Company Reports

On Sept. 22, Capri's shares rose 6% after a Women's Wear Daily report said the firm has been speaking with potential buyers. The report suggests that a deal is not imminent.

Capri is led by Michael Kors, a major brand in the attractive midtier handbag market. Michael Kors generates nearly all of Capri's operating profit. 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 were only $2.9 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 the 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.

Capri's first-quarter sales fell 3.5% as a 7.1% decrease from Michael Kors (77% of total) offset a 10.5% rise from Jimmy Choo (23%). Gross margin increased 2 percentage points to 65% and adjusted operating margin improved to 3.6% from 2.5%.

Capri is led by Michael Kors, a major brand in the attractive midtier handbag market. Michael Kors generates essentially all of Capri's operating profit. 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 were only $2.9 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 the 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.

Capri's fiscal 2026 fourth-quarter sales fell 4% (adjusted for Versace sale) as a 6% decline for Michael Kors (82% of total) offset a 5% increase for Jimmy Choo (18%). Capri's gross margin rose nearly 5 percentage points to 64.8%, including a benefit from a tariff receivable.

Capri is led by Michael Kors, a major brand in the attractive midtier handbag market. Michael Kors generates essentially all of Capri's operating profit. 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 the 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.

Excluding Versace (disposed), Capri's fiscal 2026 third-quarter revenue fell 4% as a 5.6% decrease for Michael Kors (84% of total) was partially offset by a 5% increase for Jimmy Choo (16%). Gross margin fell 230 basis points due to tariffs and led to a 7.7% adjusted operating that fell from 9.1%.

Capri is led by Michael Kors, a major brand in the attractive midtier handbag market. Michael Kors generates essentially all of Capri's operating profit. 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 the 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.

Capri's fiscal 2026 second-quarter sales dropped 2.5% on declines of 1.8% and 6.4% at Michael Kors (86% of total) and Jimmy Choo (14%), respectively. Gross profit fell 130 basis points to 61% due to higher tariffs, while adjusted operating margin dropped 190 basis points to 2.3%.

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 the 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.

Sales of both Michael Kors (80% of total) and Jimmy Choo (20%) decreased 6% in Capri's fiscal 2026 first quarter. The firm's adjusted operating margin fell 120 basis points to 2.5%, but adjusted EPS rose to $0.50 from $0.16. Versace was treated as a discontinued operation given its impending 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.

Capri closed a tough fiscal 2025 with a 15% sales decline, a 61% gross margin, and a negative 3.2% adjusted operating margin in its (March-ended) fourth quarter. The firm's sale of Versace to Prada for $1.375 billion in cash should close in calendar 2025's second half.

In a deal that had been rumored for months, Capri has agreed to sell Versace to Prada for $1.375 billion in cash.

Capri is led by Michael Kors (68% of fiscal 2024 sales), a major brand in the attractive midtier handbag market. However, we believe it 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 only $3 billion in fiscal 2025, 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.

We are maintaining our fair value estimate for narrow-moat Prada after it announced its acquisition of the Versace brand from Capri for EUR 1.25 billion. We view the transaction price as fair based on our estimates for Capri’s revenue and profitability development.

Capri is led by Michael Kors (68% of fiscal 2024 sales), a major brand in the attractive midtier handbag market. However, we believe it 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 only $3 billion in fiscal 2025, 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.

Although unsightly, no-moat Capri’s fiscal third-quarter results were mostly in line with our forecast. However, the company's outlook for the fourth quarter and fiscal 2026 was disappointing and signals that improvement in sales and earnings may not come until fiscal 2027. We expect to lower our $50 fair value estimate by a high-single-digit percentage, but we still regard the shares as significantly undervalued. Even though the firm has struggled mightily during and after the failed merger with narrow-moat Tapestry, we think its brands have high awareness and potential for much better profitability.

Capri is led by Michael Kors (68% of fiscal 2024 sales), a major brand in the attractive midtier handbag market. However, we believe it 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 were only $3.5 billion in fiscal 2024, 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 now faces challenges such as slowing consumer spending on apparel and accessories, inflation, and lower wholesale orders.

No-moat Capri’s planned sale to narrow-moat Tapestry for $57 per share has ended. The deal was opposed by the US Federal Trade Commission on antitrust grounds, and it was unlikely to close after a recent ruling (see our notes of Oct. 25 and Nov. 8). No break-up fee will be paid, but Tapestry will reimburse Capri about $45 million for costs.