Capri Holdings (NYSE:CPRI) is a new name in the fashion world, but the concepts the holding company has under its corporate umbrella have strong brands with global appeal. The company formerly known as Michael Kors Holdings has grown in two distinct phases, with the acquisition of Jimmy Choo in 2017 and the more recent merger with Versace bringing Capri to its current status.

Coming into Wednesday's fiscal fourth-quarter financial report, Capri investors were ready to deal with relatively flat earnings but still wanted to see encouraging signs of top-line growth. Revenue did indeed move higher thanks in part to acquisitions, but Capri's strategic vision isn't generating the level of confidence in future results that most shareholders want to see.

Capri Holdings logo.

Image source: Capri Holdings.

Growing pains for Capri

Capri Holdings' fiscal fourth-quarter results looked reasonably solid on their face. Sales came in at $1.34 billion, which was up 13% from year-ago levels and slightly outpaced what most of those following the stock were expecting to see. Adjusted net income eased lower by 2% to $95 million, but the resulting $0.63 per share in adjusted earnings topped the consensus forecast among investors for $0.61 per share.

Capri investors got their first full look at how all three of its segments performed for full three-month periods. The original Michael Kors business remained the largest of the three, with sales of $1.07 billion falling 0.4% from levels the previous year. Comparable store sales were down 1% on a currency-neutral basis. Operating income for the unit was even weaker, falling 15% over the same period.

Unfortunately, although Jimmy Choo and Versace produced substantial increases to Capri's overall revenue, they weren't profitable. Jimmy Choo's revenue climbed 29% year over year to $139 million, even though current impacts cost the company more than 6 percentage points of additional growth. Yet the unit posted an adjusted operating loss of $16 million. Similarly, Versace contributed $137 million in revenue during its first full quarter as part of Capri, but its operating loss of $6 million on an adjusted basis also held the overall business back.

The segments had mixed performances worldwide. For Michael Kors, the American region produced modest growth, but it wasn't enough to outweigh declines in Europe and Asia. Meanwhile, Versace and Jimmy Choo got the vast majority of their revenue from overseas, leaving them the most exposed to the effects of the strong U.S. dollar during the period.

What's ahead for Capri?

CEO John Idol marked the end of the fiscal year by detailing recent events. "We expanded our fashion luxury group with the addition of Versace" during fiscal 2019, Idol said, "one of the world's most storied Italian luxury brands." The CEO pointed to Jimmy Choo's strong results and ongoing efforts to have Michael Kors focus on product innovation, brand engagement, and customer experience.

In the long run, Capri hopes to grow substantially. Long-term goals for Versace include bringing $900 million in revenue to $2 billion, and getting Jimmy Choo from $600 million to $1 billion. Michael Kors' opportunity is more fully played out, but a move from $4.5 billion to $5 billion would still be a nice driver of overall sales.

Yet not everyone was happy about Capri's fiscal 2020 guidance. The company expects revenue of roughly $6 billion, below the $6.15 billion consensus among those following the stock. Earnings projections of $4.95 per share would be slightly below where Capri ended fiscal 2019, which would be similarly disappointing despite $0.25 per share in earnings headwinds from integrating Versace into the mix.

Shareholders weren't pleased with the results, and Capri shares dropped 10% in morning trading following the announcement. The long-run prospects for Capri might be good, but as we've seen in recent quarters, investors don't seem to be patient right now about letting the retailer make slow progress toward reaching its goals.