Capri Holdings is showing signs of improving profitability across its remaining luxury portfolio even as overall revenue remains under pressure, with Jimmy Choo operating income more than tripling, Michael Kors gross margin expanding 280 basis points and companywide net debt falling from approximately $1.5 billion to $224 million in one year.
Jimmy Choo generated fiscal Q1 2027 revenue of $179 million, increasing 10.5% year-over-year and 9.3% on a constant-currency basis. Operating income increased to $13 million from $4 million, while operating margin expanded 480 basis points to 7.3% from 2.5%.
The operating-income increase substantially outpaced Jimmy Choo’s revenue growth, with Capri attributing the margin improvement primarily to expense leverage on higher sales. Gross profit rose to $123 million from $114 million, but gross margin fell 170 basis points to 68.7% because of channel mix.
Michael Kors presented a different picture. Revenue declined 7.1% to $590 million, or 7.6% on a constant-currency basis, but gross margin increased significantly despite the sales contraction.
Michael Kors gross profit was $377 million and gross margin reached 63.9%, compared with $388 million and 61.1% a year earlier. Capri attributed the 280-basis-point margin expansion mainly to higher full-price sell-throughs and lower tariff rates than in fiscal Q1 2026.
Michael Kors operating income nevertheless declined to $55 million from $63 million, with operating margin decreasing to 9.3% from 9.9% as lower revenue created expense deleverage.
Capri’s consolidated revenue declined 3.5% to $769 million, but adjusted operating income increased to $28 million from $20 million and adjusted operating margin expanded to 3.6% from 2.5%. Adjusted net income increased to $76 million from $60 million, while adjusted EPS rose to $0.67 from $0.50.
The balance sheet has changed even more dramatically. Capri ended June with $114 million of cash and $338 million of total borrowings, resulting in net debt of $224 million compared with approximately $1.5 billion one year earlier.
Inventory also declined 20% year over year to $624 million. Capri generated $73 million of operating cash flow and spent $25 million on capital expenditures, resulting in $48 million of free cash flow.
The company repurchased approximately 2.6 million shares for $50 million during the quarter at an average price of approximately $19.31. Capri still had $871 million available under its share repurchase authorization at quarter-end.
Capri has nevertheless lowered its fiscal 2027 revenue expectation to approximately $3.4 billion. Management cited roughly $50 million of impact from Michael Kors inventory delays, another $50 million from weaker EMEA trends related to the Middle East conflict and approximately $35 million of currency headwinds relative to its previous assumptions.
Despite the lower revenue outlook, Capri still expects fiscal 2027 diluted EPS of approximately $2.15, which management said would represent approximately 40% growth over the prior year. The company is implementing cost reductions to protect earnings as it works to stabilize Michael Kors and sustain Jimmy Choo’s growth.
KEY QUOTES:
“We are encouraged by our first quarter results, which exceeded our expectations and demonstrated the progress we are making to build a stronger and more profitable business. Our strategic initiatives across both Michael Kors and Jimmy Choo are driving deeper consumer engagement through enhanced brand storytelling and compelling product innovation.”
“Based on our revised revenue expectations we are taking actions to reduce operating expenses which are enabling us to maintain our fiscal 2027 earnings per share outlook of approximately $2.15, representing 40% growth over the prior year.”
John D. Idol, Chairman and CEO of Capri Holdings
