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DATE

  • Wednesday, May 28, 2025, at 8:30 a.m. EDT

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — John Idol
  • Chief Financial and Chief Operating Officer — Tom Edwards
  • Vice President, Investor Relations — Jennifer Davis

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RISKS

  • The company recorded a non-cash tax valuation allowance of $545 million for Q4 FY2025, which contributed to a net loss of $581 million and diluted loss per share of $4.90.
  • Gross margin declined 170 basis points to 61%. Declines were driven by lower full-price sell-throughs on older styles and inventory actions.
  • Michael Kors' Q4 FY2025 gross margin dropped to 58.6% from 60.8% in Q4 2024, and Jimmy Choo fell to 66.2% from 70.1%.

TAKEAWAYS

  • Versace Divestiture: Management confirmed the pending sale of Versace to Prada Group, stating proceeds will be used to “substantially reduce our debt levels and reinstate a share repurchase program.”
  • Revenue: Q4 FY2025 revenue decreased 15% year over year to $1 billion, while Michael Kors revenue declined 16% and Jimmy Choo 3%.
  • Geographic Revenue Breakdown: Americas revenue in Q4 FY2025 fell 13%, EMEA revenue declined 14%, and Asia dropped 23%.
  • Channel Performance: Total retail sales declined by a mid-teens percentage. E-commerce outperformed physical stores. Wholesale revenue dropped by double-digit percentages.
  • Gross Margin: Gross margin fell 170 basis points to 61%, due to inventory actions taken to improve year-end position.
  • Operating Margin: Company operating margin (non-GAAP) moved to negative 3.2% from positive 6.4%. Michael Kors' operating margin was 4.6% versus 14.1% in Q4 2024. Jimmy Choo was at negative 7.5% versus negative 5.8%.
  • Net Loss: Net loss was $581 million, driven primarily by the non-cash tax valuation allowance.
  • Inventory: Inventory ended at $869 million, up 1% year over year. $60 million was received earlier than planned for tariff mitigation in FY2026.
  • Debt: Debt totaled $1.5 billion at the end of the quarter, and cash was $166 million. The leverage ratio was 3.2x net debt to adjusted EBITDAR at the end of FY2025.
  • Stores: Store optimization included planned closure of 75 predominantly Michael Kors stores in the coming fiscal year, with wholesale closures expected to remove approximately $100 million revenue drag in following year comparisons.
  • Michael Kors Brand Initiatives: A 10% increase in the global consumer database and positive traction from new JetSet and Hotel Stories marketing campaigns.
  • Jimmy Choo Brand Initiatives: Jimmy Choo global consumer database increased 11% and saw a strong response to new accessories and sneakers.
  • Q1 2026 Trend: Michael Kors retail comps improved from a 15% decline to nearly flat at the time of the call, led by full price business.
  • Guidance: Fiscal 2026 revenue guidance is $3.3 billion to $3.4 billion, Michael Kors is $2.75 billion-$2.85 billion, and Jimmy Choo is $540 million-$550 million; Gross margin is expected at 61% to 61.5% for FY2026.
  • Tariff Impact: Estimated unmitigated tariff cost of $60 million to cost of goods sold in FY2026, mainly on U.S. imports. China represents about 5% of U.S. production for Michael Kors and Jimmy Choo combined in FY2026.
  • Capital Expenditure: Capital expenditures are projected at $110 million in FY2026, including approximately $350 million planned over three years for Michael Kors store renovations.
  • Share Repurchase: Share repurchase program is planned to resume after Versace sale and debt reduction.
  • EPS Guidance: Fiscal 2026 EPS is expected to be between $1.20 and $1.40 on approximately 119 million shares outstanding.
  • First Quarter Guidance: Q1 FY2026 revenue is expected at $765 million to $780 million and EPS at $0.10-$0.15.

SUMMARY

Capri Holdings (CPRI 2.58%) outlined a major strategic shift through the sale of Versace to Prada Group, with proceeds targeted at substantial debt reduction and eventual reinstatement of share repurchases. The company also reported progress from new brand storytelling and product initiatives, and accelerating consumer database growth. Jimmy Choo experienced strong sell-through in new accessory collections and record-breaking sneaker launches (non-GAAP), contributing to higher consumer engagement.

Near-term guidance reflects tariff headwinds. Gross margin compression was largely tied to inventory actions, and continued disciplined capital allocation focused on store renovations and digital investment. The company expects to achieve revenue stabilization over FY2026 as turnaround initiatives gain traction, laying the foundation for growth and margin expansion in 2027 and beyond.

  • John Idol said, “We are confident in our ability to grow Michael Kors to $4 billion in revenue and Jimmy Choo to $800 million in revenue while restoring operating margins to the double-digit range.”
  • Versace will be treated as a discontinued operation from FY2026, and its removal from guidance results in future financials being driven exclusively by Michael Kors and Jimmy Choo.
  • Tom Edwards noted, “Assuming a 10% baseline tariff and a 30% tariff on imports from China, we estimate the impact of tariffs on products shipped into the United States would increase our cost of goods sold by approximately $60 million in fiscal 2026 on an unmitigated basis.”
  • Management intends to stabilize the wholesale business and achieve modest growth starting in FY2027.
  • Store productivity initiatives, including a program to renovate approximately 50% of the Michael Kors fleet over three years, are positioned as key levers for sales recovery.
  • The company’s cost-saving actions encompass store closures, global headcount reductions, office consolidation, and supply chain efficiencies.
  • Foreign currency movements are expected to modestly increase revenue and operating expenses in FY2026, due to U.S. dollar weakness.

