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Capri Holdings (CPRI) Down 0.2% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have lost about 0.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Capri Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Capri Holdings Beats on Q3 Earnings, Raises FY22 View
Capri Holdings Limited reported stronger-than-anticipated third-quarter fiscal 2022 results despite a challenging backdrop. Both the top and the bottom line improved meaningfully on a year-over-year basis. The company was encouraged by the performance of all three luxury brands. Impressively, management raised fiscal year revenues and earnings per share view. The company also provided outlook for fiscal 2023.
Consumers’ return to active social lifestyles has spurred demand for luxury apparel and accessories, and Capri Holdings has benefited from the same. The company has been deploying resources to expand offerings, upgrade distribution, create seamless omni-channel and digital capabilities, and deepen customer engagement.
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $2.22 per share that showcased a sharp improvement from adjusted earnings of $1.65 reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of $1.68. Better revenue performance and margin expansion aided bottom-line results.
Total revenues of $1,609 million comfortably surpassed the Zacks Consensus Estimate of $1,468.5 million and surged approximately 24% year over year. On a constant-currency basis, total revenues rose 25%.
Adjusted gross profit increased approximately 24% year over year to $1,047 million. We note that adjusted gross margin expanded 40 basis points to 65.1%, reflecting sustained benefits from strategic endeavors, largely offset by a roughly 400 basis points increase in supply-chain costs compared with the year-ago quarter.
The company reported adjusted operating income of $359 million, up from $257 million in the prior-year quarter. Markedly, operating margin increased 260 basis points to 22.3%.
Segment Details
Revenues from Versace increased 29% year over year to $251 million. Operating margin increased 600 basis points to 12.7%. Global sales in retail channel increased more than 20%, with double-digit growth in both e-commerce and store sales. By geography, total revenues in the Americas, EMEA and Asia increased 56%, 30% and 2%, respectively.
Jimmy Choo revenues came in at $178 million, up 47% compared with the prior-year period. The segment operating income was $16 million and operating margin was 9% against operating loss of $8 million and negative operating margin of 6.6% in the prior-year quarter. Global sales in retail channel surged more than 40%, with double-digit growth in both e-commerce and store sales. By geography, total revenues in the Americas, EMEA and Asia increased 59%, 73% and 18%, respectively.
Revenues from Michael Kors grew 20% year over year to $1,180 million. Operating margin came in at 28.4% versus 28.5% in the year-ago period. Global sales in retail channel increased in the mid-teens, with double-digit jump in both e-commerce and store sales. Wholesale revenues grew over the year-ago period but remains well below the historic levels. By geography, total revenues in the Americas and EMEA increased 21% and 30%, respectively. Revenues in Asia dropped 2%, as growth in Japan, Korea and Southeast Asia was offset by decline in Mainland China.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $261 million, net receivables of $449 million, long-term debt of $976 million and total shareholders’ equity of $2,775 million. Total liquidity at the end of the quarter was $1.3 billion. During the quarter, the company repaid approximately $150 million of debt.
During the quarter, the company repurchased roughly 3.2 million shares for approximately $200 million. As of Dec 25, 2021, the remaining availability under the share repurchase authorization was $800 million.
As of Dec 25, 2021, the company had 1,286 retail stores, including 834 Michael Kors, 240 Jimmy Choo and 212 Versace stores.
FY22 Outlook
Capri Holdings now envisions revenues at approximately $5.56 billion for fiscal 2022 compared with the previous forecast of $5.4 billion. The company also raised earnings guidance to $6.00 per share from its prior view of $5.30. We note that the company had reported revenues of $4,060 million and earnings per share of $1.90 in fiscal 2021.
Management expects gross margin expansion of roughly 200 basis points and operating margin of approximately 19% for fiscal 2022. It continued to project operating expenses of approximately $2.6 billion, higher than $2.2 billion reported in fiscal 2021.
Fiscal 2022 top-line projection assumes revenues of approximately $1.08 billion from Versace, $600 million from Jimmy Choo, and $3.88 billion from Michael Kors. Management anticipates operating margin of approximately 17%, 2% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.
Management envisions fourth-quarter revenues to be roughly $1.4 billion. It projected gross margin expansion of 50 basis points and operating margin of approximately 13.5%. The company guided earnings of 80 cents a share.
For the final quarter, Capri Holdings anticipates revenues of approximately $310 million from Versace, $140 million from Jimmy Choo, and $950 million from Michael Kors. The company expects operating margin of about 15% and 20% for Versace and Michael Kors, respectively, in the fourth quarter. It forecasts a negative operating margin of 10% for Jimmy Choo.
FY23 View
Capri Holdings foresees fiscal 2023 revenues to be approximately $6.1 billion and earnings of approximately $6.60 per share, both suggesting an increase of about 10% over fiscal 2022. It projected gross margin expansion of 50 basis points and operating margin of roughly 19%. Management expects revenues of about $1.3 billion from Versace, $675 million from Jimmy Choo, and $4.125 billion from Michael Kors. The company anticipates operating margin of approximately 18%, 8% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for fiscal 2023.
For the first quarter, management envisions revenues to be roughly $1.35 billion. It projected adjusted operating margin of approximately 18.5% and guided earnings of $1.45 per share. The company anticipates second-quarter revenues to be $1.45 billion, adjusted operating margin of about 18% and earnings of $1.60 per share.
Capri Holdings forecast third-quarter revenues to be $1.75 billion, adjusted operating margin of about 23.5% and earnings of $2.50 per share. For the final quarter, the company projected revenues to be $1.55 billion, adjusted operating margin of about 15% and earnings of $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.57% due to these changes.
