Capri Q2 FY2027 Earnings: Margin Recovery Offsets Lower Revenue

Capri Holdings (NYSE: CPRI) reported Q2 FY2027 revenue of $809 million, down 5.5% from $856 million, while diluted EPS from continuing operations improved to $0.25 from a loss of $0.28. Higher full-price sell-through, brand mix, and lower tariff rates lifted gross margin, while Jimmy Choo’s growth partly offset lower Michael Kors sales. The quarter ended September 26, 2026, and the results released October 30 exclude Versace, which is classified as discontinued operations.

Core Financial Results

Approximately $20 million of revenue came from wholesale shipments that arrived earlier than anticipated, supporting the second quarter at the expense of the third quarter. Even with that timing benefit, reported revenue declined 5.5%, or 4.9% in constant currency.

Profitability improved despite the revenue contraction. Gross margin expanded by 230 basis points, and total operating expenses declined to $502 million from $534 million, helping both GAAP and adjusted operating results move higher.

Free cash flow is a non-GAAP measure calculated after $15 million of capital expenditures.

Business and Segment Performance

The two brands moved in opposite directions. Michael Kors, which generated about 82% of quarterly revenue, remained the primary source of the company’s sales decline, while Jimmy Choo posted double-digit growth and returned to operating profitability.

At Michael Kors, higher full-price sell-through and lower tariff rates improved gross margin, but lower revenue produced expense deleverage. Operating income therefore declined from $73 million, although operating margin edged up from 10.1% to 10.3%. About $15 million of Michael Kors revenue reflected wholesale shipments pulled forward from the third quarter.

Jimmy Choo’s higher revenue generated expense leverage, moving the segment from a $9 million operating loss and a negative 6.9% margin a year earlier to positive operating income. Higher full-price sell-through also supported its gross-margin expansion. Approximately $5 million of revenue was shifted into the quarter from Q3.

Geographically, revenue in the Americas declined to $447 million from $491 million. EMEA was unchanged at $261 million, while Asia decreased to $101 million from $104 million.

Cash Flow and Balance Sheet

Capri generated $51 million of operating cash flow and $36 million of free cash flow during the quarter. Inventory was $712 million at quarter-end, down 7% year over year, indicating that inventory declined faster than reported revenue.

Cash and cash equivalents totaled $125 million, while borrowings were $461 million, leaving net debt of $336 million. That compares with net debt of $1.6 billion on September 27, 2025.

The company spent $150 million to repurchase approximately 10.3 million shares at an average price of about $14.56. Remaining authorization under the repurchase program was $721 million. The repurchase spending exceeded quarterly free cash flow, although the company ended the period with substantially less net debt than a year earlier.

Earnings Guidance

Capri said it increased its full-year outlook, but the release did not provide the previous figures, so the size of the revision cannot be quantified. The guidance is presented on an adjusted, non-GAAP basis.

The third-quarter revenue outlook reflects the $20 million of wholesale shipments pulled into Q2, consisting of $15 million at Michael Kors and $5 million at Jimmy Choo. Full-year guidance assumes an incremental 10% tariff rate on U.S. imports through July 24, 2026, followed by a rate of 10% to 12.5% thereafter.

Management’s View

Chairman and CEO John D. Idol said trends at both brands improved sequentially during each month of the quarter. Management attributed that progress to sharper product assortments, efforts to improve brand desirability, and stronger consumer engagement.

The company continues to expect total revenue to return to growth in the second half of FY2027. Management identified new collections, higher marketing investment, and improvements to the consumer experience as the main supports for that expectation.

Risks Investors Need to Watch

• Michael Kors remains the main revenue pressure. The brand represents about 82% of quarterly sales, so its 8.6% reported decline continues to outweigh growth at Jimmy Choo.
• The operating-margin cushion is still limited. GAAP operating margin improved materially but remained at 1.2%, leaving profitability sensitive to weaker sales or higher expenses.
• Shipment timing raises the bar for interpreting Q3. The $20 million pulled into Q2 directly reduces third-quarter revenue, making underlying demand trends more important than sequential comparisons.
• Tariffs, consumer confidence, and currencies could affect guidance. The outlook relies on stated tariff assumptions and does not incorporate tariff rates above those levels, additional inflation pressure, weakening confidence, or major currency fluctuations.
• Capital allocation requires monitoring. The $150 million spent on repurchases was more than four times the quarter’s $36 million of free cash flow, even as net debt remained substantially below the prior-year level.

Summary

Capri’s Q2 FY2027 results showed a clear improvement in profitability despite lower revenue. Better full-price selling, brand mix, and tariff comparisons expanded gross margin, while Jimmy Choo’s growth partly offset continued weakness at Michael Kors. The next test is whether improving brand trends can produce the second-half revenue growth management expects after accounting for the wholesale shipments pulled forward from Q3.