Michael Kors ran short on inventory in the first quarter of fiscal 2027 after congestion at ports in Asia stretched transit times and left the brand without enough product on shelves. In response, parent company Capri Holdings is leaning on air cargo and closer coordination with its freight forwarders to work around the bottleneck.
The disclosure came during the company’s Aug. 5 earnings call, where executives said the delays were significant enough to shave an estimated $50 million off second-quarter revenue and contribute to a broader, roughly $600 million cut to Capri’s full-year revenue outlook, now pegged at approximately $3.4 billion.
Inventory at “historical lows”
Capri’s total inventory fell 20% year over year to $624 million for the quarter ended June 27, driven largely by a 25% decline at Michael Kors specifically. Chairman and CEO John Idol told analysts that roughly half of that decline was the deliberate result of the company’s push to shed clearance and markdown stock, while the other half stemmed from goods stuck in transit because of the port delays.
Idol described the resulting inventory position — including for clearance and markdown product — as being at historically low levels, a dynamic that is squeezing near-term sales even as it supports the brand’s broader push toward fuller-price selling.
Air freight as a stopgap, not a strategy
To keep merchandise moving, Capri said it has selectively shifted goods onto planes and pressed its freight forwarders to secure space on faster vessels. CFO and COO Tyler Reddien told analysts the company is taking steps to speed up receipts, including greater reliance on air freight, and expects inventory trends to normalize and rebuild through the second half of the fiscal year to support renewed revenue growth.
Executives characterized the disruption as temporary, with inventory levels expected to recover through the back half of fiscal 2027 in time to support holiday demand.
Capri joins a growing list of apparel and accessories companies that have turned to air cargo this year to plug gaps created by shipping delays. But the tactic carries a cost: air freight rates run well above ocean rates and are expected to climb further in the second half of the year, making the mode a poor long-term substitute for ocean shipping. Hugo Boss, for one, said earlier this year that it wants to eventually treat air freight as an occasional fix rather than a routine part of its logistics network.
Broader pressure on Michael Kors
The inventory shortfall compounded an already difficult quarter for Michael Kors, where revenue fell 7.1% to $590 million and operating margin slipped to 9.3%. Sales at the brand’s retail stores were down by a high-single-digit percentage, a decline executives attributed both to the port-driven delays and to an intentional pullback in promotional and markdown activity. Softening demand in Europe, tied to reduced tourism and the impact of the conflict in the Middle East, added further pressure to the region’s results.
Jimmy Choo offered a counterweight, with revenue climbing 10.5% to $179 million and operating margin expanding to 7.3%, underscoring how Capri’s two smaller luxury brands are increasingly carrying the portfolio while Michael Kors works through its inventory reset.
To protect its full-year earnings outlook of roughly $2.15 per share despite the lowered revenue guidance, Capri said it is cutting operating expenses by about $70 million, with reductions aimed at non-essential overhead rather than marketing or technology investment.
Looking ahead, Capri expects Michael Kors to return to growth in the back half of the fiscal year as inventory levels rebuild and the brand laps its heaviest period of promotional reduction, with the third quarter flagged as a potential inflection point.
Source: SupplyChainDive