INDUSTRY GLOSSARY

  • AUR: Average Unit Retail, the average selling price per item, used as an indicator of pricing power and premiumization in retail operations.
  • Sell-through: The proportion of inventory sold within a period, reflecting product sellout velocity and demand.
  • Store Optimization Program: Capri's initiative aimed at improving store productivity through closures, renovations, and selective wholesale reductions.
  • Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, and restructuring, used for leverage ratio calculations.

Full Conference Call Transcript

Jennifer Davis: With me this morning are Chairman and Chief Executive Officer, John Idol, and Chief Financial and Chief Operating Officer, Tom Edwards. Before we begin, let me remind you that certain statements made on today's call may constitute forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ from those we expect. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website. Investors should not assume that the statements made during this call will remain operative at a later time. The company undertakes no obligation to update any information discussed on today's call.

Unless otherwise noted, all financial information on today's call will be presented on a non-GAAP basis. These non-GAAP measures exclude certain costs associated with impairment charges, restructuring and other charges, ERP implementation costs, Capri transformation costs, and transaction-related expenses. To view the corresponding GAAP measures and related reconciliation, please review our latest earnings release posted on our website earlier today at CapriHoldings.com. I would also like to note that given the pending sale of Versace, beginning in fiscal 2026, we will reclassify Versace as a discontinued operation, which means it will no longer be included in our non-GAAP results. Therefore, comments on today's call will focus only on Michael Kors and Jimmy Choo.

Now, I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer.

John Idol: Thank you, Jennifer. And good morning, everyone. I would like to begin today's call by discussing our recent announcement regarding the pending sale of Versace to Prada Group. After careful evaluation, we concluded that the most effective way to maximize value at Capri Holdings is to focus our resources on the compelling growth opportunities within our Michael Kors and Jimmy Choo brands. This transaction also positions us to substantially reduce our debt levels and reinstate a share repurchase program in the future. Both are important steps towards enhancing shareholder returns. Additionally, a strengthened financial foundation will enable us to more aggressively invest in reinvigorating the Michael Kors brand.

With our new strategic initiatives in place, our strong balance sheet, and focused senior leadership team, we are well-positioned to accelerate the growth trajectory of both Michael Kors and Jimmy Choo. Entering fiscal 2026, we are optimistic about our path forward. While the macro environment has become more challenging, with uncertainty around tariffs, we remain focused on executing against our strategic initiatives that are designed to improve current sales trends and position the company for future growth. Across our luxury houses, we are focused on building brand desirability through compelling storytelling, exciting fashion luxury product, and engaging omnichannel consumer experience. While our strategies are tailored uniquely for each brand, our overarching goals are similar.

First, in terms of building brand desire, our primary objective is to engage and inspire both new and existing consumers. Second, in terms of product, we are committed to creating exciting fashion designs and further enhancing our core styles, many of which feature our iconic brand codes. Third, our retail omnichannel strategy entails leveraging our enhanced data analytics and digital capabilities to grow e-commerce revenues as well as increase store sales densities. Fourth, we are focused on stabilizing and returning our wholesale business to growth. Now turning to our fourth quarter fiscal 2025 results. Overall, business remained challenged, and we were disappointed with our performance.

Revenue decreased 15% during the quarter as we were impacted by the continued softening demand for fashion luxury goods globally. Our performance was further affected by store closures, as well as ongoing reductions in the wholesale channel. At Michael Kors, fourth quarter revenue decreased 16% compared to the prior year. Despite these results, we began to see encouraging signs of progress stemming from our new brand storytelling and product initiatives during the fourth quarter. In our own retail channel, we saw a sequential improvement in March that accelerated into the first quarter. Michael Kors is a powerful fashion luxury brand that has a strong heritage, and we are eager to build on this solid foundation.

Guided by the insights gained from our data analytics and consumer feedback, we believe we have the right strategies underway to grow over time. First, we are focused on engaging new and existing consumers through a modern interpretation of our JetSet heritage based on our brand vision of traveling the world in style. Second, we are reinforcing our iconic brand codes and creating exciting product with compelling value to drive higher whole price sell-throughs. Third, we are focusing on improving store productivity through our optimization program, which includes store closures and renovations. And fourth, we plan to stabilize our wholesale business and return it to modest growth in the future.

In February, we launched our new JetSet storytelling, which reconnects with the heritage of the Michael Kors brand through our new brand vision of traveling the world in style. We are amplifying our storytelling strategies around a new franchise called Hotel Stories, a series that captures and conveys the very essence of our brand. The first chapter of Hotel Stories took place in Ibiza at the Montes Sol Hotel, featuring English actress and singer Suki Waterhouse. The story features exciting fashion moments captured in Ibiza and at the hotel while celebrating the joy of traveling the world in style. We are pleased with the and believe it is helping us reignite brand desirability.

According to our consumer insights, we have seen an inflection in brand affinity as well as a significant improvement in purchase intent. Additionally, our new storytelling is generating higher engagement across social media. We continue to believe that one of our most valuable assets and key differentiators is our founder and chief creative officer, Michael Kors. As a world-renowned fashion designer, his iconic runway shows cast a powerful halo over the brand. Michael's fall winter 2025 runway show channeled relaxed chic in a space inspired by a classic downtown New York loft. Attendees included Suki Waterhouse, Uma Thurman, Kerry Washington, Lea Michele, among others.

During New York Fashion Week, Michael Kors was the second most engaged fashion brand on social media. The show generated over 170 million impressions and 60 million video views. The combined power of our JetSet storytelling and data analytics capabilities helped contribute to a 10% year-over-year increase in Michael Kors' global consumer database.

