A month has gone by since the last earnings report for Capri Holdings (CPRI). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Capri Holdings due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Capri Holdings Limited before we dive into how investors and analysts have reacted as of late.
CPRI Q1 Earnings Beat Estimates on Margin Gains, Jimmy Choo Growth
Capri Holdings Limited reported first-quarter fiscal 2027 results, with revenues declining but adjusted earnings increasing year over year. Both metrics surpassed the Zacks Consensus Estimate.
CPRI's Q1 Performance: Key Insights
The company reported adjusted earnings of 67 cents per share for the first quarter, up 34% from 50 cents a year earlier. The reported figure exceeded the Zacks Consensus Estimate of 40 cents.
Revenues declined 3.5% year over year to $769 million from $797 million but topped the consensus estimate of $750 million. Better full-price selling and lower tariff rates helped lift gross margin, while Jimmy Choo delivered double-digit revenue growth during the quarter.
CPRI's Margin & Cost Performance
Gross profit edged down 0.4% year over year to $500 million from $502 million. Gross margin expanded 200 basis points to 65% from 63% in the prior-year period, supported by stronger full-price sell-throughs and lower tariff rates despite lower sales.
Selling, general and administrative expenses declined 0.9% year over year to $451 million from $455 million.
Adjusted operating income increased 40% year over year to $28 million from $20 million. Adjusted operating margin improved 110 basis points to 3.6% from 2.5% in the previous year period.
CPRI Sees Mixed Regional Revenue Trends
Revenues in the Americas fell 6.3% to $430 million from $459 million and exceeded the Zacks Consensus Estimate of $408 million. Revenues in EMEA slipped 1.8% to $224 million from $228 million and came in below the consensus estimate of $234 million, reflecting softer European trends, reduced tourist traffic and disruption related to the conflict in the Middle East.
Asia revenues increased 4.5% to $115 million from $110 million, ahead of the consensus estimate of $111 million. Management also noted positive full-price comparable sales for Michael Kors in China.
Capri Holdings' Michael Kors Sales Decline
Michael Kors revenues decreased 7.1% year over year to $590 million from $635 million but exceeded the Zacks Consensus Estimate of $585 million. Revenues in the Americas declined 9.9% to $372 million from $413 million, EMEA revenues fell 5.3% to $142 million from $150 million, while Asia revenues increased 5.6% to $76 million from $72 million.
Gross profit declined 2.8% year over year to $377 million from $388 million. Gross margin expanded 280 basis points to 63.9% from 61.1% in the previous year period, benefiting from higher full-price sell-throughs and lower tariff rates.
Operating income decreased 12.7% year over year to $55 million from $63 million, while operating margin narrowed 60 basis points to 9.3% from 9.9%, as expense deleverage associated with lower revenues more than offset the gross-margin improvement. Operating income remained above the Zacks Consensus Estimate of $51 million.
CPRI Benefits From Jimmy Choo Momentum
Jimmy Choo revenues increased 10.5% year over year to $179 million from $162 million, exceeding the Zacks Consensus Estimate of $166 million. Revenues in the Americas climbed 26.1% to $58 million from $46 million, EMEA revenues increased 5.1% to $82 million from $78 million, and Asia revenues rose 2.6% to $39 million from $38 million.
Gross profit increased 7.9% year over year to $123 million from $114 million, while gross margin declined 170 basis points to 68.7% from 70.4% due to channel mix.
Operating income rose to $13 million from $4 million a year ago, ahead of the Zacks Consensus Estimate of $4 million. Operating margin improved 480 basis points to 7.3% from 2.5%. Retail and wholesale revenues both increased at low-double-digit rates, supported by broad-based growth across regions and product categories.
Capri Holdings Reports Lower Debt and Inventory Levels
Capri ended the quarter with cash and cash equivalents of $114 million compared with $129 million a year earlier. Total borrowings stood at $338 million, with a net debt of $224 million. Operating cash flow was $ 73 million for the first quarter, with free cash flow of $48 million. Capital expenditure was $ 25 million.
Inventory declined year over year to $624 million from $779 million. In the quarter, the company repurchased about 2.6 million shares for $50 million, leaving $871 million available under its authorization.
CPRI's Future Outlook
Capri Holdings lowered its fiscal 2027 revenue outlook, now expecting approximately $3.4 billion compared with its previous forecast of $3.525 billion. The revision reflects an estimated $50 million impact from inventory delays at Michael Kors, a $50 million hit from softer trends in the EMEA region related to the ongoing conflict in the Middle East and a $35 million foreign currency headwind.
The company also reduced its operating income outlook to approximately $170 million from $190 million previously, while maintaining its earnings per share expectation of about $2.15 and an effective tax rate in the low-teens range. Net interest and other income guidance was raised to approximately $100 million from the earlier expectation of $85-$90 million.
At the brand level, Michael Kors' revenue outlook was lowered to approximately $2.765 billion from $2.9 billion, while Jimmy Choo's revenue forecast was increased to approximately $635 million from $625 million.
For the second quarter of fiscal 2027, Capri expects revenues of approximately $780 million. The outlook reflects inventory delays at Michael Kors, softer trends in EMEA, foreign currency headwinds and the timing shift of wholesale shipments that benefited the first quarter. The company expects operating income of about $10 million and earnings per share of approximately 20 cents.
Michael Kors is projected to generate roughly $645 million in revenues with a high-single-digit operating margin, while Jimmy Choo is expected to produce about $135 million in revenues with a negative mid-single-digit operating margin.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -51.94% due to these changes.
VGM Scores
Currently, Capri Holdings has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a score of A on the value side, putting it in the top 20% for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Capri Holdings Limited (CPRI) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
