Capri Swings to Loss Amid Versace Sale, Tapestry Merger Collapse

Ticker: CPRI · Form: 10-Q · Filed: 2025-11-04T00:00:00.000Z

Sentiment: bearish

Topics: Luxury Retail, Earnings Miss, Merger Termination, Asset Sale, Shareholder Equity Decline, Debt Increase, Discontinued Operations

Related Tickers: CPRI, PRDSY, TPR

TL;DR

**Capri's Q2 is a disaster, with a net loss and a failed merger; the Versace sale is a desperate move to raise cash.**

AI Summary

Capri Holdings Ltd (CPRI) reported a net loss of $28 million for the three months ended September 27, 2025, a significant decline from a net income of $23 million in the prior year period. Total revenue decreased to $856 million from $878 million year-over-year. The company's net income from continuing operations also saw a substantial drop, moving from a $42 million income to a $34 million loss. Gross profit decreased to $522 million from $547 million, while total operating expenses remained relatively stable at $534 million compared to $553 million. A key business change is the proposed sale of its Versace business to Prada S.p.A. for $1.375 billion in cash, leading to the classification of Versace as discontinued operations. The termination of the merger agreement with Tapestry, Inc. due to FTC opposition is another significant event, with Tapestry reimbursing Capri $45 million for expenses. Risks include macroeconomic pressures, currency fluctuations, and increased competition, as highlighted by the substantial accumulated other comprehensive loss of $433 million.

Why It Matters

Capri's shift to a net loss and declining revenue signals significant headwinds for investors, particularly after the high-profile failure of the Tapestry merger. The proposed sale of Versace to Prada, while providing a cash infusion, also indicates a strategic pivot and potential divestment of a core luxury brand, which could impact Capri's long-term brand portfolio strength and competitive positioning against rivals like LVMH and Kering. Employees at Versace may face uncertainty during the transition, while customers could see changes in brand strategy. The broader market will watch how Capri navigates this period of strategic realignment and whether its remaining brands, Michael Kors and Jimmy Choo, can drive future growth in a challenging luxury retail environment.

Risk Assessment

Risk Level: high — Capri reported a net loss of $28 million for the quarter, a sharp reversal from a $23 million net income in the prior year. Total shareholders' equity plummeted from $372 million to a deficit of $70 million, primarily due to a significant accumulated other comprehensive loss of $433 million. The termination of the Tapestry merger, coupled with the ongoing sale of Versace, indicates substantial strategic uncertainty and operational challenges.

Analyst Insight

Investors should consider divesting or shorting CPRI shares given the net loss, declining revenue, and significant strategic uncertainty following the failed Tapestry merger and the Versace divestiture. The substantial decrease in shareholders' equity to a negative value signals deep financial distress.

Financial Highlights

debt To Equity
N/A
revenue
$856M
operating Margin
N/A
total Assets
$5,617M
total Debt
$1,764M
net Income
-$28M
eps
N/A
gross Margin
60.9%
cash Position
$120M
revenue Growth
-2.5%

Revenue Breakdown

SegmentRevenueGrowth
Michael KorsN/AN/A
Jimmy ChooN/AN/A
VersaceN/AN/A

Key Numbers

Key Players & Entities

FAQ

Why did Capri Holdings report a net loss in Q2 2025?

Capri Holdings reported a net loss of $28 million for the three months ended September 27, 2025, primarily due to a decrease in total revenue to $856 million from $878 million, and a significant shift in net income from continuing operations from a $42 million income to a $34 million loss.

What is the status of the Versace sale by Capri Holdings?

Capri Holdings entered into a Stock Purchase Agreement with Prada S.p.A. on April 10, 2025, to sell its Versace business for an aggregate purchase price of $1.375 billion in cash. The Versace business has been classified as discontinued operations and its assets and liabilities as held for sale.

What happened with the proposed merger between Capri Holdings and Tapestry, Inc.?

The proposed merger between Capri Holdings and Tapestry, Inc. was terminated on November 13, 2024, after the U.S. Federal Trade Commission (FTC) filed a lawsuit to block the merger and a District Court granted a preliminary injunction. Tapestry reimbursed Capri approximately $45 million for certain expenses.

How has Capri Holdings' financial position changed regarding shareholders' equity?

Capri Holdings' total shareholders' equity significantly declined from $372 million as of March 29, 2025, to a negative $70 million as of September 27, 2025. This was largely driven by an accumulated other comprehensive loss of $433 million.

What are the key risks facing Capri Holdings according to the 10-Q filing?

Key risks include macroeconomic pressures, general uncertainty regarding the overall future economic environment, currency fluctuations, disruptions in manufacturing or shipments, loss of market share due to increased competition, and the ability to successfully execute growth strategies or cost reduction measures.

How did operating expenses change for Capri Holdings in the last quarter?