Now turning to product. At its core, our strategy is centered around designing fashion products with standout style and compelling value. During the fourth quarter, we launched several new accessories groups that celebrate our iconic brand codes and are aligned with our new strategic pricing architecture. We are seeing an overwhelmingly positive response from consumers across these platforms.

Our new Leila, Dakota, and Bryant groups are experiencing extremely strong full-price sell-throughs and attracting new consumers to the brand. Additionally, we are seeing renewed momentum in our iconic core signature groups. We are pleased with the green shoots emerging within accessories and are working diligently to apply the same strategies to our footwear and apparel business. Next, I would like to discuss our store renovation plans. Retail stores are a critical pillar in driving our sales recovery, and we believe our global store renovation program will help change Michael Kors' sales trajectory. Over the next three years, we plan to renovate approximately 50% of the store fleet, as well as key department store locations.

Our new store design concept reflects a modern and warm residential aesthetic. With our store renovation process now underway, we look forward to sharing our progress and results with you in the future. Now, I would like to take a few moments to address current quarter-to-date trends. Overall, first quarter trends to We are also beginning to see improving trends in key indicators that we closely monitor, including our consumer database, door traffic, and AUR. The Michael Kors customer database continues to grow both month over month and year over year, underscoring the continued strength and desirability of the brand. Additionally, we have seen even more robust growth in our VIP loyalty consumer base.

In terms of store traffic trends, we have begun to see a moderation in the rate of decline. And lastly, in terms of AUR, in our full price retail stores, quarter-to-date trends turned positive. Overall, we have been moving very quickly to execute our exciting next chapter for Michael Kors. One that is built on the strength of our heritage and guided by our consumer insights. While still in the early stages of our turnaround initiatives, we are seeing positive indicators that our strategies are beginning to work. Now moving to Jimmy Choo. Fourth quarter revenue decreased 3% compared to the prior year. Jimmy Choo is an iconic brand with a sense of glamour and a playfully daring spirit.

Over its 29-year history, Jimmy Choo has built a reputation for its dedication to time-honored craftsmanship and innovative design. We have a renewed focus on Jimmy Choo and are developing strategies to realize the full potential of this highly recognized luxury brand. First, we are committed to engaging and energizing both new and loyal consumers through storytelling centered around an empowered sense of glamour. Second, we are focused on growing accessories and expanding our casual footwear offering. Third, we are taking actions to enhance store productivity and elevate our retail experience. And fourth, we intend to stabilize and return our wholesale businesses to growth.

During the fourth quarter, we saw strong performance in new accessory styles, including our diamond and cinch bags. The cinch group has been the fastest-selling Jimmy Choo day bag in the last five years. Looking ahead, we will build upon the momentum of these successful platforms by introducing new materials and animations each season. At the same time, we will continue to reinforce our leadership in evening bags through an ongoing commitment to innovation, craftsmanship, and glamorous design. Additionally, we have significant potential to broaden Jimmy Choo's reach by expanding our pricing architecture and attracting new audiences.

In the fall season, we will be introducing a wider offering of accessories, including three new collections priced between $500 and $1,000, to appeal to a broader base of luxury consumers. We believe this initiative will significantly increase sales in accessories, which in turn should strengthen the brand's positioning and increase store productivity. In footwear, we continued to see declines across the dress category, consistent with industry trends. We are focused on bringing newness to this category with innovation and animation. The recently launched Scarlet featuring our iconic drop heel is a good example of a new style that is generating excitement and strong sell-throughs. We continue to believe there is a meaningful opportunity to expand our casual offering.

Our sneaker business has grown to approximately 10% of our footwear sales, and we are introducing new styles to further expand this category. For example, during the fourth quarter, we launched the Diamond Flex, a new sneaker with an ultra-soft construction featuring a flexible, lightweight sole. Sales of the Diamond Flex far exceeded our expectations, and it has been the fastest-selling sneaker in Jimmy Choo's history. Turning to brand awareness and consumer engagement. Our storytelling continues to focus on glamour, igniting joy, and empowering achievement. For spring, our initiatives emphasized new seasonal styles featuring American actress and fashion icon Chloe Sevigny.

Additionally, to celebrate the opening of our new Madison Avenue flagship store as well as debut our spring collection, we hosted a series of high-impact events for influencers and clients during New York Fashion Week. These brand events generated strong engagement and broad social media amplification, driving 20 million impressions across key digital platforms. Complementing these efforts, Jimmy Choo debuted exclusive campaigns around the launch of our new Diamond Trainer styles featuring brand ambassador Wang Yibo. We also partnered with influencers to create social media posts. These activities generated strong engagement and resulted in nearly 50 million impressions across social media platforms.

Now, our engaging consumer communication, which combines storytelling with data analytics, helped contribute to an 11% year-over-year increase in Jimmy Choo's global consumer database. With our renewed focus on strategic initiatives, we are establishing the essential building blocks to fully harness Jimmy Choo's unique potential and expand its position within the world of fashion luxury. In conclusion, as we enter fiscal 2026, we are optimistic about our path forward. While still early, we are beginning to see positive indicators that give us confidence. Looking ahead, we continue to expect trends to improve throughout fiscal 2026, positioning us to return to growth in fiscal 2027 and beyond.

We are confident in our ability to grow Michael Kors to $4 billion in revenue and Jimmy Choo to $800 million in revenue while restoring operating margins to the double-digit range. Before I hand the call over to Tom, as many of you know, he will be leaving Capri Holdings on June 20th, and this marks his final earnings call with us. I would like to express my deep appreciation for Tom's exceptional leadership and his many contributions over the past eight years. His impact as both CFO and COO has been significant, and I am truly grateful for his partnership throughout his time at Capri Holdings. Thank you, Tom.

