Capri cuts revenue outlook as Iran war hits Michael Kors sales
Capri Holdings Faces Revenue Challenges Amid Global Uncertainty
By Sanskriti Shekhar and Danielle Kaye
Aug 5 (Reuters) - Capri Holdings cut its annual revenue forecast on Wednesday, citing second-quarter inventory delays at its key Michael Kors brand and softer demand for its pricey handbags and accessories due to conflict in the Middle East.
Shares of the New York-based accessible luxury group fell about 2% in early trading.
Impact of Global Events on Sales
Capri said recent congestion at ports in Asia, though temporary, would hurt second-quarter sales at Michael Kors, its largest brand by revenue, by $50 million. It estimated another $50 million hit for the fiscal year from weaker demand in Europe and emerging markets because of the U.S.-Iran war.
The company now expects fiscal 2027 revenue of about $3.4 billion, down from its previous forecast of about $3.53 billion.
Consumer Behavior and Market Trends
U.S. luxury companies have been grappling with uneven demand as inflation-weary consumers pull back on discretionary purchases, while economic uncertainty weighs on spending in key international markets.
War in the Middle East has hit tourism in Europe, weighing on Capri's sales in the region, the company said.
Michael Kors Brand Performance
Challenges and Strategic Shifts
Michael Kors has also faced criticism for its design innovation in recent years, in contrast to handbag rival Coach, owned by Tapestry, which has established itself as a leading brand for Gen Z.
In a bid to drive a reset at Michael Kors, Capri has pulled back on promotions and focused on revamping its stores to drive direct-to-consumer sales at full price, while also investing in product innovation.
Outlook and CEO Comments
"We are disappointed with our second-quarter outlook," CEO John Idol said on a post-earnings call. But he added that the company expects Michael Kors revenue to return to growth in the second half of fiscal year 2027, thanks to new products, marketing investments, fewer promotions and store renovations.
The brand offers a wide range of products, from small accessories such as card cases and bag charms with prices starting at $79.50, to handbags costing around $600, according to the brand's website.
Revenue at Michael Kors fell to $590 million in the quarter ended June 27, from $635 million a year earlier, marking the brand's 15th consecutive quarter of sales declines.
Portfolio Changes and Future Prospects
Divestments and Brand Focus
Last year, Capri sold Versace to Prada for about 1.3 billion euros ($1.5 billion), after failing to capitalize on the inclusion of the Italian brand in its portfolio and as the U.S.-based fashion group zeroes in on growing its Michael Kors and Jimmy Choo labels.
"Capri needs to get both Michael Kors and Jimmy Choo back to consistent sales growth and better profitability," said Morningstar analyst David Swartz. "This is probably 2-3 years away."
Financial Outlook and Analyst Perspectives
Despite slashing its full-year revenue outlook, Capri reaffirmed its adjusted annual earnings per share forecast of about $2.15, saying it would reduce operating expenses to offset the weaker sales.
Capri said it expects Jimmy Choo to continue growing and return to profitability, with revenue for the brand rising 10.5% to $179 million for the quarter.
The company's first-quarter revenue fell 3.5% to $769 million. Analysts on average estimated $752.7 million, according to data compiled by LSEG.
It reported quarterly adjusted earnings per share of 67 cents, compared with an estimate of 40 cents per share.
(Reporting by Sanskriti Shekhar in Bengaluru and Danielle Kaye in New York; Editing by Tasim Zahid and Joyjeet Das)
