Updated 1:17 p.m. ET May 27
Capri Holdings is starting to bounce back after years of underperformance and an aborted buyout by Tapestry Inc.
Revenues for the fourth quarter ended March 28 fell 3.7 percent to $796 million, a 7 percent decrease in constant currencies, reflecting a decline in outlet sales.
That focus on higher-quality sales helped the bottom line. Net losses were “immaterial” at $4 million, which compared very favorably with the $645 million in red ink logged a year earlier. Capri is looking to get something from the trade war, saying the government owes it about $65 million for IEEPA tariffs that were ruled illegal, $40 million of which were logged as a reduction in the cost of goods sold in the quarter.
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After adjusting for the sale of Versace in December and restructuring charges, Capri said its adjusted earnings per share tallied 22 cents — a dime below the 32 cents analysts forecast, according to Yahoo Finance.
Investors were hoping for a little more and pushed shares of the company down 5.4 percent to $17.50 in midday trading.
“We had a lot of issues coming out of fiscal 2025 that we needed to correct,” said John Idol, chairman and chief executive officer, on a conference call with analysts. “I feel really good. And I think the teams feel really good about what is happening, and we do a lot of research on the consumer and the way the consumer is looking at both Jimmy Choo and Michael Kors. And we haven’t seen healthy indicators like this for both brands in years.”
After years of difficulties, Idol said the Michael Kors business was ready to grow again.
Comparable store sales were positive in the brand’s full-price doors, where average unit retail prices increased by low-double digits, with better sell-through.
And the complexion of the outlet business is changing too.
“While actions to reduce promotional activity and third-party sales are creating near-term pressure on revenue, these deliberate steps are strengthening the long-term foundation of the brand,” Idol said. “Outlet AURs turned positive during the fourth quarter, reflecting our quality of sale initiatives, select price increases and early flow of new product.”
As Capri works harder to control prices, it’s changing the pressure points in its business.
“Even though the wholesale business is down double digits, the majority of that is coming from the reduction in off-price sales,” Idol said. “You can see we entered the year with inventories down 17 percent. And we just don’t have the inventory to sell in the off-price channel.…We’re feeling optimistic that we’ve got the right building blocks in place.”
Overall, Capri’s revenues fell by $147 million, or 4.1 percent, to $3.5 billion last year as efforts to reduce promotions, third-party sales and off-pricers took better than $150 million chunk out of the top line.
Longer term, Idol said revenues at its Michael Kors division could grow to $4 billion, from $2.9 billion last year, while the Jimmy Choo business could grow to $800 million, up from $600 million.
While investors have that vision of the future to bet on, they also have another buyer in the market.
Capri restarted its share repurchases during the quarter, buying back 4 million shares for $79 million.
This fiscal year, Capri is looking for revenues of $3.5 billion, on target with analyst estimates, and earnings per share of about $2.15, which is below the $2.32 analysts were forecasting.