Capri Holdings (CPRI -1.84%), the fashion powerhouse that owns brands including Versace, Jimmy Choo, and Michael Kors, published results for its fiscal 2025 second quarter on Nov. 7. The company faced a tough quarter with its revenue falling 16.4% year-over-year to $1.08 billion, amid muted global demand for luxury goods. Adjusted earnings per share (EPS) of $0.65 was down from the prior-year period's $1.13. Despite these difficulties, management pointed to strategic advancements in expanding its customer base and maintaining brand equity. The company's decision not to issue guidance tied back to the continued uncertainty about the fate of rival Tapestry's attempt to acquire Capri.
Capri Holdings
| Metric | Fiscal Q2 2025 | Fiscal Q2 2024 | % Change |
|---|---|---|---|
| Total revenue | $1.08 billion | $1.29 billion | (16.4%) |
| Adjusted EPS | $0.65 | $1.13 | (42.5%) |
| Adjusted operating margin | 3.0% | 12.2% | (920 basis points) |
| Net income (GAAP) | $24 million | $90 million | (73.3%) |
Overview of Capri's Business and Strategic Focuses
Capri Holdings is a global fashion conglomerate known for its stable of luxury brands: Versace, Jimmy Choo, and Michael Kors. Each brand carries a unique market position, contributing to Capri's overarching brand equity and competitive edge. The essence of Capri’s business model lies in luxury fashion, which demands tight control over branding, consumer perception, and premium pricing strategies.
A central focus for Capri has been geographic expansion, specifically in the lucrative Asian markets. Simultaneously, it has been intensively developing its e-commerce and omnichannel capabilities to align with modern shopping behaviors. Despite these efforts, the recent quarter's performance highlighted the company's high debt levels and the strain of macroeconomic factors on revenue and profitability.
Quarterly Financial and Strategic Highlights
During the fiscal second quarter, Capri recorded a notable 16.4% fall in revenue to $1.08 billion, consistent with the broader challenges in the fashion industry. Operating margins contracted to 3.0% from 12.2% in the prior-year period due to expense deleverage on reduced sales volumes. This contraction was partly attributable to broader macroeconomic pressures and softened demand for luxury items globally. CEO John D. Idol articulated the impact of these global trends, noting, "softening demand globally for fashion luxury goods."
On a brand level, performances showed significant disparities; Versace saw a precipitous revenue drop of 28.2% to $201 million, exacerbated by a 33% decrease in the Americas. Conversely, Jimmy Choo grew its revenue by 6.1% to $140 million, buoyed by strength in markets across Europe and the Middle East. However, Michael Kors experienced a 16.0% revenue decline to $738 million.
Strategically, Capri added 10.9 million consumers to its customer database, a 13% increase. Such engagement points to potential future opportunities when market conditions stabilize. Issues with inventory management persisted; its 10% reduction in inventory levels indicated efficient handling but also a cautious stance regarding future sales potential. Capri's net debt as of the end of the quarter stood at $1.53 billion, down from $1.86 billion a year earlier, suggesting it has made some progress in managing its financial leverage.
Future Outlook and Strategic Considerations
Management again refrained from offering financial guidance owing to the uncertainties around its potential merger with Tapestry. The District Court of the Southern District of New York recently granted the Federal Trade Commission's motion for a preliminary injunction blocking the transaction while the agency holds its own proceedings, but the two companies have jointly filed an appeal of that decision. Investors will keenly observe how the merger attempt plays out.
Looking ahead, industry watchers anticipate Capri's continued emphasis on extending its presence in Asia, a crucial market for luxury expansion. Enhancing digital sales will form another pivotal point, as e-commerce increasingly dominates luxury channels.
