Capri Holdings Ltd. - 10-Q Summary (Q3 Fiscal 2026)
Business Context and Reporting Period
This report covers the quarterly period ended December 27, 2025 (Fiscal Q3 2026). Capri Holdings Ltd. operates two primary reportable segments: Michael Kors and Jimmy Choo. A material event during this period was the completion of the sale of the Versace business to Prada S.p.A. on December 2, 2025. Consequently, Versace results are classified as discontinued operations for all periods presented. The Company also terminated its previously proposed merger with Tapestry, Inc. in November 2024, receiving a $45 million reimbursement.
Key Financial Metrics
| Metric (in millions) | Q3 2026 (3 Months) | Q3 2025 (3 Months) | YTD 2026 (9 Months) | YTD 2025 (9 Months) |
|---|---|---|---|---|
| Total Revenue | $1,025 | $1,068 | $2,678 | $2,794 |
| Gross Profit | $623 | $674 | $1,647 | $1,756 |
| Gross Margin | 60.8% | 63.1% | 61.5% | 62.8% |
| Income from Continuing Ops | $46 | $26 | $50 | $31 |
| Net Income (Total) | $116 | $(546) | $141 | $(535) |
| Diluted EPS (Total) | $0.96 | $(4.61) | $1.18 | $(4.54) |
| Operating Cash Flow (Continuing) | N/A | N/A | $258 | $441 |
| Total Debt (Carrying Value) | $234 | N/A | $234 | $1,490 |
| Cash & Equivalents | $154 | N/A | $154 | $107 |
Note: Net Income includes a $59 million gain from discontinued operations (Versace sale) in Q3 2026. Prior year Net Loss was heavily impacted by a $552 million loss from discontinued operations.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 4.0% ($43 million) in Q3 and 4.2% ($116 million) YTD compared to the prior year. On a constant currency basis, the decline was 5.9% for both periods.
- Michael Kors: Revenue decreased 5.6% in Q3 and 4.5% YTD, driven by underperforming strategic initiatives and reduced promotional activity.
- Jimmy Choo: Revenue increased 5.0% in Q3 but decreased 2.5% YTD.
- Margin Compression: Gross margin decreased 230 basis points in Q3 and 130 basis points YTD. Management attributes this primarily to the unfavorable impact of increased U.S. import tariffs.
- Debt Reduction: Total debt decreased significantly from $1.49 billion (March 2025) to $234 million (December 2025). The Company used proceeds from the Versace sale to fully prepay its 2025 Term Loans ($712 million).
- Impairment Charges: Impairment charges dropped to $0 in Q3 2026 and $21 million YTD, compared to $81 million in Q3 2025 and $101 million YTD. Prior year charges were largely related to Jimmy Choo goodwill and brand intangibles.
Outlook, Risks, and Management Commentary
- Guidance: The filing does not provide specific numerical guidance for the full fiscal year. Management expects to spend approximately $100 million on capital expenditures in Fiscal 2026.
- Share Repurchases: A new three-year, $1.0 billion share repurchase program was approved on November 4, 2025. Implementation is expected to begin in Fiscal 2027; no purchases have been made under this new program as of December 27, 2025.
- Risks:
- Macroeconomic & Tariffs: Continued inflation, geopolitical instability, and new U.S. tariffs on imports from Vietnam, Cambodia, Indonesia, and Bangladesh pose risks to profitability.
- Currency: Volatility in foreign exchange rates (Euro, British Pound, Chinese Renminbi) impacts reported results.
- Legal: Pending shareholder class action lawsuits related to the terminated Tapestry merger.
- Unusual Items: The $45 million gain on the sale of Versace is a non-recurring item included in discontinued operations. The $45 million reimbursement from Tapestry for merger termination costs was recorded in the prior year.
Investor Verification Checklist
- Versace Sale Finalization: Verify the final closing statement adjustments for the Versace sale, which could adjust the preliminary $45 million gain recorded in Q3.
- Tariff Impact: Assess the long-term sustainability of gross margins given the explicit attribution of margin compression to new U.S. import tariffs.
- Michael Kors Turnaround: Monitor the performance of "strategic initiatives" cited as a cause for revenue decline to determine if they are being corrected.
- Debt Covenant Compliance: Confirm continued compliance with the 4.0x net leverage ratio covenant under the 2025 Credit Facilities following the debt paydown.
- Share Repurchase Timing: Track the commencement of the new $1.0 billion buyback program scheduled for Fiscal 2027.