A month has gone by since the last earnings report for Capri Holdings (CPRI Quick QuoteCPRI - Free Report) . Shares have lost about 16.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Capri Holdings Q4 Earnings Beat, Revenues Up 24.6% Y/Y

Capri Holdings Limited reported stronger-than-anticipated fourth-quarter fiscal 2022 results, despite a challenging backdrop. Both the top and the bottom lines improved meaningfully on a year-over-year basis. The company was encouraged by the performance of all three luxury brands.

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 Deeper

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.02 per share that showcased a sharp improvement from adjusted earnings of 38 cents reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of 82 cents. Better revenue performance, margin expansion and lower tax rate aided bottom-line results.

Total revenues of $1,492 million comfortably surpassed the Zacks Consensus Estimate of $1,402 million and surged 24.6% year over year. On a constant-currency basis, total revenues rose 28.4%.

Adjusted gross profit increased approximately 25.1% year over year to $951 million, while adjusted gross margin expanded 20 basis points (bps) to 63.7%. The company reported an adjusted operating income of $212 million, up from $143 million in the prior-year quarter. Markedly, the operating margin increased 230 bps to 14.2%.

Segment Details

Revenues from Versace increased 34% year over year to $315 million. The operating margin increased 360 bps to 15.9%. Global retail AUR jumped high-single digits. Accessories sales soared 75%. Worldwide sales in retail channel rose more than 20% with double-digit increases in both e-commerce and store sales. By geography, total revenues in the Americas surged 81% and revenues in EMEA increased 30%. Revenues in Asia fell 5%, as strong double-digit increases in Japan and Southeast Asia were offset by a decline in China.

Jimmy Choo revenues came in at $156 million, up 25.8% from the prior-year period. The segment operating loss was $15 million compared with an operating loss of $18 million in the year-ago period. Global retail AUR increased high teens. Accessories sales jumped 30%. Global sales in retail channel advanced about 40% with strong double-digit increases in both e-commerce and store sales. By geography, total revenues at Americas increased 55%, EMEA jumped 23%, and Asia rose 10%.

Revenues from Michael Kors grew 21.8% year over year to $1,021 million. The operating margin came in at 20.6% versus 20.5% in the year-ago period. Global retail AUR rose low double digits. Signature represented 45% of the assortment across all categories. Global sales in retail channel increased in the high-teens with double-digit increases in both e-commerce and store sales. By geography, total Michael Kors revenues in the Americas increased 22%, revenues in EMEA increased 37%, and revenues in Asia increased 4%.

Other Details

Capri Holdings ended the quarter with cash and cash equivalents of $169 million, net receivables of $434 million, long-term debt of $1,131 million and total shareholders’ equity of $2,558 million.

During the quarter, the company repurchased roughly 5.1 million shares for approximately $300 million. The company’s board of directors authorized a new share repurchase program of up to $1 billion on Jun 1, 2022. This new two-year program will override the existing $1 billion share repurchase program, which had $500 million remaining.

Management incurred capital expenditures of $153 million in fiscal 2022, and were primarily spent on new store development, renovations, IT and e-commerce enhancements. As of Apr 2, 2022, the company had 1,271 retail stores, including 825 Michael Kors, 237 Jimmy Choo and 209 Versace stores.

Guidance

Capri Holdings estimates revenues to be approximately $5.95 billion for fiscal 2023. This suggests a year-over-year increase of 5% on a reported basis and approximately 10% on a constant-currency basis. It guided earnings per share of approximately $6.85, which indicates an increase from adjusted earnings of $6.21 reported in fiscal 2022.

Management projected gross margin to be roughly flat, reflecting benefits from strategic initiatives, offset by increased transportation expenses and higher input costs. It expects an operating margin of approximately 18% versus 19% in the year-ago period. The company anticipates capital expenditures of approximately $300 million for fiscal 2023.

The fiscal 2023 top-line projection assumes revenues of approximately $1.225 billion from Versace, $650 million from Jimmy Choo and $4.075 billion from Michael Kors. Management anticipates an operating margin of approximately 16%, 5% and 24% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.

Management envisions first-quarter fiscal 2023 revenues to be roughly $1.3 billion. This indicates a year-over-year increase of 4% on a reported basis and approximately 9% in constant currency. It projected earnings per share of approximately $1.35, which suggests a decline from adjusted earnings of $1.42 reported in first-quarter fiscal 2022. The company expects its operating margin to be approximately 16.5%, down from 20.8% in the year-ago period.

For the first quarter, Capri Holdings anticipates revenues of approximately $265 million from Versace, $155 million from Jimmy Choo, and $880 million from Michael Kors. The company expects operating margin in the low double-digit range for Versace, the mid-single-digit range for Jimmy Choo and low to mid 20% range for Michael Kors.    

For the second quarter, the company expects revenues to be $1.425 billion and adjusted earnings to be $1.60 per share with adjusted operating margin of 17%. This compared with revenues of $1.3 billion and adjusted earnings of $1.53 per share in the year-ago period.

For the third quarter, the company expects revenues to be $1.725 billion and adjusted earnings to be $2.55 per share with adjusted operating margin of 23.5%. This compared with revenues of $1.609 billion and adjusted earnings of $2.22 per share in the year-ago period.

For the fourth quarter, the company expects revenues to be $1.50 billion and adjusted earnings to be $1.35 per share with adjusted operating margin of 14.5%. This compared with revenues of $1.492 billion and adjusted earnings of $1.02 per share in the year-ago period.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

The consensus estimate has shifted -8.16% due to these changes.

VGM Scores

Currently, Capri Holdings has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.