Total operating expenses for Capri Holdings were $534 million for the three months ended September 27, 2025, a slight decrease from $553 million in the same period last year. This includes selling, general and administrative expenses of $481 million.

What impact did foreign currency fluctuations have on Capri Holdings' results?

Capri Holdings reported a foreign currency loss of $3 million for the three months ended September 27, 2025, compared to a gain of $11 million in the prior year period. For the six months, there was a gain of $2 million compared to a gain of $7 million in the prior year.

What is the current outstanding share count for Capri Holdings?

As of October 29, 2025, Capri Holdings Limited had 119,143,278 ordinary shares outstanding. This is an increase from 117,913,201 shares outstanding at March 29, 2025.

How much cash did Capri Holdings generate from operating activities?

Capri Holdings used $60 million in net cash from operating activities for the six months ended September 27, 2025, a significant change from providing $133 million in the same period last year.

What are Capri Holdings' primary brands after the Versace sale?

After the proposed sale of Versace, Capri Holdings will primarily own and operate the Michael Kors and Jimmy Choo brands, which are leading designers, marketers, distributors, and retailers of branded women's and men's accessories, apparel, and footwear.

Risk Factors

Industry Context

Capri Holdings operates in the highly competitive global luxury goods market, encompassing accessories, apparel, and footwear. The industry is characterized by strong brand loyalty, evolving consumer preferences, and significant global economic sensitivity. Key players compete on brand prestige, product innovation, and retail experience. Recent trends include a focus on digital engagement and sustainability, alongside ongoing macroeconomic challenges impacting discretionary spending.

Regulatory Implications

The FTC's opposition to the proposed merger with Tapestry highlights increased regulatory scrutiny on large M&A transactions within the retail and luxury sectors. Companies must navigate complex antitrust regulations and potential challenges to strategic combinations. Capri's reimbursement from Tapestry ($45 million) underscores the financial implications of failed deals due to regulatory hurdles.

What Investors Should Do

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Key Dates

Glossary

Discontinued Operations
A component of a business that the reporting entity has disposed of or classified as held for sale, and that represents a separate major line of business or geographical area of operations. (The Versace business is classified as discontinued operations due to the pending sale to Prada, impacting how its financial results are presented.)
Accumulated Other Comprehensive (Loss) Income
A component of shareholders' equity that includes unrealized gains and losses that have not yet been realized and recognized in the income statement. (A significant increase in accumulated other comprehensive loss to -$433 million indicates substantial unrealized losses, impacting total equity.)
Held for Sale
Assets that management has committed to sell and are available for immediate sale in their present condition, and the sale is probable within one year. (Assets and liabilities related to the Versace business are classified as held for sale on the balance sheet.)
Continuing Operations
The ongoing business activities of a company that are not part of discontinued operations. (Financial discussions in the notes often refer to continuing operations, excluding the impact of Versace.)
Operating lease right-of-use assets
Assets recognized under ASC 842 for the right to use an underlying asset for the lease term. (These represent a significant portion of the company's non-current assets, reflecting lease commitments.)
Treasury shares
Shares that a company has repurchased from the open market. (A large number of treasury shares are held, reducing the number of outstanding shares and impacting equity calculations.)
Noncontrolling interest
The portion of equity in a subsidiary that is not attributable to the parent company. (A small noncontrolling interest is present, indicating partial ownership of a subsidiary by external parties.)
Provision (benefit) for income taxes
The amount of income taxes expected to be paid or refunded for the period. (The provision for income taxes can fluctuate significantly, especially with changes in income from continuing and discontinued operations.)

Year-Over-Year Comparison

Compared to the prior year period, Capri Holdings reported a significant downturn, with total revenue decreasing from $878 million to $856 million for the three months ended September 27, 2025. The company swung from a net income of $23 million to a net loss of $28 million. Gross profit also declined from $547 million to $522 million. A major development is the classification of Versace as discontinued operations due to its pending sale, and the termination of the Tapestry merger, which resulted in a $45 million reimbursement. The balance sheet shows a substantial increase in long-term debt and a sharp decline in total shareholders' equity, alongside a significant increase in accumulated other comprehensive loss.

