Capri Holdings Limited delivered a mixed but better than expected third quarter, with revenue down but earnings and cash generation ahead of guidance as the group pivots to a leaner, Michael Kors, and Jimmy Choo only portfolio. The company also used proceeds from the sale of Versace to slash net debt to just $80 million, sharply improving its balance sheet heading into fiscal 2027.
Headline Q3 Fiscal 2026 Numbers
In the quarter ended December 27, 2025, total revenue from continuing operations fell 4.0 percent year over year to $1.025 billion, or 5.9% lower on a constant currency basis. Gross profit came in at $623 million with a gross margin of 60.8%, versus 63.1% a year earlier, as underlying margin expansion was offset by higher than expected tariffs.
Operating income rose to $46 million, lifting the operating margin to 4.5% from 2.4% last year, while adjusted operating income reached $79 million for a 7.7% adjusted margin. Net income from continuing operations jumped to $57 million, or $0.47 per diluted share, with adjusted EPS at $0.81 versus $0.63 in the prior year period.
Brand Performance: Michael Kors Soft, Jimmy Choo Returns To Profit
Michael Kors generated quarterly revenue of $858 million, down 5.6% on a reported basis and 7.3% in constant currency. The brand’s gross profit was $512 million with a 59.7% gross margin, and operating income of $119 million translated into a still healthy 13.9% operating margin, albeit lower than last year’s 16.2%.
Jimmy Choo was the bright spot, with revenue up 5.0% to $167 million (up 1.9% in constant currency). Gross profit improved to $111 million at a 66.5% margin, and the brand swung to an operating profit of $3 million and a 1.8% operating margin, compared with a $6 million operating loss and (3.8%) percent margin a year earlier.
Balance Sheet: Versace Sale Transforms Leverage
Following the December 2, 2025, completion of the sale of Versace to Prada S.p.A., Capri Holdings now reports the Italian house as discontinued operations and has redeployed the proceeds to reduce debt. The group ended the quarter with $154 million in cash and equivalents and $234 million in total borrowings, resulting in net debt of $80 million, down from $1.17 billion at December 28, 2024.Net inventory stood at $663 million, down 6.5% year over year, reflecting tighter stock management. Operating cash flow of $271 million and capital expenditures of $19 million yielded $252 million in free cash flow for the quarter, underscoring stronger cash discipline.
CEO Commentary And Strategic Focus
John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “We were pleased with our third quarter performance which exceeded our expectations. Across both Michael Kors and Jimmy Choo we continue to advance our strategic initiatives to position our iconic brands for long-term success. Looking ahead, we remain confident that these strategies will support a return to growth in fiscal 2027 as well as establish the groundwork for sustainable performance well into the future.”
Mr. Idol continued, “Recently we completed the sale of Versace which was a thoughtful decision to strengthen our financial foundation, ensuring we have the flexibility to support Michael Kors and Jimmy Choo’s strategic initiatives and enhance long term shareholder value. The proceeds from the sale were used to significantly reduce our debt levels and we ended the quarter with $80 million of net debt.”
Full-Year Fiscal 2026 Outlook
On an adjusted basis and for continuing operations only, Capri Holdings expects full year fiscal 2026 revenue of approximately $3.45 to 3.475 billion and operating income of about $100 million. Net interest income is forecast in the $85 90 million range, with an effective tax rate in the low to mid teens and diluted EPS projected between 1.30 and 1.40 dollars on roughly 120 million weighted average diluted shares.
For Michael Kors, management is guiding to $2.86 to 2.875 billion in revenue and a high single digit operating margin, while Jimmy Choo is expected to deliver $590 to 600 million of revenue and a negative low single digit operating margin for the year as investments continue. Capital expenditures are planned at about $100 million, focused on strategic projects rather than broad expansion.
