Capri Holdings Targets $4B in Michael Kors Sales with Growing Strategic Success

Key Highlights from Capri Holdings Limited’s Q1 2026 Earnings Call

Capri Holdings Limited (CPRI) released its first-quarter results for fiscal year 2026, showcasing early signs of recovery and strategic progress across its brands. The company’s leadership provided insights into the performance of Michael Kors and Jimmy Choo, along with financial projections and long-term goals.

Strategic Initiatives and Brand Performance

John D. Idol, Chairman and CEO of Capri Holdings, emphasized that the company is seeing sequential improvements in both revenue and earnings per share, exceeding expectations. He noted that the initial signs of success from the brand’s strategic initiatives are becoming evident, particularly at Michael Kors and Jimmy Choo.

At Michael Kors, traffic has improved, and full-price sell-throughs have shown positive momentum. For the first time in three years, average unit retail (AUR) trends turned positive in the full-price channel. Additionally, the brand has exited 30% of U.S. department store doors over the past year, with most wholesale door reductions expected to be completed by the end of the year.

Idol also highlighted a shift in brand storytelling, using influencer partnerships and data analytics to boost engagement. This effort has led to a 9% year-over-year increase in the global database for Michael Kors.

For Jimmy Choo, there has been a noticeable improvement in performance, driven by new product launches that have resulted in higher full-price sell-throughs and AURs. The introduction of the Curve group and expansion of day and casual footwear offerings have contributed to this growth, with the Sinch bag becoming the brand’s best-selling day bag.

Store Optimization and Long-Term Goals

The company remains on track to close 75 underproductive Michael Kors stores during fiscal 2026. Additionally, it plans to renovate approximately 50% of the store fleet over the next three years. Idol believes that these renovations will lead to higher store productivity.

Looking ahead, the CEO reaffirmed long-term revenue targets: $4 billion for Michael Kors and $800 million for Jimmy Choo. These goals reflect confidence in the brand’s ability to return to growth in fiscal 2027.

Financial Outlook and Guidance

Rajal Mehta, Interim CFO, confirmed that the company's performance exceeded expectations, driven by strong results at both Michael Kors and Jimmy Choo as strategic initiatives take hold.

The company raised its revenue guidance for fiscal 2026 to between $3.375 billion and $3.45 billion, citing a weaker U.S. dollar and outperformance in Q1. Michael Kors is now projected to generate $2.8 billion to $2.875 billion in revenue, while Jimmy Choo is expected to bring in $565 million to $575 million.

Full-year gross margin is expected to be between 60.5% and 61%, with operating expenses forecasted at $2 billion and operating income anticipated at $100 million. Diluted EPS guidance for the year is set between $1.20 and $1.40.

The company also expects Q2 revenue to range from $815 million to $835 million, with Michael Kors at $685 million to $700 million and Jimmy Choo at $130 million to $135 million.

Mehta added that the company anticipates offsetting a majority of the impact from tariffs in fiscal 2027 through cost efficiencies, sourcing optimization, and targeted price increases.

Financial Results and Inventory Position

Q1 total company revenue came in at $797 million, a 6% decrease compared to the prior year. Net income was $60 million, resulting in diluted EPS of $0.50. Gross margin remained flat at 63%, while operating expenses decreased by $22 million due to cost reduction efforts.

Operating margin stood at 2.5%. Michael Kors’ operating margin was 9.9%, while Jimmy Choo maintained a 2.5% operating margin. Inventory at the end of the quarter totaled $779 million, reflecting earlier product receipts and currency impacts. Cash reserves were $129 million, with debt reaching $1.67 billion.

Analyst Questions and Management Responses

During the Q&A session, analysts probed various aspects of the company’s performance. Matthew Boss of JPMorgan asked about sell-through trends and pricing power at Michael Kors. Idol responded that improvements are visible, noting a significant sequential improvement in comps in full-price stores.

Brooke Siler Roach of Goldman Sachs inquired about the impact of pricing and tariffs on margins. Mehta acknowledged an increase in unmitigated tariff impact for fiscal 2026, estimating $85 million, up from $60 million previously. However, he expects gross margin expansion in fiscal 2027.

Other questions focused on growth expectations, balance sheet management post-Versace sale, and the role of Jimmy Choo in the company’s strategy. Idol confirmed that there is no year-over-year growth plan yet, with anticipated growth starting in the full-price channel. He also reiterated that Jimmy Choo is not for sale, emphasizing its growth potential.

Sentiment and Market Reaction

Analysts’ tone was neutral to slightly positive, focusing on the sequential improvements but seeking clarity on margin recovery and the pace of turnaround. Management maintained a confident but measured tone, using phrases like “we are encouraged” and “we believe.” However, some defensiveness was observed during Q&A when addressing timing of revenue growth.

Compared to the previous quarter, management showed increased confidence backed by early positive indicators. Analysts appeared more optimistic than last quarter but remained cautious about structural challenges.

Risks and Challenges

Management flagged the dynamic global macroeconomic environment as a risk, with tariff increases estimated to have an unmitigated $85 million impact for fiscal 2026. Mehta indicated that mitigation efforts are underway, with most offsets expected in fiscal 2027.

Idol also noted the risk of not recapturing business lost from store closures and highlighted the challenge of softness in the formal footwear category.

Final Takeaway

Capri Holdings’ Q1 2026 earnings call underscored early traction in its turnaround strategies at Michael Kors and Jimmy Choo. Improvements in full-price sell-throughs, growing consumer engagement, and a raised revenue outlook all point to a positive trajectory. While tariff headwinds and macroeconomic uncertainty remain, management is confident in returning to growth in fiscal 2027. The company outlined clear paths to achieving long-term revenue targets of $4 billion for Michael Kors and $800 million for Jimmy Choo, alongside margin expansion and capital deployment plans following the anticipated Versace sale.