Capri Holdings Ltd (CPRI) stock intrinsic value fair value estimate & owner earnings analysis

Capri Holdings owns two fashion brands after selling Versace to Prada in December 2025: Michael Kors (about $2.87 billion of fiscal 2026 revenue) and Jimmy Choo (about $600 million). Sales are roughly 58% Americas, 29% Europe/Middle East/Africa and 13% Asia. Gross margins are high (62% overall) but the brands carry heavy store and marketing costs, so operating profit is thin: about 0.7% of revenue in fiscal 2026. How we measured earnings. We use cash from operations, remove swings in inventory, receivables and payables, and subtract share-based pay and the capital spending needed to keep stores and systems running. Because Versace is now reported separately, the current business is measured on a continuing-operations basis: about $138 million in fiscal 2024, a $80 million shortfall in fiscal 2025 and $122 million in fiscal 2026, or roughly $1.02 per share in the latest year. We treat $1.02 as the normal level (the middle of the three years since the business took its present shape). Earlier years, which include Versace and a much larger Michael Kors, are stored but not used to set the level. A $65 million refund of tariffs later ruled unlawful was recorded as a receivable and does not enter our earnings level. Note that a $120 million cash outflow tied to the Versace business sits outside these figures, and the company plans capital spending of about $125 million in fiscal 2027, roughly double fiscal 2026. Trend. Revenue fell 12.5% in fiscal 2025 and 4.1% in fiscal 2026 (6.2% at constant currency), with Michael Kors down 4.7% as management cut promotions and off-price sales, and Jimmy Choo citing weaker demand for luxury fashion. First-quarter fiscal 2027 revenue was $769 million against $797 million a year earlier, down 3.5%. Because earnings have been falling with revenue rather than growing, we credit no growth in any case; nothing we can name and document supports an upturn. The last completed year is not a useful growth comparison (earnings moved from a loss to $122 million), and our base case starts with a decline of 3%, at or below the recent revenue trend. Base case, about $10.10 per share: earnings start at $1.02 and decline 3% a year for ten years, then fade 5% a year, reflecting that Michael Kors is a long-established brand with steady 60%-plus gross margins that we expect to keep generating cash, but that has not shown it can stop shrinking. Bear case, about $3.30 per share: earnings start near $0.70 (fiscal 2025 showed how quickly they can turn negative when sales fall against fixed store costs and cash taxes) and fall 12% a year for ten years, then nothing. Debt is now modest at about $357 million after $1 billion of repayments from the Versace proceeds, so leverage is not the main threat; a shrinking brand with fixed costs is. We did not deduct debt from any case because interest is already paid out of the cash flows we measure. Bull case, about $14.70 per share: earnings return to about $1.18 (the fiscal 2024 level) and decline only 1% a year for ten years, then 3% a year, if the company's quality-of-sale reset stops costing revenue. We use no market recovery or new product assumption. What would make this wrong: a stabilization of Michael Kors sales would put value above our base; a faster decline in sales, or a repeat of fiscal 2025's cash-tax and interest drag, would put it toward the bear case. Impairment charges on Jimmy Choo (a $155 million brand carrying value with only a 6% cushion in the most recent test) do not affect our cash-based earnings but signal how fragile that brand's outlook is.