Now, Tom will review our fourth quarter results and guidance in more detail.

Tom Edwards: Thank you, John, and good morning, everyone. Starting with fourth quarter results, total company revenue of $1 billion decreased 15% versus prior year, slightly better than our expectations. We reported an operating loss of $33 million, slightly below our expectations. Our net loss was $581 million, resulting in diluted loss per share of $4.90, primarily due to a non-cash tax valuation allowance that I will discuss in more detail shortly. Now turning to fourth quarter results in more detail. Starting with revenue by channel, total company retail sales declined mid-teens, with e-commerce performing slightly better than stores. The impact of our store optimization program negatively impacted retail.

In the wholesale channel, revenue declined double digits due to overall softness in the channel as well as to our prior initiatives to reduce wholesale exposure. Turning to revenue performance by geography. In the Americas, revenue decreased 13%. Revenue in EMEA declined 14%, while revenue in Asia decreased 23%. Now looking at revenue performance by brand. Given the pending sale of Versace, beginning in fiscal 2026, we will reclassify Versace as a discontinued operation, which means it will no longer be included in our non-GAAP results. Therefore, my comments will focus only on the Michael Kors and Jimmy Choo brand. At Michael Kors, revenue decreased 16% compared to the prior year.

Global retail sales decreased mid-teens while wholesale declined double digits. Excluding the impact of foreign currency and store closures, retail sales declined at a similar rate in the fourth quarter versus the third quarter. By geography, sales in the Americas decreased 12%. Revenue in EMEA declined 15%, while revenue in Asia decreased 31%. At Jimmy Choo, revenue decreased 3% compared to the prior year. Global retail sales declined high single digits and wholesale increased high teens. By geography, total revenue in the Americas decreased 7%. Revenue in EMEA increased 9%, and revenue in Asia declined 16%. Now looking at total company margin performance. Gross margin of 61% declined 170 basis points.

This was below our expectations primarily due to actions taken during the quarter to ensure we enter the year in a more current inventory position. By brand, Michael Kors gross margin of 58.6% compared to 60.8% last year. The decline versus prior year was primarily driven by lower full price sell-throughs on older styles. Notably, AUR trends improved from high single-digit declines in the third quarter to mid-single-digit declines in the fourth quarter, driven by a sequential improvement in full price sell-through trends on new styles. Jimmy Choo gross margin of 66.2% compared to 70.1% last year.

The decline versus prior year was primarily driven by the impact of inventory taken to enter fiscal 2026 in a better position as well as the effect of the April 2024 acquisition of our second footwear factory. As a reminder, we acquired footwear factories to further align with the luxury industry's best practices and to strengthen our technical competencies while ensuring consistent future supply for Jimmy Choo. Today, approximately 50% of Jimmy Choo's footwear is vertically integrated. Operating expense decreased $25 million. The decline versus prior year was the result of our cost reduction program. These benefits were partially offset by higher variable costs and unfavorable foreign currency translation compared to our expectation.

As a percent of revenue, operating expense was 64.2% compared to 56.3% last year, primarily reflecting expense deleverage on lower revenue. Total company operating margin was negative 3.2%, compared to positive 6.4% last year. By brand, Michael Kors operating margin of 4.6% compared to 14.1%, and Jimmy Choo operating margin of negative 7.5% compared to negative 5.8% last year. Now I would like to discuss the tax valuation allowance. In light of our recent results, the future use of our deferred tax assets was reevaluated, and we recorded a non-cash valuation allowance of $545 million, $119 million of which was related to Versace.

Depending on our levels of profitability, we may be able to benefit from these deferred tax assets in the future. Taken together, our net loss was $581 million, resulting in diluted earnings per share of negative $4.90. Now turning to our balance sheet. Looking at inventory, we ended the quarter with $869 million, a 1% increase versus prior year. We received $60 million worth of inventory earlier than anticipated. The early receipt of inventory will provide the benefit of mitigating the tariff impact in fiscal 2026. By the end of the fiscal year, we anticipate inventory levels will be down in the mid-single-digit range.

We ended the quarter with cash of $166 million and debt of $1.5 billion, resulting in net debt of approximately $1.3 billion. This is higher than we originally anticipated due to the earlier timing of inventory receipts as well as the weaker US dollar, which increased the dollar value of our euro-denominated debt. Looking at our leverage ratio, net debt to adjusted EBITDAR was 3.2 times at the end of fiscal 2025. Now turning to guidance. Compared to prior expectations, there have been a number of changes, including first, the pending sale of Versace, second, the impact of tariffs, and third, foreign currency exchange rates.

I would like to take a few minutes to discuss how each is impacting our guidance. Starting with the pending sale of Versace. Since we will reclassify the business as discontinued operations, beginning in fiscal 2026, our guidance now excludes Versace from our results. Additionally, upon completion of the sale, which we expect will occur in the second half of calendar 2025, we plan to use the proceeds to reduce debt. After doing so, we anticipate we will have minimal net debt remaining on our balance sheet. As a result, we anticipate our interest expense will significantly decline. Turning to tariffs. The situation remains highly dynamic, but we are proactively managing the risk and remain positioned to respond.

Our sourcing is broadly diversified, with the majority of Michael Kors fiscal 2026 production volume originating from Vietnam, Cambodia, and Indonesia. Jimmy Choo sources the vast majority of its products from Italy. For Michael Kors and Jimmy Choo combined, China represents approximately 5% of US production volume. We anticipate we will begin to see the impact of current tariff rates in our fiscal first quarter when shipments of affected products commence. As the year progresses, the impacts will increase.

