Capri Holdings ((CPRI)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Capri Holdings’ recent earnings call painted a picture of cautious optimism, as the company navigates through challenges while capitalizing on strategic initiatives. Despite facing revenue declines, wholesale channel softness, and tariff impacts, Capri Holdings is witnessing positive momentum. The company is making strides with improved consumer engagement and successful product strategies, alongside a promising store renovation program and enhanced influencer partnerships, all of which are poised to drive future growth.
Sequential Improvement in Trends
Capri Holdings reported a sequential improvement in revenue and earnings per share, surpassing expectations. This positive trend was largely driven by better-than-anticipated performance at both Michael Kors and Jimmy Choo, as strategic initiatives began to take effect.
Positive Signs for Michael Kors
The Michael Kors brand is showing signs of recovery, particularly in retail channels. Improved traffic trends and stronger full-price sell-throughs on new styles have been observed, with Average Unit Retail (AUR) trends turning positive in full-price channels for the first time in three years.
Increased Consumer Engagement
Capri Holdings has successfully enhanced consumer engagement through storytelling initiatives like the hotel stories series and expanded influencer partnerships. These efforts have contributed to a 9% year-over-year increase in Michael Kors’ global database.
Successful Product Strategies
New product introductions at both Michael Kors and Jimmy Choo have driven higher full-price sell-throughs and AURs. Collections such as Lila, Lalita, and Bryant have performed strongly, showcasing the success of Capri Holdings’ product strategies.
Store Renovation Program
Capri Holdings is set to renovate approximately 50% of its store fleet over the next three years. This initiative is expected to enhance the consumer experience and boost store productivity, positioning the company for future growth.
Revenue Decline
Despite positive developments, Capri Holdings faced a 6% decline in total company revenue, amounting to $797 million. Both Michael Kors and Jimmy Choo experienced revenue decreases compared to the previous year.
Challenges in Wholesale Channel
The wholesale channel continues to present challenges, with revenue declining in the high single digits. The softness in this channel is compounded by Capri Holdings’ initiatives to reduce wholesale exposure.
Impact of Tariffs
Higher tariff rates have significantly impacted the cost of goods sold, with an estimated unmitigated impact of $85 million for fiscal 2026, up from a prior estimate of $60 million.
Softness in Certain Product Categories
Footwear revenue saw a double-digit decline during the quarter, primarily due to a downturn in the dress category, which remained soft at Jimmy Choo as well.
Forward-Looking Guidance
Capri Holdings provided forward-looking guidance, anticipating gradual sequential improvement in trends in the latter half of the fiscal year. The company expects total revenue for fiscal 2026 to be between $3.375 billion and $3.45 billion. Key initiatives include completing the majority of wholesale door reductions and expanding the influencer strategy.
In conclusion, Capri Holdings’ earnings call highlighted a cautiously optimistic outlook, with strategic initiatives beginning to bear fruit. While challenges persist, particularly in revenue and the wholesale channel, the company’s focus on consumer engagement, product innovation, and store renovations offers a promising path forward.