Capri Holdings: Is the Turnaround Finally Here?

Capri Holdings reported second-quarter fiscal 2027 results on October 30, 2026, showing a 5.5% year-over-year revenue decline to $809 million. However, operating income jumped 55% to $31 million, driven by gross margin expansion.

The company made a strategic decision to cut promotional activity at its Michael Kors brand, reducing markdown inventory by about 40% and promotional days by roughly 50%. This created a short-term sales headwind but lifted average unit retail prices and margins.

Meanwhile, Jimmy Choo was a bright spot, with revenue growing 11.5% as the brand expanded casual footwear and handbag collections, attracting younger consumers.

Capri also made significant progress on its balance sheet, reducing net debt from $1.6 billion a year ago to just $336 million. This improved financial flexibility allowed the company to repurchase 10.3 million shares in the quarter, reducing its share count by approximately 9%.

Management raised its full-year share repurchase target to $300 million and expressed confidence in returning to revenue growth in the second half of the year, supported by product rollouts and store renovations.

The revenue decline might look concerning at first glance, but it's largely a result of deliberate actions to reduce discounting and protect brand equity. By cutting promotions, Capri is sacrificing short-term sales for long-term pricing power and healthier margins.

The 55% increase in operating income shows that this strategy is already paying off. Gross margin expansion and cost control are driving profitability even as sales dip.

More importantly, the dramatic reduction in net debt from $1.6 billion to $336 million significantly de-risks the investment case. A stronger balance sheet gives Capri the flexibility to invest in growth initiatives and return capital to shareholders.

The accelerated share buyback program is a strong signal that management believes the stock is undervalued. Reducing the share count by 9% in a single quarter amplifies earnings per share growth for remaining shareholders.

Looking ahead, the company expects to return to revenue growth in the second half, which could be the catalyst that re-rates the stock. If Capri can achieve its long-term target of $4 billion in Michael Kors revenue with low-20% operating margins, today's price could look like a bargain.