Investing.com -- TD Cowen downgraded Capri Holdings to Hold from Buy and lowered its price target to $17, saying the expected recovery at Michael Kors has become increasingly dependent on flawless execution despite early signs of operational improvement.

The brokerage said it continues to support management's long-term turnaround strategy but believes investors should move to the sidelines as the path to growth remains uncertain. TD Cowen values the company at 7 times its fiscal 2028 earnings estimate.

The brokerage said Michael Kors must continue renovating its store experience, better leverage customer data to improve product innovation, marketing and pricing, and develop new iconic handbag platforms to restore sustainable growth.

TD Cowen acknowledged Capri's stronger balance sheet, healthy free cash flow generation and efforts to reduce discounting while improving the quality of sales. However, it flagged risks including customer response to selective outlet price increases, intense competition from Coach, and pressure from other luxury and handbag brands offering attractive value and fashion.

The brokerage said first-quarter Michael Kors revenue fell 7.1%, slightly better than Wall Street expectations for a 7.8% decline, but second-quarter guidance of an roughly 11% drop came in well below analysts' expectations for flat sales.

While management continues to forecast a return to growth in the second half of fiscal 2027, TD Cowen said the outlook now leaves less room for execution errors, with the recovery increasingly reliant on successful outlet transformation, new product launches and continued strength in the full-price business.

Reflecting the higher execution risk, TD Cowen lowered its third- and fourth-quarter Michael Kors sales forecasts to about a 1% decline and roughly 1% growth, respectively.