Hapless Capri Strives to Return Michael Kors to Past Profitability After Versace Sale

Capri is led by Michael Kors (68% of fiscal 2025 sales), a major brand in the attractive midtier handbag market. However, we believe the label lacks the brand strength to provide an economic moat for Capri, rating poorly on the criteria that Morningstar uses to evaluate luxury brands, such as conspicuousness of consumption, pricing power, and control over distribution. Powered by store openings and retail expansion during 2010-15, Michael Kors became one of the largest American handbag producers in sales and units. However, the brand’s sales are projected at less than $3 billion in fiscal 2026, down from a peak of $4.7 billion in fiscal 2016, due to markdowns at third-party retail, store closures, and weakness in some categories. While Capri has reduced distribution of the label to limit discounting of its bags, it faces challenges such as slowing consumer spending on apparel and accessories, intense competition, and lower wholesale orders.