Why Is Capri Holdings (CPRI) Down 8.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Capri Holdings (CPRI). Shares have lost about 8.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Capri Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important drivers.

Jimmy Choo Growth & Versace Sale Lift Capri Holdings’ Q3 Earnings Beat

Capri Holdings delivered better-than-expected third-quarter fiscal 2026 results, with both revenues and earnings surpassing the Zacks Consensus Estimate. While the top line declined year over year, improved operating performance, disciplined expense management and benefits from strategic actions supported profitability growth. Results also reflected continued progress at both Michael Kors and Jimmy Choo, alongside a significantly strengthened balance sheet following the completion of the Versace divestiture.

More on Capri Holdings’ Q3 Results

Capri Holdings reported adjusted earnings of 81 cents per share, which beat the Zacks Consensus Estimate of 78 cents. The bottom line increased from 63 cents reported in the year-ago period, driven by improved operating leverage. On a reported basis, earnings from continuing operations were 47 cents per share compared with 5 cents in the prior-year quarter. 

Total revenues came in at $1,025 million, surpassing the Zacks Consensus Estimate of $998 million. The top line declined 4% year over year on a reported basis and 5.9% on a constant-currency basis. 

Gross profit decreased to $623 million from $674 million in the year-ago quarter. Gross margin contracted 230 basis points to 60.8%, as higher-than-anticipated tariff impacts more than offset the underlying margin expansion of 70 basis points. Operating income rose to $46 million from $26 million a year ago, with the operating margin improving 210 basis points to 4.5%. On an adjusted basis, the operating margin came in at 7.7%, down from 9.1% in the prior-year quarter.

CPRI’s Q3 Revenue Insights by Segments

Revenues from Michael Kors declined 5.6% year over year to $858 million on a reported basis and 7.3% on a constant-currency basis. Despite the sales decline, the brand saw sequential improvement in retail trends, with full-price sales rising in the low double digits in the full-price channel. Operating income was $119 million, down from $147 million a year ago, while operating margin shrank 230 basis points to 13.9%. 

Jimmy Choo delivered a solid performance, with revenues increasing 5% year over year to $167 million on a reported basis and 1.9% in constant currency. Growth was driven by strength in core accessories and improving retail sales trends. The brand reported operating income of $3 million compared to an operating loss of $6 million in the prior-year quarter, translating to an operating margin of 1.8%.

Capri Holdings’ Financial Health Snapshot

Capri Holdings exited the quarter with cash and cash equivalents of $154 million and total borrowings of $234 million, resulting in net debt of just $80 million, a dramatic improvement from $1.17 billion a year earlier. Operating cash flow for the quarter was $271 million, while capital expenditures totaled $19 million, leading to robust free cash flow of $252 million. Inventory levels declined 6.5% year over year, reflecting improved inventory discipline.

Other Developments at CPRI

During the quarter, Capri Holdings completed the sale of its Versace business to Prada, a move aimed at sharpening its focus on its core Michael Kors and Jimmy Choo brands. Management highlighted that proceeds from the transaction were used primarily to reduce debt, enhancing financial flexibility and positioning the company for long-term growth and shareholder value creation.

CPRI’s FY26 Outlook

For fiscal 2026, Capri Holdings expects total revenues between $3.45 and $3.475 billion, with adjusted operating income of about $100 million. CPRI projected adjusted earnings in the band of $1.30-$1.40 per share. Management envisions capital expenditures of roughly $100 million for the fiscal year.

For Michael Kors, revenues are projected in the range of $2.86-$2.875 billion, with an operating margin in the high-single-digit range. Jimmy Choo revenues are expected in the band of $590-$600 million, with an operating margin in the negative low-single-digit range.

Bottom Line

Capri Holdings’ third-quarter fiscal 2026 performance underscores improving profitability trends, disciplined execution and a substantially stronger balance sheet. While revenue pressures persist, operational momentum at Jimmy Choo, sequential improvement at Michael Kors and enhanced financial flexibility position the company favorably as it works toward a return to growth in fiscal 2027.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -27.73% due to these changes.

VGM Scores

At this time, Capri Holdings has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research