Capri Holdings ((CPRI)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Capri Holdings’ recent earnings call presented a mixed sentiment, reflecting both positive developments and ongoing challenges. While the company announced a promising new share repurchase program and improvements in the Michael Kors full price channel, particularly in Asia and Europe, these were offset by an overall revenue decline, challenges in the North American outlet channel, and a decrease in Jimmy Choo’s revenue. Additionally, a higher effective tax rate negatively impacted earnings.
Share Repurchase Program
The Board of Directors at Capri Holdings has authorized a new $1 billion share repurchase program, set to commence in fiscal ’27. This move signals the company’s financial strength and a strong focus on maximizing shareholder returns.
Full Price Channel Improvement
Michael Kors has seen a positive turnaround in its full price channel, with the accessories business playing a pivotal role in driving growth. This improvement is a significant positive for the brand.
Retail Channel Growth in Asia
Michael Kors experienced a substantial 25% increase in revenue in Asia, attributed to higher wholesale shipments. This growth highlights the brand’s expanding footprint and strong market presence in the region.
Continued Revenue Growth in Europe
The European market also showed promise, with Michael Kors’ revenue in EMEA increasing by 4%. This growth reflects a robust consumer reception to new product introductions.
Overall Revenue Decline
Despite some positive developments, Capri Holdings reported a 2.5% decrease in total company revenue, amounting to $856 million on a reported basis. This decline underscores some of the challenges the company faces.
Higher Effective Tax Rate Impact
The company’s results were adversely affected by a higher-than-anticipated effective tax rate, which reduced earnings by $0.20 per share, highlighting a significant financial challenge.
Challenges in North America Outlet
The North American outlet business faced a decline due to reduced promotional activity and strategic pricing adjustments, indicating ongoing challenges in this segment.
Jimmy Choo Revenue Decline
Jimmy Choo’s revenue decreased by 6.4% compared to the previous year, with wholesale revenue declining in the mid-teens due to shipment timing issues.
Forward-Looking Guidance
Capri Holdings provided forward-looking guidance, maintaining its revenue forecast between $3.375 billion and $3.45 billion for the fiscal year, with an anticipated gross margin of approximately 60.5% to 61%. The company plans to repay most of its debt using proceeds from the Versace sale, expected to close in the fiscal third quarter. The strategic focus remains on enhancing the Michael Kors and Jimmy Choo brands, aiming to stabilize the business this year and return to growth in fiscal ’27.
In summary, Capri Holdings’ earnings call painted a picture of a company navigating through a complex landscape. While there are promising initiatives and growth in certain regions, challenges remain, particularly in North America and with the Jimmy Choo brand. The company’s strategic focus on brand enhancement and financial maneuvers like the share repurchase program are steps toward stabilizing and eventually growing the business.