri]

So that gives us a positive outlook on revenues, in particular for 2027 and 2028. But let me stop there and I'll turn it over to Tom for the discussion around our gross margin.

[Thomas Edwards, EVP, CFO & COO at Capri]

Sure. And Simeon, on gross margins, there are a couple of points here. The first is just to kind of remind back on our prior guidance, where we are improving gross margin for the year based on the strategic initiatives for Jimmy Choo and Michael Kors, getting the right inventory into place and do everything that we are planning and are doing to drive the brand and that we are seeing the first real results in green shoots here in the first quarter. With that increase and those initiatives that all still is in place and we still feel very good about that. What is happening now is there is an overlay for the tariff impact in fiscal 'twenty six.

[Thomas Edwards, EVP, CFO & COO at Capri]

And that as I noted in the prepared remarks was about 60,000,000 higher costs on an unmitigated basis. And if I just do the math between prior expectations of 50 bps, that tariff amount is about a down 150 plus. So we get to at a midpoint down 100 bps basis points for gross margin for the year. And that is before we really get the traction on the mitigation activities. Our goal is to fully mitigate over time the tariff impact.

[Thomas Edwards, EVP, CFO & COO at Capri]

We're looking at sourcing optimization. We are looking and working with our sourcing partners to create cost efficiencies, and we will be strategically evaluating select price increases. So as we move through the year, we'll get more visibility on that. But our first priority in all of that is to maintain the momentum of our brand recovery. And we'll be doing that as we strategically and very carefully assess our reactions, particularly on the pricing front.

[Simeon Siegel, Managing Director at BMO Capital Markets]

Great. Thanks, guys.

[Operator]

Thank you. Our next question comes from the line of Brook Roach with Goldman Sachs. Please proceed with your question.

[Brooke Roach, Vice President - Equity Research at Goldman Sachs]

Good morning and thank you for taking our question. It sounds like you have a lot of emerging momentum at Michael Kors retail. I was hoping you could discuss the wholesale outlook for the brand this year. How are your partner discussions going today versus your expectations at Investor Day a few months ago, particularly in the North America business? Thank you.

[John Idol, Chairman, CEO & Director at Capri]

Thank you, and good morning, Brooke. I would say it's just about where we presented to you in at our Investor Day. We've been around the world. We've met with all of our strategic wholesale partners. And I would say the, and this is on Michael Kors, I would say the response has very consistent in that number one, people are very much feeling positive about us returning to the focus around our Jetset heritage.

[John Idol, Chairman, CEO & Director at Capri]

They like the new storytelling, the way it's been developed around, hotel stories and traveling where we have a much associated with the Michael Kors brand. I would say that's also caused a significant inflection in That I mentioned before, Leila, Nolita, Bryant and Dakota, all seeing very strong sell throughs on a global basis. So we're seeing positive response from those partners. In certain cases, they've actually gone back and relooked at their commitments to us and increased those commitments. I would also say that we, I think you're probably aware we launched on Amazon recently.

[John Idol, Chairman, CEO & Director at Capri]

And that has been very, very successful. It has exceeded our expectations. And it's also showing the ability to communicate with a broader customer group who has a high level of engagement with us. And our full price selling on that platform has been excellent. So it's a little hard to see how that's going to all come together when I talk about wholesale because we do, as I mentioned before, we still have some additional store closures that will happen throughout the fall season.

[John Idol, Chairman, CEO & Director at Capri]

Most of it will come to an end in September, October, November. So I think the kind of the true measurement we will start to see fourth quarter, calendar fourth quarter and then into spring of next year. So we do have decline planned for wholesale. But as I've said, again, in my prepared remarks, our goal and our belief is that we will stabilize that part of our business and actually see some modest growth, especially in fiscal year twenty seven and twenty eight.

[Brooke Roach, Vice President - Equity Research at Goldman Sachs]

Great. Thanks so much. I'll pass it

[Operator]

you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed with your question.

[Katy Hallberg, Vice President at TD Cowen]

Hi there. This is Katie on for Oliver. One thing we wanted to talk about and ask is just on sort of what's within your control to help drive traffic and conversion and those strong trends that you're currently seeing in your own retail channel given just a more volatile consumer backdrop that we're seeing? Thank you.

