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Capri Holdings Ltd. (NYSE: CPRI) shares took a hit Wednesday after the luxury fashion company trimmed its fiscal 2027 revenue forecast, blaming inventory shortages at Michael Kors, weaker demand in Europe, the Middle East and Africa (EMEA), and foreign exchange headwinds. The news came even as the company reported first-quarter results that beat Wall Street earnings expectations.
The company's portfolio includes the Michael Kors and Jimmy Choo brands.
Adjusted earnings came to 67 cents per share, topping the analyst consensus estimate of 40 cents. Revenue declined 3.5% year over year to $769 million but exceeded the consensus estimate of $752.7 million.
CEO John D. Idol said the company continued to make progress on strategic initiatives at Michael Kors and Jimmy Choo through stronger brand storytelling and product innovation. However, he said lower-than-expected inventory levels at Michael Kors, softer EMEA trends and updated foreign exchange assumptions weighed on the company's revenue outlook.
Gross profit slipped to $500 million from $502 million a year earlier. Gross margin expanded to 65.0% from 63.0%, driven by higher full-price sell-through rates and lower tariff costs.
Operating cash flow totaled $73 million, while free cash flow was $48 million.
Capri ended the quarter with $114 million in cash and $338 million in borrowings. Inventory fell 20% year over year to $624 million, reflecting planned reductions in Michael Kors markdown inventory and overall lower inventory levels.
The company repurchased $50 million of stock during the quarter. As of June 27, about $871 million remained available under its share repurchase authorization.
Michael Kors revenue fell 7% year over year, hurt by lower promotional activity, reduced third-party sales, fewer off-price shipments and efforts to improve sales quality. Revenue declined 10% in the Americas and 5% in EMEA but increased 6% in Asia. The brand opened new flagship stores in Beijing and Kuala Lumpur.
Jimmy Choo revenue increased 10.5%, supported by growth across all regions. Revenue rose 26% in the Americas, 5% in EMEA and 3% in Asia. Both retail and wholesale sales posted low-double-digit growth.
For the second quarter, Capri expects revenue of about $780 million, including approximately $645 million from Michael Kors and $135 million from Jimmy Choo. The company forecasts operating income of about $10 million and GAAP earnings of about 20 cents per share.
For fiscal 2027, Capri maintained its GAAP earnings outlook of $2.15 per share, above the analyst consensus estimate of $2.08, but cut its revenue forecast to $3.4 billion from $3.525 billion. The new outlook is below the analyst consensus estimate of $3.514 billion.
The company said the revised revenue outlook reflects a roughly $50 million impact from lower second-quarter Michael Kors inventory availability, a $50 million hit from weaker EMEA trends due to the ongoing conflict in the Middle East, and about $35 million in foreign exchange headwinds.
Capri expects fiscal 2027 revenue of about $2.765 billion for Michael Kors and $635 million for Jimmy Choo.
The company said Michael Kors is expected to return to revenue growth in the second half of fiscal 2027, supported by new product launches, higher marketing spending, normalized promotional activity and store renovations.
Jimmy Choo is also expected to return to profitability in fiscal 2027, with long-term goals of reaching $800 million in annual revenue and low-double-digit operating margins.
Capri expects fiscal 2027 operating income of about $170 million, up roughly 40% year over year, and plans to repurchase about $200 million of shares. The company also raised its gross margin outlook to about 64%, up from 62.3% in fiscal 2026.
CPRI Price Action: Capri Holdings shares were down 4.42% at $16.30 at the time of publication on Wednesday, according to market data.
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