Capri Holdings Ltd (CPRI) shares plummeted 5.79% in pre-market trading on Tuesday following the release of its second-quarter fiscal 2026 earnings report. The luxury fashion company posted disappointing results, with adjusted earnings falling short of analysts' expectations despite beating revenue estimates.

The company reported a surprise adjusted loss of $0.03 per share for the quarter ended September 30, a significant drop from earnings of $0.64 per share in the same period last year. This figure missed the analyst consensus estimate of $0.13 per share. However, Capri's revenue of $856 million, while down 2.5% year-over-year, surpassed the expected $825.7 million.

Investors were likely concerned by the company's weakened profitability, as evidenced by the adjusted operating margin of just 2.3%. The impact of tariffs was cited as a significant factor, with CFO mentioning on the conference call that tariffs negatively impacted gross margin by approximately 130 basis points. Additionally, the company's outlook for the third quarter suggests continued pressure, with an expected gross margin decline of about 200 to 250 basis points compared to last year due to tariff impacts. Despite maintaining its full-year earnings guidance, these near-term challenges appear to have spooked investors, leading to the sharp stock decline.