Capri Holdings (CPRI) reports Q4 2026 earnings: $796M revenue, 490 basis point gross margin increase, and 40% EPS growth expected in FY27.

Key Takeaways

• Revenue for the fourth quarter was $796 million, a 4% decline year-over-year, in line with expectations.
• Gross margin expanded by 490 basis points to 64.8%, influenced by a $40 million refund related to tariffs.
• Net income reached $27 million, translating to $0.22 EPS, a significant recovery from a loss in the previous year.
• The company plans to return to low single-digit revenue growth in fiscal 2027, with earnings per share expected to increase by 40%.
• Capri repurchased $79 million worth of shares in the fourth quarter, reflecting renewed confidence in future growth.

Financial Performance

Capri Holdings Limited's fourth quarter results for fiscal 2026 showcased a blend of challenges and positive developments. The total revenue for the quarter stood at $796 million, marking a 4% decline compared to the previous year. However, this decline was anticipated as the company continued to implement strategic initiatives aimed at enhancing long-term growth. Notably, the gross margin saw a 490 basis point improvement, reaching 64.8%. This increase was partially attributed to a $40 million refund linked to a Supreme Court decision regarding tariffs, which positively impacted cost of goods sold.

Net income for the quarter was $27 million, resulting in an earnings per share (EPS) of $0.22, a substantial recovery from the loss recorded in the prior year. The company's balance sheet also showed improvement, with cash reserves at $135 million and a significant reduction in net debt, down to $222 million from $1.4 billion last year.

Strategic Initiatives

Capri's strategic initiatives have focused on reinforcing brand desirability and enhancing operational efficiency across its luxury fashion houses, Michael Kors and Jimmy Choo. During fiscal 2026, the company emphasized product innovation, storytelling, and consumer engagement, resulting in higher sell-through rates and average unit retails (AURs) across both brands. The company has actively reduced promotional activity and off-price sales to improve the quality of sales, which impacted revenue by over $150 million during the fiscal year.

At Michael Kors, revenue declined by 5.5% year-over-year, primarily due to these quality of sale initiatives. However, the brand has seen a positive consumer response to its new fashion offerings and brand storytelling, which have begun to resonate more effectively with consumers, especially younger ones. Store traffic trends improved sequentially, indicating a potential turnaround in brand performance.

Jimmy Choo, on the other hand, reported a 5% increase in revenue, showcasing strong momentum and a return to growth. The brand's strategic focus on casual footwear and accessories is expected to drive sustainable long-term revenue growth and profitability.

Future Outlook

Looking ahead to fiscal 2027, Capri Holdings is optimistic about returning to growth, with a projected revenue increase at a low single-digit rate, targeting approximately $3.525 billion. The company anticipates gross margin expansion of 200 basis points as it continues to enhance its pricing architecture and reduce promotional activities. Operating income is expected to rise by 60% year-over-year, reflecting the positive impact of these strategic initiatives.

Management has set ambitious goals, including a diluted EPS forecast of approximately $2.15, which represents a 40% increase from the previous year. The company plans to leverage its cash flow for strategic investments, including store renovations and share repurchases, further enhancing shareholder value.

Capri's management expressed confidence in the potential for both Michael Kors and Jimmy Choo to achieve sustainable long-term growth. The initiatives implemented throughout fiscal 2026 are seen as foundational steps toward realizing the goal of $4 billion in revenue for Michael Kors and $800 million for Jimmy Choo in the coming years.

Overall, the company's ability to navigate ongoing challenges while executing its strategic vision positions it well for future success. Capri's focus on brand desirability, innovative product offerings, and operational excellence will be key drivers of growth in the competitive luxury fashion market.

In conclusion, Capri Holdings Limited has demonstrated resilience amid industry challenges, and its strategic initiatives are beginning to yield positive results. With a clear focus on sustainable growth and profitability, the company is well-positioned to enhance shareholder value and solidify its presence in the luxury fashion segment.

This analysis is based on public earnings call materials and is not investment advice.