Capri (NYSE:CPRI) said its fiscal third-quarter 2026 results from continuing operations came in ahead of management’s expectations, supported by improved full-price selling and reduced promotional activity across Michael Kors and Jimmy Choo. Executives also highlighted the recently completed sale of Versace, which the company reclassified as a discontinued operation, as a move aimed at strengthening the balance sheet and increasing flexibility to invest in its remaining brands.
Quarterly results exceeded expectations
For the third quarter, Capri reported total revenue of $1.025 billion, down 4% year over year on a reported basis and down 5.9% in constant currency. Retail sales declined mid-single digits, which management described as a slight sequential improvement from the second quarter, while wholesale revenue was flat compared to last year.
Operating expenses declined $32 million, generating 80 basis points of expense leverage. Operating margin was 7.7%, down from 9.2% a year earlier, which management attributed to higher tariff rates.
Versace sale reshaped the balance sheet
Capri said it completed the sale of Versace during the quarter and received approximately $1.4 billion in cash proceeds, which it used to significantly reduce debt. The company ended the quarter with $154 million in cash and $234 million of debt, resulting in net debt of about $80 million. Mehta compared that to net debt of approximately $1.6 billion at the end of the second quarter.
Management said the company’s priorities for cash going forward are to invest in the brands—particularly through store renovations and technology and digital enhancements—and then return cash to shareholders through repurchases. Executives noted the board previously authorized a $1 billion share repurchase program that is expected to commence in fiscal 2027.
Michael Kors: revenue down, but full-price indicators improved
Michael Kors third-quarter revenue decreased 5.6% year over year on a reported basis (down 7.3% in constant currency). Retail sales declined mid-single digits, with store closures cited as a low-single-digit headwind, and wholesale sales also fell mid-single digits.
By geography, Michael Kors revenue declined 9% in the Americas, rose 6% in EMEA, and slipped 1% in Asia. CEO John Idol said Europe continued to outperform with mid-single-digit increases in trends, while the Americas declined low double digits and Asia declined low single digits, though he pointed to sequential improvements in both the Americas and Asia.
Idol emphasized that reduced promotional activity has pressured reported sales but improved the health of the business. He said full-price sales in the brand’s full-price channel increased low double digits sequentially, leading to higher average unit retails (AURs) and higher gross margins. In outlet, revenue remained impacted by a strategy to reduce promotions and by assortments reflecting the prior design direction for much of the quarter, though management said newer, more modern styles introduced late in the quarter delivered higher full-price sell-throughs and higher AURs.
During the Q&A, Idol attributed the sequential improvement in retail trends partly to stronger full-price selling, increased focus on icon products, and early traction from new product flowing into outlets. He also cited headwinds from efforts to reduce daigou-related sales and said those reductions would largely be behind the company by about August or September of next year.
On product and customer targeting, Idol said the company refined its pricing architecture and saw strong response to smaller bag silhouettes priced in the $150 to $250 range, which he linked to increased engagement from Gen Z consumers. He also said Michael Kors signature product represents about 40% of sales after the company reduced penetration from prior levels and that management expects it may trend slightly lower over time as leather and suede styles gain momentum.
Michael Kors gross margin was 59.7% versus 62.6% a year ago, which Mehta said was driven by higher tariffs; excluding tariffs, he said gross margin expanded 60 basis points.
Jimmy Choo: revenue growth and improving profitability
Jimmy Choo delivered year-over-year revenue growth in the quarter, with sales up 5% on a reported basis (up 1.9% in constant currency). Retail sales increased low single digits and improved sequentially, while wholesale revenue grew double digits.
By geography, Jimmy Choo revenue increased 23% in the Americas and 3% in EMEA, while declining 10% in Asia. Idol said the brand’s full-price retail channel rose mid-single digits and pointed to continued traction in accessories and growth in casual footwear. He highlighted the holiday campaign featuring Sydney Sweeney and said it reached about 150 million consumers across social platforms. The company also cited over 400 in-store events worldwide and said Jimmy Choo’s global consumer database grew 8% year over year.
Mehta said Jimmy Choo gross margin increased to 66.5% from 66.0%, driven primarily by higher full-price sell-throughs, and that excluding tariffs, the brand’s gross margin expanded 80 basis points. Jimmy Choo operating margin improved to 1.8% from negative 3.8% a year ago.
Guidance narrowed; management reiterated fiscal 2027 growth outlook
Capri narrowed its fiscal 2026 outlook, projecting revenue between $3.45 billion and $3.475 billion. By brand, management expects Michael Kors revenue of $2.86 billion to $2.875 billion and Jimmy Choo revenue of $590 million to $600 million. Gross margin is anticipated to be about 61%, with operating expenses slightly more than $2 billion, and operating income of roughly $100 million.
Mehta said full-year net interest income is expected to be $85 million to $90 million, the effective tax rate is expected to be in the low-to-mid teens, and weighted average shares outstanding are expected to be about 120 million. Based on those assumptions, Capri forecast fiscal 2026 diluted EPS of $1.30 to $1.40.
Looking beyond the current year, management said it expects a sequential improvement in retail trends in the fourth quarter and reiterated confidence in returning to both revenue and earnings growth in fiscal 2027. Executives also discussed planned gross margin expansion driven by higher full-price sell-throughs, sourcing efficiencies, and targeted price increases, alongside continued expense discipline.
On long-term profitability, Idol said the company believes Michael Kors could return to 20%+ operating margins over time as revenue grows and leverage is achieved, while also expressing confidence that Jimmy Choo can return to double-digit operating margins as accessories expand and scale improves.
About Capri (NYSE:CPRI)
Capri Holdings Limited (NYSE: CPRI) is a global luxury fashion company that designs, markets and distributes a range of premium lifestyle products. The company’s principal brands—Michael Kors, Versace and Jimmy Choo—offer handbags, ready-to-wear apparel, footwear, watches, jewelry, fragrance and other accessories. Capri Holdings combines in-house design talent with international sourcing, manufacturing and retail operations to deliver collections that reflect each brand’s distinct heritage and aesthetic vision.
Formed in 2018 through the rebranding of Michael Kors Holdings following the acquisition of Versace, Capri has since integrated Jimmy Choo into its portfolio.