Assuming a 10% baseline tariff and a 30% tariff on imports from China, we estimate the impact of tariffs on products shipped into the United States would increase our cost of goods sold by approximately $60 million in fiscal 2026 on an unmitigated basis. Our global supply chain is highly agile, supported by longstanding relationships with our manufacturing partners. In fiscal 2026, we expect to begin to offset the impact of tariffs, with the goal of fully mitigating their effect over time. Some of the actions we are taking include sourcing optimization to minimize tariff exposure, working with our sourcing partners to create cost efficiencies, and strategically evaluating select price increases. And finally, looking at foreign currency.

Given the recent weakening of the US dollar, based on today's exchange rates, foreign currency is now expected to modestly increase both revenue and operating expense dollars in fiscal 2026 compared to fiscal 2025. Due to the uncertainty around tariffs, including the potential impact on consumer spending, as well as fluctuating foreign currency exchange rates, we are providing guidance assuming a range of outcomes. In fiscal 2026, we expect total company revenue to be between $3.3 and $3.4 billion. By brand, we expect Michael Kors revenue between $2.75 and $2.85 billion, and Jimmy Choo revenue between $540 million and $550 million. As we think about the cadence of the year, we anticipate gradual progression as our strategic initiatives gain traction.

For the year, we anticipate gross margin approximately 61% to 61.5% compared to a combined Michael Kors and Jimmy Choo gross margin of 62.2% last year. We expect operating expense of approximately $2 billion, reflecting the removal of Versace from our results as well as our cost reduction initiatives. As a reminder, our cost savings initiatives include store closures, global headcount reductions, office consolidation, and other efficiency measures across our supply chain and back office. Given the significant weakening of the US dollar, we now anticipate foreign currency will modestly increase operating expense dollars. We expect full-year operating income in a range around $100 million.

By brand, we anticipate Michael Kors operating margin in the and Jimmy Choo operating margin in the negative mid-single-digit range. Turning to our expectations around certain non-operating items. We expect net interest income between $85 million and $90 million, reflecting minimal debt levels and lower interest expense in the back half of the year after the as well as interest income from our net investment hedges. We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately 119 million. As a result, we expect to generate diluted earnings per share between $1.20 and $1.40. Now turning to capital allocation.

As I mentioned, we plan to use the proceeds from the sale of Versace to reduce debt. Going forward, as we think about allocating our cash flow, our first priority is to invest in the business. This includes store renovations, as our retail locations are one of the cornerstones to rebuilding sales growth. As discussed during our Investor Day, we plan to renovate approximately 50% of the Michael Kors store fleet over the next three years. We anticipate these renovations will cost approximately $350 million over the three-year period and will be included in our store optimization program.

Our second priority is to maintain a strong balance sheet, and our third priority is to return cash to shareholders via share repurchases. Over time, we anticipate resuming share repurchases to create additional shareholder value. In terms of capital expenditures, we anticipate spending approximately $110 million in fiscal 2026, which includes Michael Kors and Jimmy Choo store renovations as well as IT expenditures, including investments in our digital and analytical capabilities. Now turning to first quarter guidance. We expect total company revenue to be between $765 million and $780 million. By brand, we anticipate Michael Kors' revenue between $615 million and $625 million, and Jimmy Choo revenue of approximately $150 million to $155 million.

Looking at operating margin, we expect first quarter operating margin will be. In terms of operating margin by brand, we anticipate Michael Kors operating margin in the mid-single-digit range and Jimmy Choo operating margin of approximately breakeven. Turning to our expectation, we expect first quarter net interest income of approximately $15 million, reflecting interest income from our net investment hedges. We anticipate an effective tax rate of approximately 15% and weighted average shares outstanding of approximately 119 million. As a result, we expect to generate diluted earnings per share of approximately $0.10 to $0.15.

In closing, as we enter fiscal 2026, we are encouraged by early signs that validate the effectiveness of our strategic initiatives and reinforce our confidence in our path forward. We expect underlying trends to continue improving through fiscal 2026. Looking to fiscal 2027 and beyond, with our strategic initiatives gaining traction, we expect to return to revenue growth and margin expansion. Now on a personal note, as this marks my final earnings call at Capri Holdings, I would like to take a moment to thank John for his support and partnership. It has been a privilege to work together.

And I would like to thank the board of directors, our leadership team, and all of our dedicated colleagues for your collaboration, support, and shared commitment over these past eight years. With the strength of Michael Kors and Jimmy Choo, I am confident that under your leadership, Capri Holdings is well-positioned to deliver sustained revenue and earnings growth as well as increased shareholder value in the future. Now we will open up the line for questions.

Operator: Thank you. We will now be conducting a question-and-answer session. If participants are using speaker equipment, it may be necessary to pick up your We ask that you please limit yourself to one question. One moment please for your first question. Our first question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

Simeon Siegel: Thanks. Hey, guys. Good morning. Tom, it's been great working with you. Best of luck on your next chapter.

Tom Edwards: Thank you, Simeon.

Simeon Siegel: So great to see the slight revenue raised at Michael Kors and the discussion on returning to growth in 2027. I guess, on the other hand, the margins look lower. So can you guys speak to a little bit what gives you comfort in the troughing revenue expectations? And then maybe a little bit more color on the drivers you're baking into the margin degradation. I guess, just especially in light of what looks like healthier full price sell-through. Thanks.

