Should You Buy Capri Holdings as Value Clashes With Turnaround Risk?

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Capri’s Valuation Makes the Bull Case Hard to Ignore

CPRI shares are down 36.2% year to date and 27% over the trailing 12 months. The current forward earnings multiple is also below the stock’s five-year median of 9.53X, giving value-focused investors a clear reason to keep Capri on the radar.

The first quarter of fiscal 2027 provided some support for that discount-closing case. Adjusted earnings rose 34% year over year to 67 cents per share, while gross margin expanded 200 basis points to 65%. Adjusted operating income increased 40% to $28 million even as revenues declined 3.5% to $769 million.

Balance-sheet risk has fallen sharply following the Versace sale. Capri ended the quarter with net debt of $224 million, down from about $1.5 billion a year earlier. Free cash flow was $48 million, and the company repurchased about $50 million of shares during the quarter.

Turnaround Progress is Real, but Michael Kors is the Test

Jimmy Choo is providing the clearest evidence of brand momentum. First-quarter revenues increased 10.5% to $179 million, while operating margin expanded 480 basis points to 7.3%. Michael Kors, however, still accounts for most of Capri’s business and posted a 7.1% revenue decline to $590 million.

Capri now expects fiscal 2027 revenues of about $3.4 billion, down from its prior $3.525 billion outlook. The revision reflects inventory delays at Michael Kors, softer EMEA demand and foreign currency headwinds. Management still expects earnings of about $2.15 per share, supported by lower operating expenses, but the reduced sales outlook leaves less room for execution missteps.

Tariff uncertainty, inflation, competitive pressure and weak consumer confidence remain additional risks. The turnaround depends on full-price selling, product innovation, marketing and store renovations translating into durable revenue stabilization without giving back recent margin gains.

Peers Show the Bar for Luxury Execution

Tapestry, Inc. TPR offers a useful comparison because Coach and Kate Spade also compete for accessories and lifestyle spending. Tapestry reported fiscal 2026 revenues of $8.0 billion and a 23% adjusted operating margin, showing the available profitability when brand momentum and execution are stronger.

Ralph Lauren Corporation RL also entered fiscal 2027 with healthier top-line momentum. Its first-quarter revenues increased 14% on a reported basis, and the company raised its full-year constant-currency revenue and adjusted operating-margin outlook.

Should Investors Buy CPRI Now?

Capri’s valuation is difficult to dismiss, and its lower leverage, margin improvement and Jimmy Choo growth make the turnaround more credible. The central question is whether Michael Kors can return to growth quickly enough to validate the low earnings multiple.

CPRI currently carries a Zacks Rank #3 (Hold), alongside a Value Score of A, Growth Score of B, Momentum Score of D and VGM Score of A. The strong Value and VGM scores support the stock’s inexpensive profile, while the weak Momentum Score tempers the near-term setup. Because Style Scores are designed to complement the Zacks Rank, the combination favors patience while investors look for firmer evidence of sustained revenue recovery. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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