Capri Q4 Revenue Falls 3.7% as Tariff Pressure Continues; Adjusted Profit Beats

What happened

Capri Holdings reported Q4 fiscal 2026 revenue declined 3.7% reported (7.0% constant currency), with GAAP operating margin of -3.4% and adjusted operating margin of -0.1%. The results reflect ongoing tariff headwinds, particularly at Michael Kors, though adjusted EPS of $0.22 came in above expectations. The revenue decline, while still negative, marks a sequential improvement from earlier quarters, supporting the narrative of gradual stabilization. However, the GAAP loss of $(0.01) per share and negative GAAP margins highlight persistent restructuring and tariff-related costs. Full-year performance and the path to FY2027 buybacks will depend on further narrowing of revenue declines and evidence of tariff mitigation success.

Implication

The Q4 print supports a gradual stabilization narrative, but investors should demand evidence of gross margin recovery and reduced reliance on promotions. The base case of $24 per share requires Michael Kors revenue declines to narrow further and gross margin to hold above 61%. If these conditions are met, the buyback catalyst in FY2027 could drive upside. However, the bear case remains viable if tariff costs persist and Kors margin weakens. We maintain a cautious stance until sequential improvement becomes more pronounced.

Thesis delta

The master report thesis anticipated Michael Kors revenue declines narrowing to 0-3% in the base case. Q4's constant currency decline of 7% is worse than that threshold, indicating stabilization is taking longer than expected. While adjusted profitability is a positive, the GAAP loss and margin pressure suggest the turnaround trajectory has a steeper slope than originally envisioned. The core investment thesis remains intact if the next quarter shows further improvement, but the margin for error has narrowed.