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Capri Holdings (CPRI) Up 20% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have added about 20% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Capri Holdings due for a pullback? 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 Limited reported better-than-expected second-quarter fiscal 2023 results. Both the top and bottom lines improved on a year-over-year basis. The company was encouraged by the performance of all three luxury brands. However, management provided a cautious sales commentary for the remainder of fiscal 2023.
Given the ongoing macroeconomic conditions, foreign currency headwinds and pandemic-related restrictions in China, Capri Holdings has taken a cautious approach on the revenue front. Nonetheless, the company reiterated its earnings per share view for the fiscal year due to higher gross margin expectations, efficient cost management and a lower share count.
Let’s Delve Deeper
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.79 per share, which showcased an improvement from the adjusted earnings of $1.53 reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of $1.55.
Total revenues of $1,412 million marginally came ahead of the Zacks Consensus Estimate of $1,399 million and increased 8.6% year over year. On a constant-currency basis, total revenues rose 17.5%.
By geographic region, revenues in the Americas increased 15%. In EMEA, revenues grew 3% on a reported basis and 20% in constant currency. In Asia, revenue decreased 2% on a reported basis but increased 12% in constant currency. This reflects strong results in Japan and Southeast Asia with Mainland China revenues down in the high-teens and down low double-digit in constant currency.
The adjusted gross profit increased approximately 7.8% year over year to $948 million. However, the adjusted gross margin contracted 50 basis points (bps) to 67.1% owing to higher supply chain costs.
The company reported an adjusted operating income of $280 million, up from $241 million in the prior-year quarter. The operating margin expanded 130 bps to 19.8%, reflecting better-than-anticipated gross margin and efficient expense management.
Segment Details
Revenues from Versace increased 9.2% year over year (or 28% in constant currency) to $308 million during the quarter under discussion. Women’s accessories retail sales increased 60%. The operating margin increased 60 bps to 20.1%. By geography, total revenues in the Americas increased 12%. Revenues in EMEA increased 10% on a reported basis and 28% in constant currency. Revenues in Asia increased 2% on a reported basis and 20% in constant currency, reflecting strong growth in Japan and Southeast Asia, partially offset by an expected decline in China.
Jimmy Choo’s revenues came in at $142 million, up 3.6% from the prior-year period. Women’s accessories retail sales grew 30%. The operating margin expanded 490 bps to 5.6%. By geography, total revenue in the Americas increased 13%. Revenues in EMEA increased 2% on a reported basis and 20% in constant currency. Revenues in Asia decreased 2% on a reported basis but increased 12% in constant currency, reflecting increases in Japan and Southeast Asia, partially offset by an expected decline in China.
Revenues from Michael Kors grew 9.2% year over year to $962 million. Women’s accessories retail sales grew in the mid-single digits. The operating margin expanded 80 bps to 25.8%. By geography, total revenue in the Americas increased 16%. Revenue in EMEA was flat on a reported basis but increased 15% in constant currency. Revenue in Asia decreased 5% on a reported basis but increased 7% in constant currency, reflecting strong growth in Japan and Southeast Asia, partially offset by an expected decline in China.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $215 million, net receivables of $441 million, long-term debt of $1,585 million and total shareholders’ equity of $2,143 million.
During the quarter, the company repurchased roughly 7.1 million shares for approximately $350 million. On Nov 9, 2022, Capri Holdings’ board of directors authorized a new share repurchase program of up to $1 billion. This new two-year program will replace the existing $1-billion share buyback program, which had $250 million of availability remaining.
As of Oct 1, 2022, the company had 1,276 retail stores. These include 821 Michael Kors, 238 Jimmy Choo and 217 Versace stores.
Guidance
Capri Holdings estimates revenues of approximately $5.7 billion for fiscal 2023, down from the prior projection of $5.85 billion. The current projection represents an approximate 1% jump over prior year on a reported basis, while on a constant currency basis, the metric is expected to increase approximately 7%. The company had reported revenues of $5.654 billion in fiscal 2022.
It reaffirmed the earnings per share guidance of approximately $6.85, which indicates an increase from the adjusted earnings of $6.21 reported in fiscal 2022.