John Idol: Good morning, Simeon. I'll take the revenue part. I'll pass the gross margin part out to Tom because I think there's a little more color to that in terms of its actual TY, LY, and how the tariffs are impacting that. Number one on the revenue side, we are optimistic given what we see happening right now for us in Q1. We are two months into the quarter, and the first number I will give you is we were down approximately 15% comp in Michael Kors retail last quarter. And we are almost flat at this point.

So there has been a significant step change in the performance of Michael Kors at retail, led by our full price business. Which is really nice to see because we have three groups that we talk about in our prepared remarks. That's Leila, Nolita, and Bryant, and then a further one called Dakota. All of which are having excellent full price sell-throughs. And they're all in the $200 to $400 range. So those are back to our historical kind of price ranges where we did where we were very successful in the past.

And between the great work that Michael and the design teams have done, as well as the great price value relationship that's been put into the product, we're seeing very, very strong green shoots. So I should also mention that our JetSet storytelling, which is around traveling the world in style, is really resonating with the consumers, and we're seeing that in some of the existing data analytics in terms of the sales and the consumers that are shopping with us, as well as some of the forward-looking analysis that we've done with consumers on intent to purchase, and that has gone up again sequentially very significantly.

So we believe, at least initially, that we're seeing results from the changes that we started to implement really in the beginning of the fourth quarter. It's nice to see that happening. We've got more work to do, particularly in excitement level onto that channel. And we're gonna be doing that starting in the back half of the year. So that's what gives us some good feeling about where the revenue projections are that we've just given you. As well as how we see a step change into next year. I would like to also add that we will be through most of the store closure program. We've got about 75 stores to close this year.

Predominantly, those will be Michael Kors. And that would have about a $50-plus million revenue impact that we will not have to anniversary next year. And, additionally, we'll have about another $50 million in wholesale door closures that were planned by us. Again, that program really ends at the end of this fall season. So we'll really be looking at comp doors. So that's almost a $100 million impact that we won't be anniversaring next year. So I think that's between our storytelling around our heritage jet set really the core of this company. Number one. Number two, the product, and our standout style with compelling value. Number three, the store closure program will be behind us.

And then on a very positive and exciting note as well, we're going to begin we've already started a store renovation program where we're gonna renovate about 50% of our fleet over the next three years. And we think that's also going to have a significant impact and inflection on our store productivity. So we're feeling very confident around what we see happening at Michael Kors. Regarding Jimmy Choo, I think we know we have some issues around the dress shoe category. We've seen ups and downs there. It came out of COVID. It was very strong. Things went back to casual again more from a fashion styling standpoint.

We are doing a better job with casual, but we think we can do even more in that category. Which obviously is our core category. But we're very excited about the announcement that we made about the three new groups coming for fall season in accessories. We think we've got a very big opportunity as we're in the luxury consumer's closet already. To be able to take our accessories and put them at more compelling price points in particular. For the aspirational luxury consumer. And we think that's a big opportunity for us. I think we've said that we are very engaged with Jimmy Choo. And we think that the brand has a great opportunity to grow and develop.

So that's what gives us a positive outlook on revenues, in particular for 2027 and 2028. Let me stop there, and I'll turn it over to Tom for the discussion around our gross margins.

Tom Edwards: Sure. And, Simeon, on gross margins, there are a couple of points here. The first is just to kind of remind back on our prior guidance. Where we are improving gross margin for the year based on the strategic initiatives for Jimmy Choo and Michael Kors, getting the right inventory into place and do everything that we are planning and are doing to drive the brand that we are seeing the first real results in green shoots here in the first quarter. With that, increase and those initiatives, that all still is in place and we still feel very good about that. What is happening now is there is an overlay for the tariff impact in fiscal 2026.

And that as I noted in the prepared remarks was about $60 million higher costs on an unmitigated basis. And if I just do the math between prior expectations of 50 bps, that tariff amount is about down 150 plus. So we get to at a midpoint down 100 bps basis points for gross margin for the year. And that is before we really get traction on the mitigation activities. Our goal is to fully mitigate over time the tariff impact. We're looking at sourcing optimization, we are looking and working with our sourcing partners to create cost efficiencies and we will be strategically evaluating select price increases. As we move through the year, we'll get more visibility on that.

But our first priority in all of that is to maintain the momentum of our brand recovery, and we'll be doing that as we strategically and very carefully assess our reactions particularly on the price front. Great.

Operator: Thank you. Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Brooke Roach: Good morning, and thank you for taking our question. It sounds like you have a lot of emerging momentum at Michael Kors retail. I was hoping you could discuss the wholesale outlook for the brand this year. How are your partner discussions going today versus your expectations at investor day a few months ago? Particularly in the North America business? Thank you.

John Idol: Thank you, and good morning, Brooke. I would say it's just about, you know, where we presented to you at our investor day. We've been around the world. We've met with all of our strategic wholesale partners. And I would say the response has been very consistent. In that number one, people are very much feeling positive about us returning to the focus around our JetSet heritage. They like the new storytelling, the way it's been developed, around hotel stories and traveling where we have a much associated with the Michael Kors brand.

I would say that's also caused a significant inflection in that I mentioned before, Leila, Nolita, Bryant, and Dakota, all seeing very strong sell-throughs on a global basis. So we're seeing positive response from those partners. In certain cases, they've actually gone back and relooked at their commitments to us and increased those commitments. I would also say that I think you're probably aware we launched on Amazon recently. And that has been very, very successful. It has exceeded our expectations. And it's also showing the ability to communicate with a broader customer group who has a high level of engagement with us. And our full price selling on that platform has been excellent.

