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Capri's Turnaround Is Taking Shape, But Is the Stock a Buy Yet?Author: Jennifer Ryan Woods. First Published: 6/28/2026. 
Key Points
- Capri's turnaround appears to be gaining traction after the company sold Versace, returned to profitability, and strengthened its balance sheet through debt reduction and positive free cash flow.
- The company expects revenue growth to return in fiscal 2027, with earnings per share projected to rise 40% as Michael Kors improves profitability and Jimmy Choo returns to the black.
- Despite signs of improvement, 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.
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Shares of Capri Holdings Ltd. (NYSE: CPRI) have lost 65% of their value over the past five years, weighed down by a failed merger, weakening luxury demand, and declining sales across its brands. However, with the recent sale of its Versace brand, improving profitability, and the company forecasting a return to growth, there are signs the turnaround may be gaining traction. Tapestry Deal Collapse Sent Shares Tumbling
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Much of Capri's struggles over the last several years can be traced to its failed merger with Tapestry Inc. (NYSE: TPR). In August 2023, Tapestry agreed to acquire Capri for $57 per share in a deal valued at approximately $8.5 billion. The announcement sent Capri shares soaring more than 55% in a single session, pushing the stock to nearly $54. The excitement was short-lived. As regulatory scrutiny intensified, Capri shares drifted lower. When a federal judge blocked the merger on antitrust grounds in October 2024, the stock plunged nearly 50% to around $21. Capri shares are now trading at around $19, down roughly 64% from their post-announcement highs and about 9% below their level immediately after the merger was terminated. The stock has remained under pressure since the deal collapsed, as the company has continued to navigate headwinds from a challenging luxury-spending environment and tariffs. Capri's Turnaround Begins to Take ShapeAs part of a broader turnaround effort, Capri announced plans in April 2025 to sell its Versace brand to Prada S.p.A. (OTCMKTS: PRDSY). The $1.375 billion cash transaction, which closed in December, was intended to streamline the business, reduce debt, and allow Capri to focus on its two remaining brands, Michael Kors and Jimmy Choo. The company's latest fiscal 2026 fourth-quarter earnings report suggests those efforts may already be paying off. For the quarter, Capri returned to profitability, reporting earnings of 22 cents per share, a sharp improvement from a loss of $4.90 per share a year earlier and 11 cents ahead of analyst expectations. Revenue from continuing operations, which excludes the divested Versace business, totaled $796 million, down 3.7% year over year and roughly $4 million shy of Wall Street estimates. The company also repurchased $79 million worth of shares during the quarter. While revenue remained under pressure, Chief Executive John Idol said on the earnings call that the company was encouraged by the progress it made executing strategic initiatives aimed at strengthening the Michael Kors and Jimmy Choo brands. New fashion offerings, he said, have driven higher full-price sell-throughs and average unit retail prices, while improved brand storytelling has helped deepen consumer engagement and attract new customers. Idol also emphasized the company's stronger balance sheet following the Versace sale. With debt reduced and cash flow improving, he said Capri has the financial flexibility to invest roughly $300 million in store renovations, primarily at Michael Kors, while continuing its share repurchase program and other growth initiatives. Company Forecasts a Return to GrowthCapri's fiscal 2027 guidance points to a meaningful improvement in the company's financial performance. The company expects revenue growth to return to the low-single-digit range, while gross margins expand by approximately 200 basis points and operating income increases by roughly 60%. Earnings per share are projected to rise 40% year over year to $2.15. The outlook also assumes $200 million of share repurchases during the year. Capri expects profitability to improve across both brands, with Michael Kors generating operating margins in the low double-digit range and Jimmy Choo returning to profitability with operating margins in the low single digits. Longer term, Idol said the company expects to grow Michael Kors revenue to $4 billion and Jimmy Choo revenue to $800 million while significantly increasing profitability. Wall Street Remains Cautiously OptimisticSome on Wall Street appear to be taking a wait-and-see approach to Capri's turnaround story. The stock currently carries a consensus Hold rating, with eight Hold ratings, one Sell, six Buys, and one Strong Buy. Several analysts lowered their price targets following the company's latest earnings report. Even so, the average 12-month price target stands at $24.79, implying roughly 30% upside from current levels. Notably, every analyst price target remains above the current share price, with targets ranging from $20 to $32. A recent decline in short interest is also an encouraging sign. The percentage of float sold short fell to 8% at the end of May, down from 10.6% at the end of March. Capri's prolonged share-price decline has left the stock trading at a discount to both the broader retail sector and some of its competitors. The company currently trades at just 0.6X sales, well below the retail industry's average price-to-sales ratio of 1.08. Capri also trades at a substantial discount to Tapestry and Ralph Lauren Corp. (NYSE: RL), which command price-to-sales multiples of 4.3 and 3.0, respectively. The valuation is not the lowest in the group, however, as PVH Corp. (NYSE: PVH) trades at 0.4X sales. Capri's turnaround is still in its early stages, and investors will likely want to see further evidence that improving trends at Michael Kors and Jimmy Choo can be sustained. However, recent results suggest the company is on firmer footing than a year ago and moving in the right direction, making the stock worth a closer look for investors willing to bet on the recovery. |
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