Capri Holdings (CPRI) Q2 2027 earnings review
Capri raises its profit plan, while Michael Kors still shrinks
Capri Holdings, the luxury group behind Michael Kors and Jimmy Choo, beat its profit plan on fewer discounts while early wholesale shipments cushioned a drop in its main brand. Total revenue fell 5% from a year ago, or 8% by our math without $20 million of orders that shipped ahead of schedule. Gross margin climbed more than 2 percentage points because shoppers paid full price more often, lifting profit per share excluding one-offs to $0.42. Chief executive John D. Idol raised the full-year revenue outlook by $20 million.
| Revenue | $809M -5.5% from a year ago (-7.8% excluding early shipments) |
|---|---|
| Gross margin | 63.3% +2.3 percentage points from a year ago |
| Profit per share, excluding one-offs | $0.42 planned ~$0.20 (-$0.03 a year ago) |
| Full-year revenue outlook | Raised $20M to ~$3.42B (-1.6% from a year ago) |
⚖️ Verdict: 🟢 Bullish
The story got better because the second-half profit hurdle came down and Jimmy Choo earned a profit in its quietest quarter. Beating the second-quarter operating profit target by $21 million allowed Capri to lower the implied second-half profit target to $116 million by our math, and $150 million of share buybacks completed the full-year repurchase goal six months early. One caution: the entire $20 million revenue raise came from Jimmy Choo and early shipments, leaving Michael Kors sales roughly flat in the second half.
The question now is whether Michael Kors can grow on its own in the second half once it laps last year's cutbacks in off-price sales. Either new handbags and higher full-price selling return the brand to real growth, or the promised recovery relies on an extra calendar week in the fourth quarter. Holiday sales against the $830 million third-quarter plan will tell.
🐂 Bull Case
Jimmy Choo Turns Profitable in Its Slowest Quarter
Jimmy Choo, the luxury shoe and handbag house, makes up about a fifth of Capri's sales. Management had planned for the brand to lose money in its seasonally quiet second quarter, with operating margin in the negative mid-single-digit range. Instead, revenue grew 11.5% from a year ago to $146 million, and even without $5 million of early wholesale shipments, sales rose 7.6% by our math.
- Operating profit: $2 million (1.4% of sales), up from a $9 million loss (-6.9%) a year ago
- Gross margin: 71.2%, up 1 percentage point on fuller-price selling
- Americas and EMEA sales: up 23.5% and 13.4% from a year ago
This matters because Jimmy Choo's store and overhead costs stayed flat at $95 million, so almost every dollar of extra gross profit reached the bottom line. Capri raised the brand's full-year sales plan by $15 million to $650 million, which leaves 7.1% growth for the fourth quarter by our math.
What to watch: Jimmy Choo's third-quarter operating margin against its low-to-mid-single-digit plan. Beating that range during the holiday quarter would show the brand can lift full-year profit above its low-single-digit target.
Fewer Discounts Lift Gross Margin Over 2 Points
Capri has been cutting back on price promotions and off-price wholesale shipments to rebuild its brand image. That strategy hurts sales volume first, so the test is whether it raises gross margin — the share of revenue left after the cost of making the goods. In the second quarter, gross margin rose 2.3 percentage points from a year ago to 63.3%, as cost of goods sold dropped from 39.0% of revenue to 36.7%.
The company attributed the gain to "higher full-price sell-throughs, brand mix and lower tariff rates". Michael Kors lifted its gross margin by 2.2 percentage points to 61.5%, and Jimmy Choo added 1.0 point to 71.2%. Because shoppers paid full price more often, Capri tripled its operating profit excluding one-offs to $31 million against a $10 million plan.
What to watch: third-quarter gross margin during the holiday shopping season. Holding the 2-point gain when rivals discount heavily would show that Michael Kors customers accept the higher prices.
Buybacks Hit the Full-Year Target in Six Months
After selling Versace last December, Capri set out to buy back $200 million of its own shares across fiscal 2027. After spending $50 million in the first quarter, the luxury group tripled its pace in the second quarter, spending $150 million to retire 10.3 million shares at an average cost of $14.56. That reached the entire $200 million full-year target in the first half and cut the diluted share count by 7.9% from a year ago.
Because the company bought shares faster and at lower prices than in the first quarter, management lowered its full-year average share count forecast from 110 million to 108 million. That reduction adds about $0.04 per share to full-year earnings by our math, accounting for most of the $0.05 raise to the full-year profit-per-share outlook. Net debt rose from $224 million in June to $336 million to fund the purchases.