So it's a little hard to see how that's gonna all come together when I talk about wholesale because we do, as I mentioned before, we still have some additional store closures that will happen throughout the fall season. Most of it will come to an end in September, October, November. So I think the kind of the true measurement, we will start to see fourth quarter calendar fourth quarter and then into spring of next year. So we do have a decline planned for wholesale.

But as I've said, again, in my prepared remarks, our goal and our belief is that we will stabilize that part of our business and actually see some modest growth especially in fiscal year 2027 and 2028.

Brooke Roach: Great. Thanks so much. I'll pass it on.

Operator: Thank you. Our next question comes from the line of Oliver Chen with TD Cowen. Please proceed with your question.

Katie: Hi there. This is Katie on for Oliver. One thing we wanted to talk about and ask is just on sort of what's within your to help drive traffic and conversion and those strong trends that you're currently seeing in your own retail channel, given just a more volatile consumer backdrop that we're seeing. Thank you.

John Idol: Yeah. Katie, so I first of all, good morning. I think we're very focused on traffic, you know, as we talked about before. We're seeing a lot of positive indicators. Our whole price AURs turn positive and see that happen really in a quarter is quite extraordinary, and we're very pleased with that. We have not seen traffic turn positive and I'll say that's more of a North America and China issue. We've got some very nice trends going in Europe for us. But the sequential declines have decelerated significantly. And, again, in full price, we're almost close to positive traffic there as well. What we're focused on is really our marketing initiatives and our storytelling.

Along with the you know, we spent a lot of time and money and have the resources around our data analytics to really give us the tools to be able to engage with new and existing consumers to excite them about the brand and to re-engage with them or to drive them in our stores. And we're seeing positive results around that initiative, and as I just mentioned, also around the significantly increased influencer program that we have going on, and you're gonna see a lot more of that particular around the hotel stories that are really just starting to launch around the globe.

So I think while we cannot a hundred percent control traffic, I think we can influence it. And we feel that we have the strategies and many tools within our control to be able to try to move that forward. And, of course, you know, having greater brand desirability also referred to as brand heat, will help to drive that as well. Through our stores. You know, conversion has always been something that even through all of our ups and downs, we've had very strong conversion rates at Michael Kors. So once they come in the door, converting with our customers has been less the issue for us.

It's been more footfall which obviously goes back to brand desirability, which goes back to brand heat, etcetera. And I don't wanna say that we've, you know, we've called the bottom, but we've definitely seen a change in Michael Kors. And it's nice to see that in such a short window of time. We've got a long way to go to rebuild this business to the $4 billion that we're aspiring to get to. But again, we are beginning to see the results of our initiatives. And we're quite hopeful given the results. Thank you.

Katie: Very helpful. Thank you very much.

Operator: Thank you. Our next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Jay Sole: Great. Thank you so much. John, I'm just wondering if you can elaborate a little bit more on some of the strategies and things that you wanna do to improve the sales trajectory of the Michael Kors brand. I mean, you talked about initiatives when it comes to product and marketing and store experience. I think you mentioned the pricing that some of the newer bags are selling for is within that traditional area where you've had a lot of success. But if you look back over the history of the brand, you know, at some moments, you've had a lot of momentum, some probably less momentum than you've wanted.

What are some of the core things that, like, you know, work consistently to drive the brand for that maybe had fallen away a little bit in the last couple of years that, you know, you can get back to get to that positive sales growth rate on a sustainable basis that you know you can do. Thank you.

John Idol: Thank you, Jay, and good morning. Jay, I think we've talked about this in the past and know, we clearly have made missteps. Over the past few years and I won't go back into some of the causes of that. Some were self-inflicted, etcetera. But I think what happened is in November, December, we got clarity in this company what you know, this business was built by Michael. Originally, plus years ago. And he really had a vision for the way a consumer wanted to look and an exciting lifestyle that they wanted to live. And that's still a very relevant positioning.

And we I think lost our way and decided that various points in time that either wasn't the right thing for us or, you know, there were other trends happening that maybe were more exciting. And what again, our consumer research really told us was the customer likes our positioning, and they really yes. They wanted it maybe a little more modern and certain products need to be a bit more relevant. But you know, when you build a brand over that period of time, to try to either completely reset its or to run away from your history, those weren't the right things for us to do.

So I think that we look at that as a first starting point and the entire management team and all of our store managers are excited. Our retail partners are excited. So, think we're onto something when it comes to that. Secondly, you know, we had aspirations of, quote, elevating the brand. And while that worked at certain moments, certainly coming out of COVID, we raised prices considerably. It worked for a while. But then the customer came back and said, that's not exactly what we expect from Michael Kors. There is a window of pricing that we enjoy consuming your products in, and we'd really like you to stay there.

And so once we finally acknowledge that's what the consumer has voted and said, you can see the results are already starting. And, you know, even though, again, in my prepared remarks, I said we're working on our footwear and ready-to-wear businesses too. Get that same level of product reception. Actually, in ready-to-wear, we're starting to see it very, very quickly as well, where the customer has leaned into some of our very important key styles that we've been marketing, and the sell-throughs are very, very high. Sell-throughs, we haven't seen in three or four years. So, again, I think that you have to learn from your mistakes. You have to be honest with yourself about what those mistakes were.

I believe we are doing both of those things today. And then we're going to stay much more focused, much more committed to I think a brand positioning that is very important. And other brands who we compete with will have their positioning. And we should stay in our lane and try to be true to ourselves. I would also say similar in Jimmy Choo with the exception you know, Jimmy Choo is glamour. It's playful, it's really got an exciting DNA. And consumers love Jimmy Choo. You don't find consumers saying anything negative or, you know, you've gone off brand, etcetera.

