Capri Holdings Q3 Earnings Miss Estimates, Gross Margin Declines Y/Y

Capri Holdings Limited CPRI has posted drab third-quarter fiscal 2025 results, wherein the top and bottom lines declined year over year. Total revenues surpassed the Zacks Consensus Estimate, while earnings missed the same. Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The company's business faced challenges during the quarter, and the results have been disappointing. The company is re-evaluating its strategies to improve current sales trends. Its performance is expected to improve throughout fiscal 2026, positioning CPRI for a return to growth in fiscal 2027 and beyond.Capri Holdings' portfolio of iconic fashion luxury brands — Versace, Jimmy Choo and Michael Kors — are globally recognized and continue to resonate with consumers. There is optimism about the future and confidence in the long-term growth potential of the company.Capri Holdings Limited Price, Consensus and EPS Surprise  Capri Holdings Limited price-consensus-eps-surprise-chart | Capri Holdings Limited QuoteMore on Capri Holdings’ Q3 ResultsThis designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of 45 cents per share, showcasing a decline from $1.20 in the year-ago period. Also, the metric lagged the Zacks Consensus Estimate of 63 cents per share.Total revenues of $1,261 million surpassed the Zacks Consensus Estimate of $1,248 million and decreased 11.6% year over year on a reported basis and 11.4% on a constant-currency basis. The company's total retail sales fell in the low-double digits, whereas wholesale revenues dropped in the low-teens. The gross profit decreased 12.5% year over year to $812 million. The gross margin contracted 60 basis points (bps) to 64.4%, primarily led by lower full-price sell-throughs.Capri Holdings reported an adjusted operating income of $76 million, considerably down from $172 million in the prior-year quarter. The adjusted operating margin shrunk 610 bps to 6%. This decrease in the operating margin was due to expense deleverage, resulting from lower revenues.CPRI’s Q3 Revenue Insights by SegmentsRevenues from Versace dipped 15% year over year to $193 million on both reported and constant-currency basis, surpassing the Zacks Consensus Estimate of $190.7 million. Retail sales dropped in the mid-teens, while wholesale revenues declined in the double digits. Regionally, revenues fell 21% in the Americas, 13% in EMEA and 11% in Asia. Despite the revenue decline, Versace's global customer database grew by 1.1 million consumers, marking a 15% year-over-year increase.Jimmy Choo’s revenues were $159 million, lagging the consensus estimate of $161.1 million. The figure marked a 4.2% decrease on both reported and constant-currency basis from the previous year. Retail sales remained consistent with the prior year, while wholesale revenues declined in the mid-teens. Regionally, revenues decreased 10% in the Americas, increased 9% in EMEA and declined 17% in Asia. Jimmy Choo's global customer database expanded by 0.7 million consumers, reflecting 12% year-over-year growth.Revenues from Michael Kors were $909 million, which beat the consensus estimate of $894 million. This marked a decrease of 12.1% on a reported basis and 11.7% at constant currency from the prior-year period. Retail sales declined in the low teens, while wholesale revenues fell in the high-single digits. Regionally, revenues decreased 10% in the Americas, 13% in EMEA and 27% in Asia. Despite the decline, Michael Kors' global customer database grew by 9 million consumers, reflecting an 11% year-over-year increase.CPRI Stock Past Three-Month Performance Image Source: Zacks Investment Research Capri Holdings’ Financial Health SnapshotThe company ended the quarter with cash and cash equivalents of $356 million, long-term debt of $1.45 billion and total shareholders’ equity, including non-controlling interest, of $1.07 billion. The operating cash flow for the fiscal third quarter was $309 million, whereas the free cash flow totaled $278 million.As of Dec. 28, 2024, CPRI had 1,205 retail stores. These include 747 Michael Kors, 224 Jimmy Choo and 234 Versace stores.What to Expect From CPRI in FY25?For fiscal 2025, Capri Holdings expects total revenues of $4.4 billion, including negative impacts of $40 million from foreign currency. Adjusted operating income is projected to be $100 million.For Versace, total revenues are expected to reach $810 million, with negative foreign-currency impacts of $10 million. The operating margin is projected to be in the negative high-single-digit range.For Jimmy Choo, total revenues are forecast at $600 million, including negative impacts of $5 million from foreign currency, with an operating margin in the negative low-single-digit range.For Michael Kors, total revenues are expected to be $3.0 billion, with negative foreign-currency impacts of $25 million. The operating margin is projected to be in the low-double-digit range.Capri Holdings’ FY26 OutlookLooking to fiscal 2026, CPRI anticipates total revenues of $4.1 billion, including negative foreign currency impacts of $100 million. Adjusted operating income is expected to be $150 million.For Versace, total revenues are projected at $800 million, with negative foreign-currency impacts of $25 million. The operating margin is expected to break even.For Jimmy Choo, total revenues are forecast at $550 million, including negative impacts of $15 million from foreign currency. The operating margin is expected to be slightly negative.For Michael Kors, total revenues are anticipated to reach $2.75 billion, with negative foreign-currency impacts of $60 million. The operating margin is projected to be in the low-double-digit range.Shares of this Zacks Rank #3 (Hold) company have gained 9.2% in the past three months compared with the industry’s growth of 13.4%.Key PicksSome better-ranked stocks in the retail space are Urban Outfitters Inc. URBN, Genesco Inc. GCO and Deckers Outdoor Corporation DECK.Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. It flaunts a Zacks Rank of (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Urban Outfitters’ fiscal 2025 earnings and revenues indicates growth of 20.6% and 7.5%, respectively, from the fiscal 2024 reported levels. URBN delivered a trailing four-quarter average earnings surprise of 22.8%.Genesco is a specialty retail and branded company selling footwear and accessories in retail stores. It currently sports a Zacks Rank #1.The Zacks Consensus Estimate for Genesco’s fiscal 2025 earnings and revenues indicates growth of 67.9% and 1.5%, respectively, from the fiscal 2024 reported figures. GCO delivered a trailing four-quarter average earnings surprise of 36.9%.Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It flaunts a Zacks Rank of 1 at present.The Zacks Consensus Estimate for DECK’s fiscal 2025 earnings and revenues implies growth of 20% and 15.3%, respectively, from the year-ago actuals. DECK delivered a trailing four-quarter average earnings surprise of 36.8%.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report Urban Outfitters, Inc. (URBN): Free Stock Analysis Report Genesco Inc. 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