[John Idol, Chairman, CEO & Director at Capri]

Yeah, Katie. So, of all, good morning. I think we're very focused on traffic. As we talked about before, we're seeing a lot of positive indicators. Our full price AURs turn positive and to see that happen really in a quarter is quite extraordinary and we're very pleased with that.

[John Idol, Chairman, CEO & Director at Capri]

We have not seen traffic turn positive and I'll say that's more of a North America and China issue. We've got some very nice trends going in Europe for us, But the sequential declines have decelerated significantly. And again, at full price, almost close to positive traffic there as well. What we're focused on is really our marketing initiatives and our storytelling, along with we spent a lot of time and money and have the resources around our data analytics to really give us the tools to be able to engage with new and existing consumers to excite them about the brand and to reengage with them or to drive them into our stores. And we're seeing positive results around that initiative.

[John Idol, Chairman, CEO & Director at Capri]

And as I just mentioned, also around the significantly increased influencer programs that we have going on. And you're gonna see a lot more of that particular around the hotel stories that are really just starting to launch around the globe. So I think while we cannot 100% control traffic, I think we can influence it and we feel that we have the strategies and many tools within our control to be able to try to move that forward. And of course, having greater brand desirability also referred to a brand heat will help to drive that as well through our stores. Conversion has always been something that even through all of our ups and downs, we've had very strong conversion rates at Michael Kors.

[John Idol, Chairman, CEO & Director at Capri]

So once they come in the door, converting with our customers has been less the issue for us. It's been more football, which obviously goes back to brand desirability, which goes back to brand heat, etcetera. And I don't want to say that we've called the bottom, but we've definitely seen a change in Michael Kors. And it's nice to see that in such a short window of time. We've got a long way to go to rebuild this business to the 4,000,000,000 that we're aspiring to get to.

[John Idol, Chairman, CEO & Director at Capri]

But again, we are beginning to see the results of our initiatives, and we're quite hopeful given the results. Thank you.

[Katy Hallberg, Vice President at TD Cowen]

Very helpful. Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question.

[Jay Sole, Managing Director at UBS Group]

Great. Thank you so much. John, I'm just wondering if you can elaborate a little bit more on some of the strategies and things that you want to do to improve the sales trajectory of the Michael Kors brand. I mean, talked about initiatives when it comes to product and marketing and store experience. I think you mentioned the pricing that some of the newer bags are selling for is within that traditional area where you've had a lot of success.

[Jay Sole, Managing Director at UBS Group]

But if you look back over the history of the brand, know, some moments, you've had a lot of momentum, some probably less momentum than you've wanted. What are some of the core things that, like, you know work consistently to drive the brand for that maybe had fallen away a little bit in the last couple of years that you know you can get back to get to that positive sales growth rate on a sustainable basis that you know you can do? Thank you.

[John Idol, Chairman, CEO & Director at Capri]

Thank you, Jay, and good morning. Jay, I think we've talked about this in the past and we clearly have made missteps over the past few years. I won't go back into some of the causes of that.

[John Idol, Chairman, CEO & Director at Capri]

Of them were self inflicted, etcetera. But I think what happened is in November, December, we got clarity in this company about, this business was built by Michael originally, some forty plus years ago. And he really had a vision for the way a consumer wanted to look and an exciting lifestyle that they wanted to live. And that's still a very relevant positioning. And we, I think, lost our way and decided at various points in time that that either wasn't the right thing for us or there were other trends happening that maybe were more exciting.

[John Idol, Chairman, CEO & Director at Capri]

What, again, our consumer research really told us was the customer likes our positioning and they really yes, they wanted it maybe a little more modern and certain products need to be a bit more relevant. But when you build a brand over that period of time to try to either completely reset it or to run away from your history, those weren't the right things for us to do. So I think that we look at that as a first starting point and the entire management team and all of our store managers are excited. Our retail partners are excited. So we think we're onto something when it comes to that.