What to watch: third-quarter share count against the 103 million outlook. Ending the quarter at 103.3 million shares means any further buying from the $721 million remaining authorization would push the count below the plan.
🐻 Bear Case
Early Shipments Drove the Beat, Not Michael Kors
"Throughout the second quarter, trends improved sequentially each month across both of our luxury houses," chief executive John D. Idol said, adding that "we continue to expect total company revenue to return to growth in the second half of fiscal 2027". Yet $20 million of the $29 million revenue beat came from "earlier than anticipated timing of wholesale shipments" that Capri pulled out of the third quarter.
- Michael Kors Q2 sales excluding the $15 million shift: down 10.6% from a year ago by our math, worse than Q1's 7.1% drop
- Michael Kors H2 sales implied by the full-year plan: up 0.2% from a year ago (+1.2% adding back the $15 million shift) by our math
- Total Capri H2 sales implied by the full-year plan: up 1.2% (+2.2% adding back the $20 million shift) by our math
That math cuts against the turnaround story. The second half laps $150 million of cut third-party sales and includes an extra calendar week worth about 1% of half-year sales. Even with those boosts, the plan leaves Michael Kors roughly flat in the second half.
What to watch: Michael Kors third-quarter sales against the $830 million outlook. Failing to beat that number would mean the brand is still shrinking in its biggest season.
Falling Sales Still Eat Into Cost Cuts
Last quarter Capri announced $70 million of full-year expense cuts to protect its profit target after lowering its sales plan. In the second quarter, selling, general and administrative expenses — store rent, payroll, marketing and corporate overhead — fell by $22 million from a year ago to $459 million. Because revenue fell faster, those expenses still rose as a share of sales by 0.6 percentage points to 56.7% by our math.
At Michael Kors, store and overhead costs fell $17 million to $322 million, but climbed from 46.8% of brand sales to 48.6%, wiping out all but 0.2 percentage points of its 2.2-point gross margin gain. Meanwhile, Capri excluded $21 million of asset write-downs, store renovation, transformation and severance charges from its adjusted profit, continuing a pattern of recurring adjustments.
What to watch: implied second-half operating expenses of about $1.01 billion by our math. If sales do not grow in the fourth quarter, store costs will keep taking a larger slice of revenue.
Interest Income Carries a Third of Planned Profit
Capri expects $2.20 of diluted earnings per share excluding one-offs this year, up 47% from last year. However, a large slice of that profit does not come from selling handbags or shoes. It comes from interest income earned on cross-currency financial contracts that sit on the balance sheet under other long-term liabilities ($826 million at quarter-end).
In the second quarter, net interest and other income brought in $34 million, matching the $31 million of adjusted operating profit from the stores and wholesale business. For the full year, the company plans for $100 million of net interest and other income alongside $175 million of operating profit. By our math, financial income makes up 36% of planned pre-tax profit, leaving earnings sensitive to tax-rate swings.
What to watch: operating profit as a share of pre-tax income in the third quarter. The plan calls for $90 million of operating profit and $25 million of interest income, which would prove the holiday quarter relies on retail operations.
Risks this quarter didn't answer
Several standing business concerns and milestones due this quarter cannot be read from the earnings release alone and await the conference call or quarterly filing.
- Michael Kors outlet overhaul: management aimed to have 70% to 75% new accessories in outlet stores by October; the release gives no channel detail.
- Michael Kors footwear and wholesale cleanup: the release does not separate shoes from handbags or retail from off-price wholesale.
- Store renovations: management promised to share the number of renovated stores on this quarter's call.
- Michael Kors Europe: sales fell 4.6% from a year ago to $185 million; whether tourist traffic or the Middle East improved awaits call commentary.
- Tariff refunds: prepaid assets fell by $56 million since March, suggesting cash collection on the $65 million tariff refund, which the filing will confirm.
👓 Other Themes
Tariff Pressure Eases Against Last Year's Base
Capri kept its trade assumptions unchanged in the outlook: an extra 10% US import tariff through July 24, 2026, and 10% to 12.5% after that. Because the company faced steeper tariff costs in the second quarter of last year before court-ordered refunds, "lower tariff rates" helped lift gross margin this quarter alongside fuller-price selling.
💲 Other KPIs
Inventory fell 7.0% from a year ago to $712 million, after dropping 19.9% in the first quarter. Last quarter Capri warned that shipping delays would hold back $50 million of Michael Kors second-quarter sales; the smaller inventory drop shows autumn goods arrived in time for the holiday season.
Free cash flow — operating cash flow of $51 million minus $15 million of capital spending on stores and technology — turned positive at $36 million, compared with a $46 million cash outflow a year ago. First-half capital spending totaled $40 million against a $125 million full-year plan.
