Earnings Call Insights: Capri Holdings Limited (CPRI) Q1 2026
Management View
- John D. Idol, Chairman & CEO, stated that "trends improved sequentially, leading to both revenue and earnings per share that exceeded our expectations" and described early signs that strategic initiatives are working to reenergize Michael Kors and Jimmy Choo. Idol emphasized, "We are on track to stabilize our business this year while establishing a strong foundation for a return to growth in fiscal '27."
- Idol described Michael Kors' performance, noting sequential improvement in traffic and full-price sell-throughs, with AUR trends turning positive in the full-price channel for the first time in three years. He highlighted the "exit of 30% of U.S. department store doors over the past year" and said that most wholesale door reductions would be completed by year-end.
- The CEO detailed a brand storytelling pivot, leveraging influencer partnerships and data analytics to drive engagement and reported a "9% year-over-year increase in Michael Kors global database."
- For Jimmy Choo, Idol reported sequential improvement, with new product launches resulting in higher full-price sell-throughs and AURs. He cited initiatives such as the introduction of the Curve group and expansion of the day and casual footwear offer, with the Sinch bag now the brand’s best-selling day bag.
- Idol confirmed the company remains on track to close 75 underproductive Michael Kors stores in fiscal '26, and plans to renovate approximately 50% of the store fleet over the next three years. "We believe that our renovation program will drive higher store productivity."
- Idol reaffirmed the long-term revenue targets: "optimistic about our ability to achieve $4 billion in revenues over time" for Michael Kors and "achieving our revenue target of $800 million over time" for Jimmy Choo.
- Rajal Mehta, Interim CFO, stated, "Performance exceeded our expectations driven by better-than-anticipated results at both Michael Kors and Jimmy Choo as our strategic initiatives begin to take hold."
Outlook
- The company raised revenue guidance for fiscal '26 to between $3.375 billion and $3.45 billion, citing weakening of the U.S. dollar and outperformance in Q1. Michael Kors revenue forecast is $2.8 billion to $2.875 billion, and Jimmy Choo is $565 million to $575 million.
- Idol and Mehta both highlighted expectations for a sequential improvement in trends in the back half of the year, with Idol noting, "we continue to expect trends to improve in the back half of fiscal '26, positioning us to return to growth in fiscal '27."
- Full-year gross margin is expected to be 60.5% to 61%. Operating expenses are forecast at $2 billion, with operating income anticipated at $100 million.
- Diluted EPS guidance for the year is $1.20 to $1.40. The company expects to generate Q2 revenue of $815 million to $835 million, with Michael Kors at $685 million to $700 million and Jimmy Choo at $130 million to $135 million.
- Mehta stated, "We anticipate offsetting a majority of the impact from tariffs in fiscal '27 through a combination of... cost efficiencies; two, sourcing optimization... and three, implementing targeted price increases."
Financial Results
- Q1 total company revenue was $797 million, a 6% decrease versus prior year. Net income was $60 million, resulting in diluted EPS of $0.50.
- Gross margin was 63%, approximately flat year-over-year. Operating expense decreased by $22 million, attributed to the cost reduction program.
- Operating margin stood at 2.5%. Michael Kors' operating margin was 9.9%, and Jimmy Choo 2.5%.
- Inventory at quarter end totaled $779 million, up $76 million, reflecting earlier product receipts and currency impacts. Cash was $129 million and debt $1.67 billion.
Q&A
- Matthew Robert Boss, JPMorgan: Asked about sell-through trends and pricing power at Michael Kors. Idol responded that improvements are visible, stating, "We have seen a very significant sequential improvement in comps in our full-price stores... two quarters does not make a year or a long-term trend, but it certainly is a very good indicator that our strategic initiatives are working."
- Brooke Siler Roach, Goldman Sachs: Inquired about margin impact from pricing and tariffs. Mehta replied, "We now anticipate approximately $85 million of unmitigated tariff impact in this year, up from our previous estimate of $60 million," and expects gross margin expansion in fiscal '27.
- Irwin Bernard Boruchow, Wells Fargo: Questioned growth expectations and balance sheet post-Versace sale. Idol confirmed, "there is no year-over-year growth plan in any of the channels yet," with anticipated growth first in the full-price channel. Mehta added, "we plan to use the [Versace sale] proceeds to substantially reduce our debt."
- Oliver Chen, TD Cowen: Requested detail on handbag families and store renovations. Idol cited strong sell-throughs from Laila, Lolita, and Bryant, and teased a new Hamilton group. He also discussed planned experiential updates to stores.
- Rakesh Babarbhai Patel, Raymond James: Asked about U.S. distribution as department store exposure shrinks. Idol explained that some stores may reopen in key markets where business was not recaptured elsewhere.
- Aneesha Sherman, Bernstein: Questioned Jimmy Choo’s role and potential divestiture. Idol stated, "Jimmy Choo is not for sale... we're excited about the growth opportunity." He described strategic moves in accessories pricing and product expansion.
Sentiment Analysis
- Analysts’ tone was neutral to slightly positive, focusing on sequential improvements but probing for clarity on margin recovery, tariff mitigation, and the pace of turnaround.
- Management maintained a confident but measured tone in prepared remarks, often using phrases like "we are encouraged" and "we believe," but displayed some defensiveness in Q&A when addressing margin and revenue growth timing.
- Compared to the previous quarter, management showed higher confidence, backed by early positive indicators, while analysts appeared more optimistic than last quarter but remained cautious on structural challenges.
Quarter-over-Quarter Comparison
- Guidance for fiscal '26 revenue and margins was raised from the previous quarter, with Michael Kors and Jimmy Choo both seeing higher revenue targets.
- The sequential improvement in retail traffic, full-price sell-throughs, and AUR at Michael Kors and Jimmy Choo marked a shift from the more cautious outlook last quarter.
- Strategic emphasis on influencer marketing, data analytics, and store renovations intensified this quarter.
- Management’s tone shifted from disappointment to cautious optimism, while analysts’ questions moved from basic stabilization to the specifics of execution and timing of growth.
Risks and Concerns
- Management flagged "the global macroeconomic environment remains dynamic" and cited tariff increases as a significant headwind, estimating an unmitigated $85 million impact for fiscal '26.
- Mehta indicated mitigation efforts are underway but will take time to materialize, with most tariff offsets expected in fiscal '27.
- Idol noted the risk of not recapturing business lost from store closures and highlighted the challenge of softness in the formal footwear category.
Final Takeaway
Capri Holdings’ Q1 2026 call emphasized early traction in its turnaround strategies at Michael Kors and Jimmy Choo, supported by improvements in full-price sell-throughs, growing consumer engagement, and a raised revenue outlook. While tariff headwinds and macro uncertainty remain, management is confident in returning to growth in fiscal 2027 and outlined clear paths to achieving long-term revenue targets of $4 billion for Michael Kors and $800 million for Jimmy Choo, with additional margin expansion efforts and capital deployment plans following the anticipated Versace sale.
Read the full Earnings Call Transcript
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