[John Idol, Chairman, CEO & Director at Capri]

Secondly, we had aspirations of elevating the brand. And while that worked at certain moments, certainly coming out of COVID, we raised prices considerably. It worked for a while. But then the customer came back and said, that's not exactly what we expect from Michael Kors. There is window of pricing that we enjoy consuming your products in and we'd really like you to stay there.

[John Idol, Chairman, CEO & Director at Capri]

So once we finally acknowledge that that's what the consumer has voted and said, you can see the results are already starting. And and, you know, even though, again, in my prepared remarks, I said we're, you know, working on our footwear and and and ready to wear businesses to get that same level of of product reception. Actually, in ready to wear, we're starting to see it very, very quickly as well, where the customer has leaned into some of our very important key styles that we've been marketing and the sell throughs are very, very high. Sell throughs we haven't seen in three or four years. So again, I think that you have to learn from your mistakes.

[John Idol, Chairman, CEO & Director at Capri]

You have to be honest with yourself about what those mistakes were. I believe we are doing both of those things today. And then we're going to stay much more focused, much more committed to, I think, a brand positioning that is very important. And other brands who we compete with will have their positioning, and and and and we should stay in our lane and and try to to, be true to ourselves. I would also say similar, in Jimmy Choo with the exception you know, Jimmy Choo is is glamour.

[John Idol, Chairman, CEO & Director at Capri]

It's playful. It's it's it's really got an exciting DNA, and consumers love Jimmy Choo. You don't you don't find consumers saying anything negative or, you know, you've gone off brand, etcetera. But what we do have to do with Jimmy Choo is we have to expand the use for the consumer, because she loves the brand, but she associates it very, very much with a more dressed up and a more formal and a more occasion vision of what the brand is. And we've got to do a better job of bringing her the other parts of how Jimmy Choo can be a part of her lifestyle.

[John Idol, Chairman, CEO & Director at Capri]

And one of those areas is casual footwear. And the other area, quite frankly, which we were off to a very good start, we got distracted, and we're more reengaged and refocused, is on accessories. Again, she comes into our store. She's willing to spend very large amounts of money on footwear. And and and and now to be able to say, yes, we'll still have our great cinch bag and our diamond bags, which will retail in the 1,400 to 2,500 range or our bonbons that will be 3,000 and higher.

[John Idol, Chairman, CEO & Director at Capri]

But to have this other range of product, which is still very expensive, and be able to have that not only in our own stores, but also on a wholesale distribution basis in in the best luxury stores in the world is gonna give Jimmy Choo, I think, another leg to be able to, drive to. And and so, again, we we just have laid out this additional strategy since we met with you at Investor Day. And so we're we're excited about where Jimmy Choo can go. We've got a store fleet located in the best locations in the world, best streets, best cities, sitting next to the best retailers the world. And we should be able to capitalize on on the brand, and and its and its recognition, as well as the fact that we've got customers who come in who are ready to shop, and we should be there with the right products. So thanks a lot, Jay.

[Jay Sole, Managing Director at UBS Group]

Great. Thank you.

[Operator]

Thank you. Our next question comes from the line of Anisha Sherman with Bernstein. Please proceed with your question.

[Aneesha Sherman, Analyst at Bernstein]

Thank you so much. My question is around your pricing strategy. So you've talked a few times now, including on this call about the need to offer those better value price points to the consumer and you're seeing some success there. When do you expect to be at steady state there on where you want to be on pricing? And then you also made a comment, I think Tom earlier on strategically evaluating price increases to mitigate some of that tariff risk.

[Aneesha Sherman, Analyst at Bernstein]

Can you talk about how that fits into your broader pricing strategy? And could there be some risk around blurring the positioning of the brand there? Thank you.

[John Idol, Chairman, CEO & Director at Capri]

So first off, good morning, Lisa. Number one, we should be where we need to be by the fall season with the Michael Kors brand. We're guessing right now, but let's say we're 60% or 70% of the way now. We made a lot of changes quickly. That also impacted some of our margin as well.

[John Idol, Chairman, CEO & Director at Capri]

We just lowered certain prices because we knew it was the right place to be. And by the way, those are historical prices. So I want to be very clear that we're not going to levels that were where we haven't been before. So that put a little pressure on us on margin, and we'll see a bit of that in first quarter as well as we slowly start to work with our supply base, etcetera, on some of those changes that we needed to make. But we should be in a very good place by the fall season.

