Jefferies maintains Capri Holdings hold rating, $21 target

On Thursday, Jefferies reiterated a Hold rating and a $21.00 price target for Capri Holdings (NYSE:CPRI), following the company’s investor day in New York City. According to InvestingPro data, analyst targets for the stock range from $19.00 to $52.11, with the stock currently trading at $22.32. The firm’s analyst, Ashley Helgans, provided insights into the luxury fashion group’s long-term financial targets, which include sales growth resuming in fiscal year 2027 and operating margin percentages returning to double digits in fiscal year 2028, both surpassing current market expectations.

Capri Holdings, the parent company of Michael Kors and Versace, has expressed confidence in its turnaround strategy, especially for these brands. The strategy involves repositioning products, making strategic investments, and increasing average unit retail (AUR) prices. The company maintains impressive gross profit margins of 64%, though InvestingPro analysis indicates a weak overall financial health score, suggesting challenges ahead. Helgans noted that there are near-term challenges as consumers adjust to fewer promotions.

The analyst highlighted that Michael Kors’ success in raising AUR and achieving sales growth will largely depend on the management’s ability to generate excitement and ’brand heat’ around its products. Michael Kors has a history of success and is backed by an experienced management team, which supports the potential for improvement. The brand plans to refocus on its heritage with a modernized jet-set approach, incorporating its signature logo and maintaining an accessible price point while offering a balance of core and fashion items.

Capri Holdings is also planning to expand its lifestyle offerings, including footwear and ready-to-wear collections. Store renovations are a part of this strategy, with 50% of the retail footprint expected to be updated within the next three years, including certain wholesale partners. The goal is to increase sales densities from $730 to $1,000 per square foot. Additionally, the company intends to leverage social media and influencers more effectively for a refreshed and authentic marketing approach.

While acknowledging the potential for Versace’s sale as a short-term catalyst, Jefferies remains cautious with a Hold rating, citing a valuation now at 20 times price-to-earnings compared to a long-term average of 10 times. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels. The focus on brand heat and excitement is seen as key for Capri Holdings to successfully implement price increases and drive sales growth, particularly given the 12.3% revenue decline in the last twelve months. InvestingPro subscribers have access to 10 additional key insights about CPRI’s valuation and growth prospects.

In other recent news, Capri Holdings Limited revealed its long-term financial projections during its 2025 Investor Day, forecasting revenue growth from $4.4 billion in fiscal year 2025 to $6.3 billion in the future. The company expects Michael Kors to contribute $4.0 billion, Versace $1.5 billion, and Jimmy Choo $800 million to future revenues. Meanwhile, Prada (OTC:PRDSY) SpA is reportedly evaluating a potential acquisition of Versace from Capri Holdings, although no formal bid has been made yet. In a strategic move, Capri Holdings appointed Philippa Newman as Chief Brand and Product Officer to enhance product development and marketing synergy. BofA Securities resumed coverage on Capri Holdings with a Neutral rating and a $23 price target, noting the brand’s recent sales and earnings declines. Despite this, BofA anticipates a return to sales growth by fiscal year 2027, assuming current strategic initiatives take effect. Bernstein analysts maintained a Market Perform rating with a $22 price target, emphasizing the potential value increase from a possible Versace sale. They noted Capri Holdings’ shift in strategy to expand in the wholesale market and appeal to price-conscious consumers.

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