On Friday, Bernstein maintained its Market Perform rating on Capri Holdings (NYSE:CPRI) shares, with a steady price target of $19.00. The firm addressed concerns regarding the potential collapse of the TPR deal and the rapid decline in the company's underlying performance.
The analysis suggested that a breakup could be the most beneficial move for Capri Holdings' shareholders. By separating, the company could leverage the robust brand equity of Versace and Choo while establishing a more focused single-brand narrative for Michael Kors.
The analyst from Bernstein highlighted the challenges faced by Capri Holdings, noting the uncertainty surrounding the TPR deal and the company's deteriorating performance. The potential failure of the deal and the decline in the company's operations raise questions about the future direction of Capri Holdings.
The suggestion of a breakup scenario comes as a strategic alternative for Capri Holdings, aiming to maximize shareholder value. The separation of the company's brands could allow each to capitalize on their individual strengths. Versace and Choo, recognized for their strong brand equity, could potentially thrive independently, while Michael Kors might benefit from a more streamlined brand story.
The recommendation by Bernstein reflects a cautious outlook on Capri Holdings, with the price target of $19.00 remaining unchanged. This target is set despite the concerns raised about the company's current trajectory and the potential benefits of a breakup.
The market will continue to monitor Capri Holdings as it navigates through its ongoing challenges and evaluates strategic options. Shareholders and interested parties will be looking for signs of stability and growth potential in the face of the suggested strategic shifts for the company.
In other recent news, Capri Holdings Limited reported second quarter earnings that missed analyst expectations due to a decrease in global demand for luxury fashion goods. The company posted adjusted earnings per share of $0.65, falling short of the anticipated $0.73. Revenue was reported at $1.08 billion, below the projected $1.18 billion, marking a 16.4% YoY decrease.
Capri Holdings' retail sales declined in the high-single-digits, and wholesale revenue saw a double-digit decrease. Despite these challenges, the company added 10.9 million new consumers across its brands, indicating a 13% growth compared to the previous year.
Among its brands, Michael Kors saw a revenue fall of 16% to $738 million, and Versace revenue declined 28.2% to $201 million. Jimmy Choo, however, posted a 6.1% revenue growth, reaching $140 million.
In other developments, Capri Holdings' proposed acquisition by Tapestry (NYSE:TPR) has been temporarily halted due to a court injunction, with both companies filing an appeal against the decision. The company has not provided specific financial guidance for upcoming periods.
InvestingPro Insights
Recent InvestingPro data paints a complex picture for Capri Holdings (NYSE:CPRI), aligning with Bernstein's cautious stance. The company's market cap stands at $2.59 billion, with a revenue of $4.796 billion in the last twelve months as of Q2 2025. However, CPRI has faced significant headwinds, as evidenced by a 10.64% revenue decline over the same period.
InvestingPro Tips highlight both challenges and potential opportunities for CPRI. The stock has experienced a substantial fall over the past year, with a one-year price total return of -54.39%. This aligns with Bernstein's concerns about the company's declining performance. However, an InvestingPro Tip suggests that net income is expected to grow this year, which could provide some optimism for investors.
Another relevant InvestingPro Tip indicates that CPRI has impressive gross profit margins, which is reflected in the data showing a 64.18% gross profit margin. This strength in margins could be a factor supporting Bernstein's suggestion of a potential breakup, as it might allow individual brands to leverage their profitability more effectively.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Capri Holdings, providing a deeper understanding of the company's financial health and market position.
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