US' Michael Kors & Jimmy Choo see dip as Capri targets FY27 growth

This excludes the performance of Versace, which has been classified under discontinued operations following a $1.375 billion acquisition agreement with Prada SpA, expected to close in the second half of calendar year 2025, Capri Holdings said in a press release.

The company reported a gross profit of $502 million, with a gross margin of 63 per cent, nearly flat compared to 63.1 per cent in the prior year. The operating income rose to $16 million from $11 million last year, improving the operating margin to 2 per cent.

On an adjusted basis, the operating income of the group stood at $20 million, with an adjusted margin of 2.5 per cent, down from 3.7 per cent in the prior-year period.

The company posted a net income of $56 million or $0.47 per diluted share, compared to $5 million or $0.03 per diluted share in Q1 FY25. The adjusted net income was $60 million or $0.50 per share, a notable increase from $18 million or $0.16 per share last year.

Inventory levels increased by 10.8 per cent year-over-year to $779 million, driven by $50 million in planned early receipts and an additional $25 million impact from foreign currency exchange and tariffs.

The company generated $20 million in cash flow from operations, spent $13 million in capital expenditures, and ended the quarter with $129 million in cash and $1.7 billion in total borrowings, resulting in net debt of $1.5 billion—unchanged from the prior year.

Segment-wise, Michael Kors revenue fell by 5.9 per cent to $635 million, or 7.3 per cent in constant currency. It delivered a gross profit of $388 million with a margin of 61.1 per cent and operating income of $63 million, resulting in a 9.9 per cent operating margin.

Jimmy Choo’s revenue stood at $162 million, down 6.4 per cent on a reported basis and 9.2 per cent in constant currency. It posted a gross profit of $114 million, improving its gross margin to 70.4 per cent from 67.1 per cent last year. The brand’s operating income was flat at $4 million, with a slightly improved margin of 2.5 per cent.

“We are encouraged by our first quarter results. Trends improved sequentially leading to both revenue and earnings per share that exceeded our expectations. This performance demonstrates the progress we are making as we execute against our strategic initiatives to energise our fashion luxury houses. While still early, we are beginning to see signs that our strategies are working,” said John D Idol, chairman and chief executive officer (CEO) at Capri Holdings.

Looking ahead, Capri Holdings is expecting revenue between $3.37 billion and $3.45 billion in FY26, with operating income of approximately $100 million and net interest income ranging from $85 to $95 million.

The effective tax rate is projected to be in the mid-teens, and diluted earnings per share (EPS) is forecast between $1.2 and $1.4. Michael Kors is expected to generate $2.80 to $2.875 billion in revenue with a high-single-digit operating margin, while Jimmy Choo is projected to earn $565 to $575 million in revenue but will operate at a negative mid-single-digit margin.

For the second quarter (Q2) of FY26, Capri Holdings anticipates revenue between $815 million and $835 million, with a slightly positive operating margin. Net interest income is expected to be around $15 million and the tax rate approximately 40 per cent.

EPS for Q2 is forecast between $0.10 and $0.15. Michael Kors is expected to contribute $685 to $700 million in revenue with a high-single-digit margin, and Jimmy Choo is projected to generate $130 to $135 million in revenue, maintaining a negative mid-single-digit margin.

The outlook incorporates assumed tariffs ranging from 15 to 30 per cent on imports from key sourcing countries, including China, India, Vietnam, Cambodia, Bangladesh, Indonesia, and the European Union (EU), added the release.

“Looking ahead, with the Versace transaction is expected to close in the second half of calendar year 2025, we are focused on executing the strategic initiatives across our two iconic brands, Michael Kors and Jimmy Choo,” added Idol. “We remain on track to stabilise our business this year while establishing a solid foundation for a return to growth in fiscal 2027.”

ALCHEMPro News Desk (SG)