Capri Holdings Limited (CPRI Quick QuoteCPRI - Free Report) posted drab second-quarter fiscal 2025 results, wherein both top and bottom lines declined year over year and lagged the Zacks Consensus Estimate. 

The company’s second-quarter results were impacted by a global slowdown in demand for luxury fashion goods. Despite this challenging retail environment, the company remains focused on executing CPRI’s strategic initiatives aimed at delivering long-term, sustainable growth across its three luxury brands. 

The company also reported a positive trend in consumer engagement, with 10.9 million new consumers added to its database, indicating 13% growth from the previous year. This underscores the enduring strength and value of its brands.

More on Capri Holdings’ Q2 Results

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of 65 cents per share, showcasing a decline from $1.13 in the year-ago period. Also, the metric came way below the Zacks Consensus Estimate of 74 cents per share.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Total revenues of $1,079 million fell short of the Zacks Consensus Estimate of $1,168 million and decreased 16.4% year over year on a both reported and constant-currency basis. Total retail sales for the company dropped a high single-digit percentage, as global demand for luxury fashion goods softened. Wholesale revenues also fell by double digits, implying reduced demand worldwide.

The gross profit decreased 16.6% year over year to $694 million. The gross margin contracted 10 basis points (bps) to 64.3% as the positive impact of a favorable channel mix was offset by a decline in full-price sell-throughs.

Adjusted operating expenses declined almost 1.9% year over year to $662 million. However, as a percentage of total revenues, the metric rose 910 bps to 61.4%.

The company reported an adjusted operating income of $32 million, considerably down from $157 million in the prior-year quarter. The adjusted operating margin shrunk 920 bps to 3%. 
This decrease in operating margin was due to expense deleverage resulting from lower revenues.

CPRI’s Q2 Revenue Insights by Segments

Revenues from Versace dipped 28.2% year over year to $201 million, which missed the Zacks Consensus Estimate of $262.9 million. The downtick stemmed from sluggish global demand for fashion luxury items. Retail sales declined by a high-teen percentage, while wholesale revenues dropped by double digits. Revenues fell 33% in the Americas, 28% in EMEA and 20% in Asia. Versace’s global customer base grew with 1.1 million new consumers, reflecting a 16% increase from the year-ago level.

Jimmy Choo’s revenues totaled $140 million, which beat the consensus estimate of $126.7 million. The figure marked a 6.1% increase on a reported basis and a 5.3% rise at constant currency compared with the previous year. Retail sales saw a low single-digit decline, while wholesale revenues grew by double digits. Revenues dropped 8% in the Americas, rose 25% in EMEA and declined 8% in Asia. Jimmy Choo’s global customer base expanded with 0.7 million new consumers, a 13% increase year over year.

Revenues from Michael Kors amounted to $738 million, which missed the consensus estimate of $781.5 million. The figure marked a decrease of 16% on a reported basis and 15.9% at constant currency compared with the prior-year period. Retail sales declined by a mid-single-digit percentage, while wholesale revenues fell by double digits. Revenues in the Americas dropped 12%, in EMEA by 15% and in Asia by 43%. Michael Kors’ global customer base grew with 9 million new consumers, indicating a 12% increase year over year.

Capri Holdings’ Acquisition Update

The company has mentioned its ongoing acquisition by Tapestry, Inc. (TPR Quick QuoteTPR - Free Report) , which was announced in August 2023. However, the transaction has been temporarily blocked by the U.S. Federal Trade Commission, which granted a preliminary injunction to pause the deal while it undergoes further scrutiny. Both companies are appealing this decision, in accordance with the merger agreement.

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CPRI’s Financial Position

Capri Holdings ended the quarter with cash and cash equivalents of $182 million, long-term debt of $1.24 billion and total shareholders’ equity, including non-controlling interest, of $1.49 billion.

As of Sept. 28, 2024, CPRI had 1,217 retail stores. These include 755 Michael Kors, 226 Jimmy Choo and 236 Versace stores.

Shares of this Zacks Rank #5 (Strongly Sell) company have lost 32.5% in the past three months against the industry’s growth of 1%.

Key Picks

Some better-ranked stocks in the same space are The Gap, Inc. (GAP Quick QuoteGAP - Free Report) and Nordstrom Inc. (JWN Quick QuoteJWN - Free Report) .

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for The Gap’s fiscal 2024 earnings and sales indicates growth of 31.5% and 0.5%, respectively, from the year-ago actuals. GAP has a trailing four-quarter average earnings surprise of 142.8%.

Nordstrom is a leading fashion specialty retailer in the United States. The company offers an extensive selection of both branded and private-label merchandise. It currently has a Zacks Rank of 2. 

The Zacks Consensus Estimate for Nordstrom’s fiscal 2024 sales indicates growth of 0.6% from the fiscal 2023 reported figure. JWN has a trailing four-quarter average negative earnings surprise of 17.8%.