The group closed a net 11 stores during the quarter and 47 over the past year, a 5.2% reduction. Michael Kors operated 655 stores (down 36 from a year ago) and Jimmy Choo operated 205 (down 11), as the group trims unproductive locations.
🔮 Guidance
Raised by $20 million, which leaves full-year sales down 1.6% from last year by our math. After cutting the plan by $125 million in Q1, management passed through $20 million of the $29 million Q2 beat. By our math, the outlook and the Q3 plan leave $837 million for Q4 (+5.2% from a year ago), helped by an extra calendar week.
Raised by $5 million, pointing to a 48% increase from last year's $118 million. Because Q2 beat its plan by $21 million and management raised the year by only $5 million, the implied second-half profit target dropped from $132 million to $116 million (+49% from a year ago) by our math. That leaves $26 million for Q4 after the $90 million Q3 plan.
Raised by $0.05, or 47% growth over last year's $1.50. After holding the target at $2.15 in Q1, management lifted it on the $5 million operating profit raise and a 2 million share reduction. With $1.09 earned in the first half and $0.95 planned for Q3, the full-year plan leaves $0.16 for Q4 by our math.
Unchanged. The group earned $68 million in the first half ($34 million in each quarter) and plans for $25 million in Q3, leaving $7 million implied for Q4 by our math.
Unchanged. The plan continues to call for a low-teens full-year tax rate on adjusted earnings.
Lowered by 2 million shares after the group spent $150 million to buy back 10.3 million shares in the second quarter.
Raised by $5 million, pointing to a 3.6% full-year decline. After the Q3 plan of $830 million, the full-year target leaves $687 million for Q4 (+4.7% from a year ago) by our math.
Unchanged. The brand earned a 9.8% operating margin in the first half and plans for a mid-teens margin in Q3.
Raised by $15 million, or 8.3% full-year growth. With $325 million delivered in the first half and $175 million planned for Q3, the target leaves $150 million for Q4 (+7.1% from a year ago) by our math.
Unchanged. Jimmy Choo earned a 4.6% operating margin across the first six months and plans for a low-to-mid-single-digit margin in Q3, so the full-year target remains conservative.
New. The plan points to a 2.0% decline from last year's $1,025 million, because $20 million of wholesale shipments moved into Q2. Adding back that shift, planned Q3 revenue is flat at $1,025 million by our math. If Capri's four-quarter average beat of 3.5% holds, Q3 revenue would reach about $1,040 million by our math.
New. The plan calls for a 13.9% increase over last year's $79 million, or an operating margin of 9.0% (up 1.3 percentage points from a year ago) by our math.
New. Down from $34 million in Q2, but well above last year's $9 million.
New. The group plans for a mid-teens tax rate in the holiday quarter, down from 38.6% on GAAP pre-tax profit in Q2.
New. Down 14.6% from last year's 120.6 million shares, reflecting the 10.3 million shares retired during Q2.
New. The target represents a 17.3% increase from last year's $0.81, helped by higher holiday operating margin and the lower share count.
New. The target is down 3.3% from last year's $858 million, and includes the $15 million hit from wholesale shipments that moved into Q2 (-1.5% adding back the shift by our math).
New. Compares with a 13.9% operating margin in the third quarter of last year and 10.3% in Q2.
New. The plan points to 4.8% growth over last year's $167 million, or 7.8% growth adding back the $5 million wholesale shift that landed in Q2 by our math.
New. Up from 1.8% in the third quarter of last year and 1.4% in Q2.
❓ Key Questions
Did Michael Kors outlets hit 75% new product?
Management previously promised that 70% to 75% of the outlet handbag assortment would be new product by October. Knowing whether those goods arrived on time and whether outlet sales stopped falling will test the holiday recovery plan.
How much does the extra week add to Q4?
By our math, the full-year plan leaves about 5% Michael Kors growth for Q4. Since fiscal 2027 includes a 53rd week worth roughly 1% of half-year revenue, investors need to know how much Q4 growth comes from the calendar.
Will Capri buy back more shares beyond $200 million?
The company spent $150 million on buybacks in Q2, reaching its $200 million full-year assumption in six months with $721 million of authorization left. Clarifying whether buybacks pause in the second half affects both net debt and the 108 million share count plan.
How many renovated stores are open and how do they perform?
Capri plans to renovate 300 stores and promised to share completion numbers on this quarter's call. The sales lift at renovated locations will show whether the $125 million capital budget can reverse retail traffic declines.