Filing Stats: 4,922 words · 20 min read · ~16 pages · Grade level 17.2 · Accepted 2025-11-04 16:10:58

Filing Documents

FINANCIAL INFORMATION

PART I FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements: Consolidated Balance Sheets (unaudited) as of S eptember 27 , 2025 and March 29, 2025 4 Consolidated Statements of Operations and Comprehensive (Loss) Income (unaudited) for the three and six months ended Sep tember 27 , 2025 and September 28 , 2024 5 Consolidated Statements of Shareholders' Equity (unaudited) for the three and six months ended September 27 , 2025 and September 28 , 2024 6 Consolidated Statements of Cash Flows (unaudited) for the six months ended September 2 7 , 2025 and September 28 , 2024 8

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 9

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 34

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 54

Controls and Procedures

Item 4. Controls and Procedures 56

OTHER INFORMATION

PART II OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 57

Risk Factors

Item 1A. Risk Factors 57

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 57

Other Information

Item 5. Other Information 58

Exhibits

Item 6. Exhibits 58

Signatures

Signatures 59 2 Special Note on Forward-Looking Statements This report contains statements which are, or may be deemed to be, "forward-looking statements." Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of management of Capri Holdings Limited ("Capri" or the "Company") about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "plans", "believes", "expects", "intends", "will", "should", "could", "would", "may", "anticipates", "might" or similar words or phrases, are forward-looking statements. These forward-looking statements are not guarantees of future financial performance. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, macroeconomic pressures and general uncertainty regarding the overall future economic environment, the imposition or threat of imposition of new or additional duties, tariffs or trade restrictions on the importation of our products; changes in fashion, consumer traffic and retail trends; fluctuations in demand for our products; loss of market share and increased competition; risks associated with operating in international markets and global sourcing activities, including currency fluctuations, disru ptions or delays in manufacturing or shipments; departure of key employees or failure to attra

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS CAPRI HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions, except share data) (Unaudited) September 27, 2025 March 29, 2025 Assets Current assets Cash and cash equivalents $ 120 $ 107 Receivables, net 217 215 Inventories, net 766 701 Prepaid expenses and other current assets 203 156 Current assets held for sale 399 342 Total current assets 1,705 1,521 Property and equipment, net 383 393 Operating lease right-of-use assets 885 825 Intangible assets, net 580 582 Goodwill 203 199 Deferred tax assets 1 — Other assets 98 99 Noncurrent assets held for sale 1,762 1,594 Total assets $ 5,617 $ 5,213 Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 370 $ 379 Accrued payroll and payroll related expenses 85 81 Accrued income taxes 84 66 Short-term operating lease liabilities 254 249 Short-term debt 11 24 Accrued expenses and other current liabilities 230 233 Current liabilities held for sale 328 304 Total current liabilities 1,362 1,336 Long-term operating lease liabilities 859 814 Deferred tax liabilities 67 233 Long-term debt 1,753 1,466 Other long-term liabilities 1,042 417 Noncurrent liabilities held for sale 604 575 Total liabilities 5,687 4,841 Commitments and contingencies Shareholders' equity Ordinary shares, no par value; 650,000,000 shares authorized; 228,929,803 shares issued and 119,072,572 outstanding at September 27, 2025; 227,672,351 shares issued and 117,913,201 outstanding at March 29, 2025 — — Treasury shares, at cost ( 109,857,231 shares at September 27, 2025 and 109,759,150 shares at March 29, 2025) ( 5,464 ) ( 5,462 ) Additional paid-in capital 1,501 1,476 Accumulated other comprehensive (loss) income ( 433 ) 57 Retained earnings 4,322 4,297 Total shareholders' equity of Capri ( 74 ) 368 Noncontrolling interest 4 4 Total shareholders' equity ( 70 ) 372 Total liabilities and shareholders' equity $ 5,617 $ 5,213 See accompanying n

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Business and Basis of Presentation The Company was incorporated in the British Virgin Islands on December 13, 2002 as Michael Kors Holdings Limited and changed its name to Capri Holdings Limited ("Capri", and together with its subsidiaries, the "Company") on December 31, 2018. The Company is a holding company that owns brands that are leading designers, marketers, distributors and retailers of branded women's and men's accessories, apparel and footwear bearing the Michael Kors, Jimmy Choo and Versace tradenames and related trademarks and logos. The Company operates in three reportable segments: Michael Kors, Jimmy Choo and Versace. See Note 18 for additional information regarding the Company's segments. On April 10, 2025, the Company and Prada S.p.A. ("Prada") entered into a Stock Purchase Agreement (the "Purchase Agreement") whereby Prada has agreed to acquire certain subsidiaries of the Company which operate the Company's Versace business for an aggregate purchase price of $ 1.375 billion in cash, subject to certain adjustments, including for net indebtedness, working capital and transaction expenses. As a result, the Company determined that the held for sale and discontinued operations criteria were met during the first quarter of Fiscal 2026 and the Company classified its results of operations and cash flows of its Versace business as discontinued operations in its consolidated statements of operations and comprehensive (loss) income and consolidated statements of cash flows for all periods presented. The related assets and liabilities associated with the discontinued operations are classified as held for sale in the consolidated balance sheets as of September 27, 2025 and March 29, 2025. Unless otherwise noted, discussion within these notes to the consolidated interim financial statements relate to continuing operations. Refer to Note 4 - "Discontinued Operations" for further information. The inter

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