Capri Holdings Ltd

A wave of deal activity spanned multiple sectors this week, led by Qualcomm's acquisition of robotics software firm PickNik to boost its presence in physical AI and robotics. Smurfit Westrock agreed to acquire Empresas CMPC's Chilean containerboard and corrugated business for $420M, including a paper machine in Santiago that produces roughly 250K tons per year. Madison Dearborn Partners agreed to acquire holding firm The Marygold Companies in an all-cash transaction valuing it at $2.00 per share, a 100% premium over its September 24, 2026 closing price. Brookfield is in exclusive talks to buy fraud detection business Actimize from Nice for $2 billion, while Goldman Sachs emerged as the lead bidder for Palmer Square Capital Management, a credit manager overseeing more than $37 billion. Elsewhere, Capri Holdings soared 10% on a report it has connected with potential acquirers, Evonik rose 7.2% in German trading after a report that BASF approached it about a takeover, RPM International agreed to acquire Italy-based Volteco S.p.A. for its Tremco Construction Products Group, and Superstar Platforms agreed to acquire fintech company TitlePal in an all-stock transaction.

Capri Holdings said it expects growth to accelerate in the second half of the year as its Michael Kors reset gains traction through new products, higher marketing spending, reduced promotions and store renovations. Speaking at the Goldman Sachs Global Retail and Consumer Conference, Chairman and CEO John Idol said the company has spent roughly the past 18 months resetting product, marketing and store strategies, particularly at Michael Kors, and that early green shoots are becoming tangible results. Michael Kors ended the prior quarter with inventories down nearly 27% and with 50% less clearance and markdown inventory than a year earlier, while about half of full-price accessories sales now come from icon products that do not go on sale. Chief Financial Officer Tyler Reddien said Capri expects Michael Kors to return to growth in the second half as inventory levels normalize and new products arrive through the fall and holiday seasons, with marketing spending rising to nearly 10% of revenue in the back half. At Jimmy Choo, accessories sales are currently increasing by more than 20%, sneakers have grown to roughly 10% to 15% of sales, and Reddien said the brand is expected to be profitable this year. Management maintained its full-year outlook, including a projected 40% increase in earnings per share, and said average prices are expected to rise in the second half on higher full-price sell-throughs and a lower promotional cadence.

Capri Holdings reported first quarter fiscal 2027 results that exceeded expectations, with revenue of $769 million, down 3.5% year-over-year, while operating income increased approximately 40% and earnings per share rose about 30% to $0.67. The company now anticipates full-year revenue of approximately $3.4 billion, down from prior expectations, citing lower-than-anticipated inventory levels at Michael Kors, softer trends in EMEA, and updated foreign currency exchange rate assumptions. Despite the revenue revision, Capri maintained its fiscal 2027 earnings per share outlook of approximately $2.15, representing 40% growth over the prior year, supported by a $70 million reduction in planned operating expenses. Michael Kors revenue decreased 7.1% to $590 million, while Jimmy Choo revenue increased 10.5% to $179 million, with Jimmy Choo expected to return to profitability in fiscal 2027. The company repurchased approximately $50 million of shares during the quarter and has $871 million remaining under its authorization.

The Supreme Court's decision to strike down President Trump's Liberation Day tariffs is emerging as a market tailwind that few are discussing, with the Treasury Department already refunding $22 billion in May out of an estimated $166 billion owed. Wells Fargo analyst Ohsung Kwon notes that around 40 companies, including Apple, Caterpillar, Dollar Tree, and Tesla, discussed refunds in the first quarter, though only eight such as Ford, General Motors, and Under Armour recognized them as a benefit. Ken Mahoney of Mahoney Asset Management sees the repayments as a legitimate earnings boost that could lead to positive estimate revisions and earnings beats, while others like Bob Lang and Giuseppe Sette view them as a one-time event unlikely to move markets meaningfully. Bloomberg Intelligence highlights an earnings-quality test as companies handle refunds differently, with Capri Holdings lifting gross profit by $40 million while Steven Madden excluded the benefit from adjusted results. Kwon expects the refunds to broaden the market and potentially fund capital expenditures, buybacks, or dividends in the second half of the year.

Capri Holdings' turnaround is showing signs of progress after the company sold its Versace brand to Prada for $1.375 billion, returned to profitability, and strengthened its balance sheet through debt reduction and positive free cash flow. In its fiscal 2026 fourth quarter, Capri reported earnings of 22 cents per share, a sharp improvement from a loss of $4.90 per share a year earlier, while revenue from continuing operations, which excludes Versace, totaled $796 million, down 3.7% year over year. The company expects revenue growth to return in fiscal 2027, with earnings per share projected to rise 40% to $2.15, as Michael Kors improves profitability and Jimmy Choo returns to the black. Despite these improvements, Capri shares remain down roughly 65% from the highs reached after the Tapestry merger announcement and trade at a substantial discount to peers such as Tapestry and Ralph Lauren, with a price-to-sales ratio of 0.6 compared to 4.3 and 3.0, respectively. Wall Street maintains a consensus Hold rating on the stock, with an average 12-month price target of $24.79, implying roughly 30% upside from current levels.

Capri Holdings reported adjusted earnings of 22 cents per share for the fourth quarter of fiscal 2026, surpassing the Zacks Consensus Estimate of 11 cents and improving significantly from an adjusted loss of $4.55 per share a year ago. Total revenues came in at $796 million, missing the consensus estimate of $804 million and declining 3.7% year over year on a reported basis. Management highlighted that strategic initiatives are gaining traction, with improving trends across Michael Kors and Jimmy Choo, and expressed confidence in returning to revenue and earnings growth in fiscal 2027, projecting low-single-digit revenue growth and nearly 40% earnings-per-share growth. For the first quarter of fiscal 2027, the company expects total revenues of approximately $750 million and earnings per share of about 40 cents. Capri Holdings also resumed share repurchases, buying back approximately 4 million shares for $79 million in the quarter.

Jefferies analysts suggest that strong wealth creation from the SpaceX IPO and surging Asian equity markets could lift demand for luxury brands. South Korea's Kospi Index has jumped 75% in the second quarter, the S&P 500 is up 15%, and Japan's Nikkei Index has risen 37%, while the SpaceX IPO has further buoyed sentiment among wealthy consumers. The firm highlights potential beneficiaries including LVMH, Moncler, Kering, Hermès, Chanel, Richemont, Prada Group, Burberry, Brunello Cucinelli, Ferragamo, Versace, Valentino, Tod's, Dolce & Gabbana, Armani, Ralph Lauren, Tapestry, Capri Holdings, On Holding, and Christian Louboutin. The Amundi Global Luxury UCITS ETF has gained 10% over the past six weeks.