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Capri Holdings Cuts Revenue Outlook on Middle East War Impact
🇸🇦 Saudi Arabia /Economy & Trade

Capri Holdings Cuts Revenue Outlook on Middle East War Impact

From Asharq Al-Awsat · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

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  • Capri Holdings lowered its annual revenue forecast due to inventory delays and reduced consumer spending caused by the Middle East conflict.
  • The company expects a $50 million hit to second-quarter sales at its Michael Kors brand and a similar impact for the fiscal year from weaker demand in Europe and emerging markets.
  • Capri aims to revitalize Michael Kors through store renovations, product innovation, and reduced promotions, anticipating a return to growth in the latter half of fiscal year 2027.

Capri Holdings has revised its annual revenue forecast downward, citing challenges that include inventory delays at its flagship Michael Kors brand and a broader decline in consumer demand for luxury goods. The company anticipates a $50 million reduction in second-quarter sales for Michael Kors, its largest revenue generator, due to port congestion in Asia. An additional $50 million impact is expected for the full fiscal year, attributed to softer demand in Europe and emerging markets, exacerbated by the ongoing conflict in the Middle East.

We are disappointed with our second-quarter outlook.

— John IdolCEO John Idol commented on the company's second-quarter outlook during a post-earnings call.

Shares of the New York-based accessible luxury group saw a slight decline in early trading following the announcement. US luxury firms are navigating a complex market characterized by uneven demand, with inflation-conscious consumers scaling back on discretionary spending. Economic uncertainty further dampens spending in key international markets. The war in the Middle East has also negatively affected tourism in Europe, impacting Capri's regional sales.

We expect Michael Kors revenue to return to growth in the second half of fiscal year 2027, thanks to new products, marketing investments, fewer promotions and store renovations.

— John IdolCEO John Idol expressed optimism about the future performance of the Michael Kors brand.

Michael Kors has faced increased competition and criticism regarding its design innovation, particularly when compared to rivals like Coach. To address these issues and drive a turnaround, Capri is implementing a strategy focused on revamping its stores, enhancing direct-to-consumer sales at full price, and investing in product innovation. The company has also reduced promotional activities.

Capri needs to get both Michael Kors and Jimmy Choo back to consistent sales growth and better profitability.

— David SwartzMorningstar analyst David Swartz discussed the challenges and goals for Capri's key brands.

Despite the lowered revenue outlook, Capri reaffirmed its adjusted annual earnings per share forecast. The company plans to offset weaker sales by reducing operating expenses. Capri expects its Jimmy Choo brand to continue its growth trajectory and return to profitability, with revenue for that brand showing a significant increase in the first quarter. The company's overall first-quarter revenue, however, experienced a slight decrease compared to the previous year.

This is probably 2-3 years away.

— David SwartzMorningstar analyst David Swartz estimated the timeframe for Capri's brands to achieve consistent growth and profitability.
DistantNews Editorial

Originally published by Asharq Al-Awsat in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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