Executive Summary
In the third quarter of fiscal 2025, Capri Holdings Limited (CPRI) faced significant challenges as it navigated a 12% decrease in total revenue year-over-year, bringing reported sales to $1.26 billion. The decline was primarily attributed to weakening demand for luxury goods globally, particularly in Asia, compounded by store optimization initiatives and strategic wholesale channel reductions. Both operating and net income fell sharply, leading to operating losses of $590 million and a net loss of $547 million, largely due to restructuring efforts and missteps in brand repositioning strategies. Management remains focused on rectifying these trends, with expectations for a gradual recovery beginning in fiscal 2026 supported by product innovation and strategic marketing initiatives.
Key Performance Indicators
QoQ: 16.87% | YoY:-11.63%
QoQ: 17.00% | YoY:-12.50%
QoQ: -1 452.63% | YoY:-583.61%
QoQ: -2 478.26% | YoY:-620.95%
QoQ: -2 526.32% | YoY:-612.22%
Key Insights
**Revenue Performance:** Revenue decreased 12% YoY due to global demand weakness; Versace, Jimmy Choo, and Michael Kors all reported declines of 15%, 4%, and 12%, respectively.
**Profitability Afflictions:** Gross profit margin was 64.4% (down 60 bps), with steep operational losses across all brands, reflecting higher operational expenses at 58.4% of revenue.
**Balance Sheet Health:** Cash at end of period was $356 million, against total debt of $1.48 billion, leading to a net debt position o...
Financial Highlights
Revenue Performance: Revenue decreased 12% YoY due to global demand weakness; Versace, Jimmy Choo, and Michael Kors all reported declines of 15%, 4%, and 12%, respectively.
Profitability Afflictions: Gross profit margin was 64.4% (down 60 bps), with steep operational losses across all brands, reflecting higher operational expenses at 58.4% of revenue.
Balance Sheet Health: Cash at end of period was $356 million, against total debt of $1.48 billion, leading to a net debt position of approximately $1.12 billion. Inventory management showed a 13% decrease YoY to $892 million, indicating proactive steps to address oversupply.
Cash Flow Dynamics: Net cash provided by operating activities stood at $309 million, reflecting effective working capital management despite overall profit pressures. Free cash flow was down to $278 million, emphasizing the cash-generating capabilities amid a decline in profitability.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.26B |
-11.63% |
16.87% |
| Gross Profit |
812.00M |
-12.50% |
17.00% |
| Operating Income |
-590.00M |
-583.61% |
-1 452.63% |
| Net Income |
-547.00M |
-620.95% |
-2 478.26% |
| EPS |
-4.61 |
-612.22% |
-2 526.32% |
Key Financial Ratios
operatingProfitMargin
-46.8%
operatingCashFlowPerShare
$2.61
freeCashFlowPerShare
$2.35
Management Commentary
Management's Strategic Focus:
- John Idol, CEO, emphasized the company is "disappointed" with Q3 results and acknowledged the need for strategic reassessment following the terminated merger with Tapestry, projecting gradual improvement entering fiscal 2026.
- On brand repositioning, Idol stated, "we believe we have the key building blocks and initiatives in place to realize the full potential" of the luxury brands, with plans to enhance consumer engagement through refined product offerings.
Waning Demand Overbrands:
- Tom Edwards, CFO, highlighted, "the overall slowdown in the fashion luxury market impacted our results" while acknowledging needed adjustments to Mango's pricing architecture to improve sell-throughs in the face of consumer pushback on high-priced luxury.
"Since the termination of the merger agreement, we have reevaluated our strategic initiatives and long-term growth plans," - John Idol, CEO.
— John Idol
"In the third quarter, our revenue decreased 12% as our results were impacted by softening demand for fashion luxury goods globally... We expect trends to improve throughout fiscal year 2026." - John Idol, CEO},
— John Idol
Forward Guidance
Management guidance for Q4 projects a revenue decline of 20%, anticipating sales of approximately $975 million. However, plans to stabilize revenue are in place for fiscal 2026, expecting to recoup growth driven by strategic brand enhancements and new product introductions across all platforms. Management aims to reduce operational expenses through cost-saving initiatives, with targeted operating income recovery to $150 million for fiscal 2026.