The Company Feels the Effects of the Luxury Slowdown and Its Failed Merger with Tapestry
Capri Holdings reported a challenging second quarter for fiscal 2025, with revenue dropping 16.4% year-over-year to $1.08 billion, falling short of analyst expectations of $1.18 billion. The global fashion luxury group, which owns Versace, Jimmy Choo, and Michael Kors, cited a softening demand for luxury goods worldwide as a primary factor. Adjusted earnings per share came in at $0.65, below the $0.74 estimate, as the company navigates shifting consumer behavior in a difficult retail environment.
Capri CEO John D. Idol acknowledged the results, stating, “Overall, we were disappointed with our second quarter results as performance continued to be impacted by softening demand globally for fashion luxury goods.” He highlighted that Capri added 10.9 million new consumers across its brand databases, a 13% increase, reflecting the “strong brand equity and enduring value of our three iconic houses.” Capri also saw a 10% year-over-year reduction in inventory, bringing it to $984 million.
Breaking down results by brand, Versace’s revenue declined 28.2% to $201 million, with retail sales falling in the high teens and wholesale revenue dropping by double digits. In the Americas, revenue fell by 33%, leading to an operating loss of $3 million for the quarter. Michael Kors saw a 16% decline in revenue to $738 million, impacted by a 43% drop in Asia, although operating income was $87 million. Jimmy Choo, however, saw a 6.1% revenue increase to $140 million, supported by double-digit wholesale growth, though it still reported an operating loss of $5 million.
Capri’s recent financial struggles come amid a pending acquisition by Tapestry Inc., owner of Coach, Kate Spade, and Stuart Weitzman. Initially valued at $8.5 billion in a deal announced in August 2023, the acquisition faces a significant hurdle after a federal judge issued a preliminary injunction, citing potential anti-competitive concerns. Capri and Tapestry have jointly appealed the ruling, but the legal proceedings could extend past the February 10 deadline stipulated in the merger agreement. As Capri’s stock continues to underperform, analysts are increasingly questioning the company’s path forward.
With Capri’s stock down nearly 49% over the past month, speculation mounts on potential restructuring options. Analysts suggest Capri might explore divestitures, potentially selling Versace or Jimmy Choo, while Michael Kors could be taken private and restructured.