(Reuters) -Capri Holdings on Tuesday topped revenue estimates for the second quarter, buoyed by improving demand for its brands, including Michael Kors as its turnaround efforts take root. The company
Capri Holdings Faces Unexpected Quarterly Loss Amid Tariff Concerns
Capri Holdings' Financial Challenges
By Anuja Bharat Mistry
Impact of Tariffs on Margins
(Reuters) -Capri Holdings reported an unexpected quarterly loss on Tuesday and warned that tariffs could impact current quarter margins, amid rising economic uncertainty affecting consumer sentiment and business operations in the retail industry.
Quarterly Performance Overview
The company - which imports the majority of products sold in the U.S. from countries including Vietnam and China - said it still expects the unmitigated tariff impact to be about $85 million in fiscal 2026.
Future Outlook and Recovery Efforts
The U.S. imposes a 20% tariff on Vietnamese imports, 40% on goods routed through Vietnam, and about 47% on Chinese imports, following recent reductions from 57%.
"As we look at Q3, we're expecting gross margins to be down 200 to 250 basis points," said CEO John Idol during the post-earnings call, attributing this to a higher inventory weight with full tariffs.
"You're going to see a larger impact of that build in Q3 and then further into Q4", he added.
Its quarterly gross margin came in at 61%, down from 62.3% owing to about a 130-basis-point negative impact from tariffs.
Capri posted a quarterly adjusted loss of 3 cents per share, compared with Wall Street estimates of a profit of 13 cents per share, as per data compiled by LSEG.
However, Capri announced a $1 billion share repurchase program on Tuesday and saw benefits from its turnaround plan take root in the second quarter.
Shares of Michael Kors parent were up 1%.
Quarterly revenue at the Michael Kors brand dipped 1.8% on a reported basis, improving from a 5.9% decline in the previous quarter.
As part of its turnaround efforts, Capri also offloaded its struggling Versace label to Italy's Prada, earlier this year.
"Capri's upbeat earnings point to some recovery in the luxury industry, but demand remains uncertain as economic turbulence dampens consumer sentiment," said Rachel Wolff, analyst with eMarketer.
Its quarterly revenue of $856 million beat estimates of $825.7 million.
(Reporting by Juveria Tabassum and Anuja Bharat Mistry in Bengaluru; Editing by Vijay Kishore)