But what we do have to do with Jimmy Choo is we have to expand the use for the consumer because she loves the brand. But she associates it very, very much with a more dressed up and a more formal and a more occasion vision of what the brand is. And we've gotta do a better job of bringing her the other parts of how Jimmy Choo can be a part of her lifestyle. And one of those areas is casual footwear, and the other area quite frankly, which, you know, we were off to a very good start. We got distracted. And we're reengaged and refocused is on accessories. Again, she comes into our store.

She's willing to spend very large amounts of money on footwear. And now to be able to say, yes, we'll still have our great cinch bag and our diamond bags, which will retail in the $1,400 to $2,500 range, or our bond bonds that will be $3,000 and higher. But to have this other range of product, which is still very expensive, and be able to have that not only in our own stores, but also on a wholesale distribution basis, in the best luxury stores in the world is gonna give Jimmy Choo, I think, another leg to be able to drive to.

And so, again, we just have laid out this additional strategy since we met with you at investor day. And so we're excited about where Jimmy Choo can go. We've got a store fleet located in the best locations in the world. Best streets, best cities, sitting next to the best retailers in the world, and we should be able to capitalize on the brand, and its recognition. As well as the fact that we've got customers who come in who are ready to shop, and we should be there with them for the right products. So thanks a lot, Jay.

Jay Sole: Great. Thank you.

Operator: Thank you. Our next question comes from the line of Anisha Sherman with Bernstein. Please proceed with your question.

Anisha Sherman: Thank you so much. My question is around your pricing strategy. So, you know, you've talked a few times now, including on this call, about the need to offer those better value price points to the consumer, and you're seeing some success there. When do you expect to be at steady state there on where you wanna be on pricing? And then you also made a comment, I think, Tom, earlier on strategically evaluating price increases to mitigate some of that tariff risk. Can you talk about how that fits into your broader pricing strategy? And could there be some risk around blurring the positioning of the brand there? Thank you.

John Idol: So first of all, good morning, Anisha. Number one, we should be where we need to be by the fall season with the Michael Kors brand. I'm guessing right now, but let's say we're 60 or 70% of the way now. You know, we made a lot of changes quickly. That also impacted some of our margin as well. We just lowered certain prices because we knew it was the right place to be. And by the way, those are historical prices, so I wanna be very clear that we're not going to levels that we're where we haven't been before.

So that put a little pressure on us on margin, and we'll see a bit of that in the first quarter as well as we slowly start to work with our supply base, etcetera, on some of those changes that we needed to make. But we should be in a very good place by the fall season. I might also say to you that conversely, also, one of the things that's gonna help impact AUR in our outlet channel, we've actually raised some prices. Where we found that some of our pricing was not commensurate with what we think the brand offered as value.

Nothing overly significant, but enough to that will hopefully help us impact our margins on a go-forward basis. But also that help us raise our AUR and selling. We're also, in particular, in our outlet channel, we are reducing a significant level of promotional activity, and that is actually that started already in the fourth quarter. That did impact some of our revenues in that channel, but that's what we wanted to do. We thought that was the right thing for us to do. So, again, there's a little bit of, you know, puts and takes here.

And I'll turn before I turn it over to Tom in a second, I think that the pricing increases as it relates to mitigating tariffs think we're gonna go slowly around that. I think we wanna first and foremost get the Michael Kors brand back on track moving forward reengaging with that consumer so that they're having a great experience with us, and how and where we need to tweak I will call it tweaking prices. There's not gonna be any significant price changes. That'll also depend on how much we're looking to do after we get done working with all of our suppliers on mitigating some of these tariffs.

And I think lastly, we need to also determine where the tariffs are because none of us actually sit here today and you know, we've given you a range in our guidance. You know, we're all sitting here as everyone is waiting to find out what is happening. And I think we'll know more of that towards the tail end of the summer. So we can have a better understanding of what, in fact, we are going to need to mitigate. And so that would also kind of get into where we would take price increases or not. But I wanna be clear.

The first thing that we want to do is to make sure that we have an exciting experience with the consumer. And again, if we can drive more revenues, that will increase our profitability. You can see that the leverage that just by having a small mid-single-digit increase in fiscal 2027 and fiscal 2028 will bring to us is quite significant. And will have a very, very big EPS impact as well as, you know, when you layer on top of that, if we do restart the share repurchase program, I think you're gonna see quite a significant lift in EPS for the company in a relatively short period of time.

Let me stop there and I'm gonna turn it over to Tom on the pricing piece.

Tom Edwards: Thank you, John. And, Anisha, I just wanna reiterate what John said. Our first priority is really brand momentum. Is the primary goal, and it's the primary really, basis for future success. So we will proceed extremely carefully on assessing any pricing actions. When ultimate tariff levels are better known, we'll certainly assess the market reaction. And look at this on a very granular basis. But our efforts now are really focused on the sourcing side working with our sourcing partners and sourcing optimization.

John Idol: Thank you. And, thank you, everyone, for joining us today. I'd like to remind everyone before we conclude the call that we are awaiting approval from various jurisdictions around the world on the Versace transaction. We are very optimistic that transaction will be completed sometime in the fall season. And as a result of that, the company will have very, very low net debt which puts us in a very strong position to be able to invest in the future of both Michael Kors and Jimmy Choo. It additionally has a very strong EPS impact for the company as our carry forward interest go down significantly.

So we're very pleased about the results of that transaction and hopeful that it will conclude in the fall season. Which will set us up for another very positive positioning for Capri Holdings. Thank you for joining us today, and look forward to updating you on our next call.

Operator: Thank you. This does conclude today's teleconference.