Digital Commerce Will Expand Luxury Appeal In China And India

Key Takeaways

• Rapid digital transformation and advanced analytics are accelerating customer acquisition, brand engagement, and productivity gains beyond expectations.
  
• Strategic brand repositioning, selective reinvestment, and focus on core luxury segments are driving margin expansion, market penetration, and long-term earnings growth.
  
• Persistent brand fatigue, intensified competition, and structural shifts in luxury retail threaten Capri Holdings' market share, margin stability, and long-term revenue growth prospects.

Catalysts

Engages in the design, marketing, distribution, and retail of branded women’s and men’s apparel, footwear, and accessories in the United States, Canada, Latin America, Europe, the Middle East, Africa, Asia, and the Oceania.

• Analyst consensus expects sequential improvement from brand revitalization strategies, but recent data shows a more substantial acceleration: multiple Michael Kors product families are experiencing the strongest full-price sell-throughs in over four years, and leading indicators from consumer research point to brand affinity and engagement being at multi-year highs-suggesting both revenue and margin inflection could materially exceed consensus in fiscal 2027.
  
• Analysts broadly agree that omnichannel investment and advanced analytics will drive gradual productivity gains, but the pace of digital transformation is far outpacing expectations: Capri has achieved a 9% annual increase in its global consumer databases at both brands, with data analytics now enabling rapid marketing optimization and personalized offers-unlocking faster-than-anticipated customer acquisition, higher retention, and significant operating leverage.
  
• The company's anticipated sale of Versace and balance sheet transformation will unlock over a billion dollars in capital for aggressive investment in store renovations, digital infrastructure, and selective market re-entry, positioning Capri to harness global affluent middle class growth and accelerate revenue expansion across currently underpenetrated markets, especially in Asia and urban centers.
  
• A strategic shift to broaden Jimmy Choo's product mix into high-velocity, accessible luxury price points, paired with direct investments in vertically integrated manufacturing, is creating a platform for double-digit operating margins at Jimmy Choo and structural top-line growth from a wider, younger customer base-substantially raising long-term earnings power beyond current market assumptions.
  
• Capri's ongoing reduction of promotional activity and exit from legacy wholesale doors, combined with the introduction of full-price icons to outlet channels and new store concepts with experiential retail elements, is re-establishing brand strength and consumer pricing power, which will drive a structural uplift in gross margin and accelerate earnings growth as cost headwinds from tariffs fade.

Capri Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Capri Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Capri Holdings's revenue will decrease by 6.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -25.7% today to 11.4% in 3 years time.
• The bullish analysts expect earnings to reach $414.4 million (and earnings per share of $3.81) by about September 2028, up from $-1.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.3x on those 2028 earnings, up from -2.3x today. This future PE is lower than the current PE for the US Luxury industry at 19.8x.
• Analysts expect the number of shares outstanding to grow by 0.98% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.36%, as per the Simply Wall St company report.

Capri Holdings Future Earnings Per Share Growth

Risks

• The continued year-over-year revenue declines at both Michael Kors and Jimmy Choo, with no growth in any channel expected for the current fiscal year, highlight persistent challenges in demand as well as possible brand maturity and aspirational fatigue, which could weigh negatively on future revenue growth and profit margins.
  
• Capri Holdings faces rising adaptation and compliance costs associated with global increases in tariffs, particularly impacting cost of goods sold by an estimated $85 million in fiscal 2026, and may not be able to fully offset these headwinds through cost efficiencies or price increases, thereby pressuring net margins and earnings.
  
• The company's ongoing reduction in wholesale exposure and closure of a significant number of department store and underproductive retail doors, while intended to optimize the fleet, creates risk of lost market coverage and customer disengagement, making revenue stabilization and recovery more difficult to achieve in the long term.
  
• Ongoing high levels of promotional activity and outlet dependency, especially as discounting is reduced to improve average unit retail (AUR), expose Capri Holdings to risks of inventory build-ups, brand dilution, and lower-than-expected traffic, thereby threatening gross margin recovery and earnings targets.
  
• Long-term secular shifts toward experiential spending, sustainability expectations, and the increasing dominance of larger global luxury conglomerates such as LVMH and Kering could undermine Capri Holdings' competitive position, weakening its pricing power, eroding market share, and constraining revenue and earnings growth over the coming years.

Valuation

• The assumed bullish price target for Capri Holdings is $39.06, which represents two standard deviations above the consensus price target of $24.91. This valuation is based on what can be assumed as the expectations of Capri Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $17.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $414.4 million, and it would be trading on a PE ratio of 16.3x, assuming you use a discount rate of 12.4%.
• Given the current share price of $21.34, the bullish analyst price target of $39.06 is 45.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.