[John Idol, Chairman, CEO & Director at Capri]

I might also say to you that conversely, also one of the things that's going to help impact AUR, In our outlet channel, we've actually raised some prices where we found that some of our pricing was not commensurate with what we think the brand offered as value. Nothing overly significant, but enough that will hopefully help us impact our margins on a go forward basis. But also that help us raise our AUR and selling. We're also, in particular in our outlet channel, we are reducing a significant level of promotional activity. And that is actually that started already in the fourth quarter.

[John Idol, Chairman, CEO & Director at Capri]

That did impact some of our revenues in that channel, but that's what we wanted to do. We thought that was the right thing for us to do. So again, there's a little bit of puts and takes here. And before I turn it over to Tom in a second, I think the pricing increases as it relates to mitigating tariffs, I think we're going to go slowly around that. I think we want to first and foremost get the Michael Kors brand back on track, forward, reengaging with that consumer so that they're having a great experience with us.

[John Idol, Chairman, CEO & Director at Capri]

And how and where we need to tweak, I will call it tweaking prices. There's not going to be any significant price changes. That will also depend on how much we're looking to do after we get done working with all of our suppliers on mitigating some of these tariffs. And I think lastly, we need to also determine where the tariffs are because none of us actually sit here today and we've given you a range in our guidance. We're all sitting here as everyone is waiting to find out what is happening.

[John Idol, Chairman, CEO & Director at Capri]

And I think we'll know more of that towards the tail end of the summer, so we can have a better understanding of what in fact we are going to need to mitigate. And so that would also kind of get into where we would take price increases or not. But I want to be clear, the first thing that we want to do is to make sure that we have an exciting experience with the consumer. And again, if we can drive more revenues, that will increase our profitability. You can see that the leverage that just by having a small mid single digit increase in fiscal twenty seven and fiscal twenty eight will bring to us is quite significant and will have a very, very big EPS impact as well as when you layer on top of that, if we do restart the share repurchase program, I think you're going to see quite a significant lift in EPS for the company in a relatively short period of time.

[John Idol, Chairman, CEO & Director at Capri]

Let me stop there and I'm going turn it over to Tom on the pricing piece.

[Thomas Edwards, EVP, CFO & COO at Capri]

Thank you, John. Anisha, I just want to reiterate what John said. Our first priority is really brand momentum. That is the primary goal and it's the primary really basis for future success. So we will proceed extremely carefully on assessing any pricing actions.

[Thomas Edwards, EVP, CFO & COO at Capri]

When ultimate tariff levels are better known, we'll certainly assess the market reaction and look at this on a very granular basis. But our efforts now are really focused on the sourcing side, working with our sourcing partners and sourcing optimization.

[Aneesha Sherman, Analyst at Bernstein]

Very helpful.

[John Idol, Chairman, CEO & Director at Capri]

Thank you everyone for joining us today. I'd like to remind everyone before we conclude the call that we are awaiting approval from various jurisdictions around the world on the Versace transaction. We are very optimistic that that transaction will be completed sometime in the fall season. And as a result of that, the company will have very, very low net debt, which puts us in a very strong position to be able to invest in the future of both Michael Kors and Jimmy Choo.

[John Idol, Chairman, CEO & Director at Capri]

It additionally has a very strong EPS impact for the company as our carry forward interest go down significantly. So we're very pleased about the results of that transaction and hopeful that it will conclude in the fall season, which will set us up for another very positive positioning for CapRe Holdings. Thank you for joining us today and look forward to updating you on our next call.

[Operator]

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Participants

Executives

• Jennifer Davis, VP, IR
• John Idol, Chairman, CEO & Director

Analysts

• Thomas Edwards, EVP, CFO & COO at Capri
• Simeon Siegel, Managing Director at BMO Capital Markets
• Brooke Roach, Vice President - Equity Research at Goldman Sachs
• Katy Hallberg, Vice President at TD Cowen
• Jay Sole, Managing Director at UBS Group
• Aneesha Sherman, Analyst at Bernstein