Capri sees quarterly sales slide again, leans on Michael Kors turnaround
Capri Holdings Faces Sales Challenges Amid Michael Kors Turnaround Efforts
By Sanskriti Shekhar and Danielle Kaye
May 27 (Reuters) - Capri Holdings forecast another quarter of declining sales on Wednesday but provided an upbeat annual profit target as it bets on a turnaround strategy focused on reviving demand for its Michael Kors brand.
Targeting a Broader Customer Base
Capri is trying to draw in a broader customer base, especially younger and wealthier shoppers, who continue to spend on nice-to-have items such as handbags despite inflationary pressures from higher gas and food costs.
Strategic Changes in Promotions and Pricing
The company has been pulling back on promotions and selling handbags and apparel at full price to help drive a reset at Michael Kors, executives said in a post-earnings call.
Product Mix Shift and Brand Value
It is also shifting its product mix, particularly towards smaller handbags and more casual footwear, which it said was resonating more with younger shoppers.
"A premium brand like Michael Kors must avoid excessive discounting or it degrades the value of the brand," said David Swartz, analyst at Morningstar, adding that even with higher prices, Michael Kors products are priced much lower than those of luxury brands.
Financial Performance and Analyst Insights
Capri reported another quarterly decline for the Michael Kors brand, which makes up the bulk of its sales. Revenue fell 5.5% to $656 million, the company said.
Michael Kors has faced criticism in recent years for its lack of design innovation and consecutive quarters of declining sales, in contrast to handbag rival Coach, owned by Tapestry, which analysts say benefits from stronger brand power.
Revenue Outlook and Market Reaction
Capri expects first-quarter total revenue of about $750 million, compared with an estimate of $789.7 million, according to data compiled by LSEG. The company's shares reversed course after early premarket gains and fell about 2%.
"There is enough demand for both brands (Jimmy Choo and Michael Kors). I think investors were discouraged that the Q1 sales outlook was not higher, but it's a long process," Swartz said.
Portfolio Adjustments and Financial Strategies
Failing to capitalize on the inclusion of the Italian brand Versace in its portfolio, the company sold it to Prada last year, highlighting Capri's push to raise cash and pay down its debt.
Quarterly Results and Tariff Recovery
Capri's fourth-quarter revenue of $796 million was largely in line with expectations, but adjusted earnings per share of 22 cents topped an estimate of 11 cents per share, while gross margin also grew.
It plans to recover all tariffs paid under the International Emergency Economic Powers Act as of March 28 and has recorded a refund of $65 million, it said.
Future Profit Expectations
The company expects fiscal year 2027 profit per share of about $2.15, compared to analysts' expectation of $1.83.
(Reporting by Sanskriti Shekhar and Juveria Tabassum in Bengaluru and Danielle Kaye in New York; Editing by Pooja Desai)
