Capri bets on Michael Kors revival to forecast annual profit above estimates
Capri Holdings' Strategy and Financial Outlook
Turnaround Strategy Focused on Michael Kors
May 27 (Reuters) - Capri Holdings <CPRI.N> forecast annual profit above Wall Street estimates on Wednesday as the company bets on a turnaround strategy focused on reviving demand for its Michael Kors bags after several quarters of decline.
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 costs of gas and food.
Global Luxury Market Challenges
luxury brands worldwide have taken a hit from the impact of the Iran war, which has disrupted the demand in the Middle East.
Michael Kors Performance and Competitive Landscape
Quarterly Revenue and Brand Criticism
Capri reported another quarterly decline for its Michael Kors brand, which makes up the bulk of its sales. Revenue fell 5.5% to $656 million, the company said.
The Michael Kors brand has faced criticism in recent years for its lack of design innovation. Its consecutive quarters of sales decline stand in contrast to handbag rival Coach, owned by Tapestry, which saw a 31% revenue jump in its most recent quarter.
Portfolio Adjustments and Focus
Capri sold Italian brand Versace last year - which it had bought just seven years earlier - to Prada, as the U.S.-based fashion group zeroes in on boosting its Michael Kors and Jimmy Choo labels.
Financial Results and Future Projections
Recent Financial Performance
Capri's fourth-quarter revenue of $796 million was largely in line with estimates, but adjusted earnings per share of 22 cents topped an expectation of 11 cents per share, according to data compiled by LSEG.
The company's gross margin for the three months ended March 28 was 64.8%, up from 59.9% a year ago. Its shares rose about 2% in premarket trading.
Tariff Recovery and Profit Forecast
Tariff Refund
Capri 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 to be received, it said.
Profit Outlook for Fiscal Year 2027
It expects fiscal year 2027 profit per share of about $2.15, compared to analysts' expectation of $1.83 per share, according to data compiled by LSEG.
(Reporting by Sanskriti Shekhar in Bengaluru and Danielle Kaye in New York; Editing by Pooja Desai)