VGM Scores
At this time, Capri Holdings has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Capri Holdings has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Capri Holdings (CPRI) Down 0.2% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have lost about 0.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Capri Holdings due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Capri Holdings Beats on Q3 Earnings, Raises FY22 View
Capri Holdings Limited reported stronger-than-anticipated third-quarter fiscal 2022 results despite a challenging backdrop. Both the top and the bottom line improved meaningfully on a year-over-year basis. The company was encouraged by the performance of all three luxury brands. Impressively, management raised fiscal year revenues and earnings per share view. The company also provided outlook for fiscal 2023.
Consumers’ return to active social lifestyles has spurred demand for luxury apparel and accessories, and Capri Holdings has benefited from the same. The company has been deploying resources to expand offerings, upgrade distribution, create seamless omni-channel and digital capabilities, and deepen customer engagement.
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $2.22 per share that showcased a sharp improvement from adjusted earnings of $1.65 reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of $1.68. Better revenue performance and margin expansion aided bottom-line results.
Total revenues of $1,609 million comfortably surpassed the Zacks Consensus Estimate of $1,468.5 million and surged approximately 24% year over year. On a constant-currency basis, total revenues rose 25%.
Adjusted gross profit increased approximately 24% year over year to $1,047 million. We note that adjusted gross margin expanded 40 basis points to 65.1%, reflecting sustained benefits from strategic endeavors, largely offset by a roughly 400 basis points increase in supply-chain costs compared with the year-ago quarter.
The company reported adjusted operating income of $359 million, up from $257 million in the prior-year quarter. Markedly, operating margin increased 260 basis points to 22.3%.
Segment Details
Revenues from Versace increased 29% year over year to $251 million. Operating margin increased 600 basis points to 12.7%. Global sales in retail channel increased more than 20%, with double-digit growth in both e-commerce and store sales. By geography, total revenues in the Americas, EMEA and Asia increased 56%, 30% and 2%, respectively.
Jimmy Choo revenues came in at $178 million, up 47% compared with the prior-year period. The segment operating income was $16 million and operating margin was 9% against operating loss of $8 million and negative operating margin of 6.6% in the prior-year quarter. Global sales in retail channel surged more than 40%, with double-digit growth in both e-commerce and store sales. By geography, total revenues in the Americas, EMEA and Asia increased 59%, 73% and 18%, respectively.
Revenues from Michael Kors grew 20% year over year to $1,180 million. Operating margin came in at 28.4% versus 28.5% in the year-ago period. Global sales in retail channel increased in the mid-teens, with double-digit jump in both e-commerce and store sales. Wholesale revenues grew over the year-ago period but remains well below the historic levels. By geography, total revenues in the Americas and EMEA increased 21% and 30%, respectively. Revenues in Asia dropped 2%, as growth in Japan, Korea and Southeast Asia was offset by decline in Mainland China.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $261 million, net receivables of $449 million, long-term debt of $976 million and total shareholders’ equity of $2,775 million. Total liquidity at the end of the quarter was $1.3 billion. During the quarter, the company repaid approximately $150 million of debt.
During the quarter, the company repurchased roughly 3.2 million shares for approximately $200 million. As of Dec 25, 2021, the remaining availability under the share repurchase authorization was $800 million.
As of Dec 25, 2021, the company had 1,286 retail stores, including 834 Michael Kors, 240 Jimmy Choo and 212 Versace stores.
FY22 Outlook
Capri Holdings now envisions revenues at approximately $5.56 billion for fiscal 2022 compared with the previous forecast of $5.4 billion. The company also raised earnings guidance to $6.00 per share from its prior view of $5.30. We note that the company had reported revenues of $4,060 million and earnings per share of $1.90 in fiscal 2021.
Management expects gross margin expansion of roughly 200 basis points and operating margin of approximately 19% for fiscal 2022. It continued to project operating expenses of approximately $2.6 billion, higher than $2.2 billion reported in fiscal 2021.
Fiscal 2022 top-line projection assumes revenues of approximately $1.08 billion from Versace, $600 million from Jimmy Choo, and $3.88 billion from Michael Kors. Management anticipates operating margin of approximately 17%, 2% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.
Management envisions fourth-quarter revenues to be roughly $1.4 billion. It projected gross margin expansion of 50 basis points and operating margin of approximately 13.5%. The company guided earnings of 80 cents a share.
For the final quarter, Capri Holdings anticipates revenues of approximately $310 million from Versace, $140 million from Jimmy Choo, and $950 million from Michael Kors. The company expects operating margin of about 15% and 20% for Versace and Michael Kors, respectively, in the fourth quarter. It forecasts a negative operating margin of 10% for Jimmy Choo.
FY23 View
Capri Holdings foresees fiscal 2023 revenues to be approximately $6.1 billion and earnings of approximately $6.60 per share, both suggesting an increase of about 10% over fiscal 2022. It projected gross margin expansion of 50 basis points and operating margin of roughly 19%. Management expects revenues of about $1.3 billion from Versace, $675 million from Jimmy Choo, and $4.125 billion from Michael Kors. The company anticipates operating margin of approximately 18%, 8% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for fiscal 2023.
For the first quarter, management envisions revenues to be roughly $1.35 billion. It projected adjusted operating margin of approximately 18.5% and guided earnings of $1.45 per share. The company anticipates second-quarter revenues to be $1.45 billion, adjusted operating margin of about 18% and earnings of $1.60 per share.
Capri Holdings forecast third-quarter revenues to be $1.75 billion, adjusted operating margin of about 23.5% and earnings of $2.50 per share. For the final quarter, the company projected revenues to be $1.55 billion, adjusted operating margin of about 15% and earnings of $1.05 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 13.57% due to these changes.
VGM Scores
At this time, Capri Holdings has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Capri Holdings has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.