Dive Brief:
- Capri Holdings’ revenue fell 11.6% year over year to $1.3 billion for the third quarter of fiscal 2025, according to a Wednesday release.
- At Michael Kors, the company’s biggest brand, year-over-year revenue declined about 12% to $909 million. Versace revenue fell 15% to $193 million, while revenue at Jimmy Choo dropped about 4% to $159 million. Wholesale declined at every brand, and retail sales slipped at each brand except Jimmy Choo, where they were flat.
- The company posted a net loss of $547 million, compared to net income of $105 million for the same period last year, which Capri attributed to a noncash impairment charge of $602 million. Adjusted year-over-year net income was $54 million, compared to $142 million in the third quarter of fiscal 2024.
Dive Insight:
This was Capri’s first earnings report since the company’s proposed merger with Tapestry was terminated following a successful challenge by the FTC.
Neil Saunders, managing director of GlobalData, said the revenue decline outpaced the larger market and signified that Capri’s brands were losing traction with many shoppers.
“While it is certainly true that there are challenges in wholesale and that the luxury market is softer, these factors do not explain Capri’s chronic inability to stabilize its sales line,” Saunders said in emailed comments.
He added that the company’s December sales had been especially underwhelming.
“Carrying on its well-established trend of significant underperformance, Capri had a miserable holiday season,” Saunders said, noting that the “eyewatering net loss of just over half a billion dollars” underlined “the fact that Capri has simply not been a good steward of the brands that make up the group.”
These problems were going to fall on Tapestry, but with the merger now off the table, Capri’s management will need “to stop treading water and start fixing the issues so that they can get back into growth,” Saunders said.
Michael Kors posted Q3 declines in every region, but was hardest hit in Asia, where year-over-year revenue fell 27%. Jimmy Choo also saw widespread declines, with the biggest drop coming from Asia, where revenue fell 17%. Versace’s regional double-digit declines were most significant in the Americas, where revenue declined 21%.
“Overall our business remained challenged during the quarter and we were disappointed with our results,” John D. Idol, Capri’s chairman and CEO, said in the release. “We are reevaluating our strategic initiatives to improve current sales trends.”
In its first forward-looking guidance statement since the now-scuttled merger with Tapestry was announced, Capri Holdings projected a fiscal 2025 revenue of about $4.4 billion, and a fiscal 2026 revenue of about $4.1 billion, down from $5.2 billion in fiscal 2024.
The company also projected revenue declines at each of its brands for the next two fiscal years.
Versace is expected to drop to $810 million in 2025, and $800 million in 2026, down from $1.03 billion in 2024. Meanwhile, Jimmy Choo is projected to see smaller declines, with predictions forecasting a drop to $600 million in 2025 and $550 million in 2026, down from $618 million in 2024. Michael Kors is projected to drop to $3 billion in 2025, and $2.75 billion in 2026, down from $3.5 billion in 2024.
Nonetheless, Idol said he was optimistic about Capri’s future and confident about its long-term potential.
“Looking ahead, we expect our performance to improve throughout fiscal year 2026 positioning us to return to growth in fiscal 2027 and beyond,” he said.
Saunders said the company will need to change direction, shuffle its management suite and stabilize its brands even if it wants to entertain another sale or merger offer down the road.
“Last year was a period of hiatus for Capri,” he said. “The company used the excuse of the deal with Tapestry for its inertia. That excuse is no longer viable, and the company needs to do the heavy lifting of reinvention. This will take some time, and the forecast that growth will not resume until fiscal year 2027 is a signal that much of the work has not yet even started.”