Management projected a gross margin expansion of 50 basis points and an operating margin to be approximately 18.3% (versus 19% in fiscal 2022).
The fiscal 2023 top-line projection assumes revenues of approximately $1.15 billion from Versace, $640 million from Jimmy Choo and $3.91 billion from Michael Kors. Management anticipates an operating margin of approximately 16%, 5% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.
Management envisions third-quarter fiscal 2023 revenues to be roughly $1.53 billion compared with revenues of $1.609 billion reported in the year-ago period. It projected earnings per share of approximately $2.20 compared with the adjusted earnings of $2.22 reported in the third quarter of fiscal 2022. The company expects its operating margin to be approximately 20.5% compared with 22.3% in the prior-year quarter.
For the third quarter, Capri Holdings anticipates revenues of approximately $240 million from Versace, $180 million from Jimmy Choo and $1.11 billion from Michael Kors. The company expects the operating margin in the high-single-digit range for Versace and Jimmy Choo and a mid-to-high 20% range for Michael Kors.
For the fourth quarter, the company expects revenues of $1.40 billion and adjusted earnings of $1.35 per share, with an adjusted operating margin of 14%. This compared with revenues of $1.492 billion, adjusted operating margin of 14.2%, and adjusted earnings of $1.02 per share in the year-ago period.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -9.17% due to these changes.
VGM Scores
Currently, Capri Holdings has a poor Growth Score of F, 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 quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Capri Holdings (CPRI) Up 20% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have added about 20% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Capri Holdings due for a pullback? 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 Q2 Earnings Beat, Revenues Rise Y/Y
Capri Holdings Limited reported better-than-expected second-quarter fiscal 2023 results. Both the top and bottom lines improved on a year-over-year basis. The company was encouraged by the performance of all three luxury brands. However, management provided a cautious sales commentary for the remainder of fiscal 2023.
Given the ongoing macroeconomic conditions, foreign currency headwinds and pandemic-related restrictions in China, Capri Holdings has taken a cautious approach on the revenue front. Nonetheless, the company reiterated its earnings per share view for the fiscal year due to higher gross margin expectations, efficient cost management and a lower share count.
Let’s Delve Deeper
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.79 per share, which showcased an improvement from the adjusted earnings of $1.53 reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of $1.55.
Total revenues of $1,412 million marginally came ahead of the Zacks Consensus Estimate of $1,399 million and increased 8.6% year over year. On a constant-currency basis, total revenues rose 17.5%.
By geographic region, revenues in the Americas increased 15%. In EMEA, revenues grew 3% on a reported basis and 20% in constant currency. In Asia, revenue decreased 2% on a reported basis but increased 12% in constant currency. This reflects strong results in Japan and Southeast Asia with Mainland China revenues down in the high-teens and down low double-digit in constant currency.
The adjusted gross profit increased approximately 7.8% year over year to $948 million. However, the adjusted gross margin contracted 50 basis points (bps) to 67.1% owing to higher supply chain costs.
The company reported an adjusted operating income of $280 million, up from $241 million in the prior-year quarter. The operating margin expanded 130 bps to 19.8%, reflecting better-than-anticipated gross margin and efficient expense management.
Segment Details
Revenues from Versace increased 9.2% year over year (or 28% in constant currency) to $308 million during the quarter under discussion. Women’s accessories retail sales increased 60%. The operating margin increased 60 bps to 20.1%. By geography, total revenues in the Americas increased 12%. Revenues in EMEA increased 10% on a reported basis and 28% in constant currency. Revenues in Asia increased 2% on a reported basis and 20% in constant currency, reflecting strong growth in Japan and Southeast Asia, partially offset by an expected decline in China.
Jimmy Choo’s revenues came in at $142 million, up 3.6% from the prior-year period. Women’s accessories retail sales grew 30%. The operating margin expanded 490 bps to 5.6%. By geography, total revenue in the Americas increased 13%. Revenues in EMEA increased 2% on a reported basis and 20% in constant currency. Revenues in Asia decreased 2% on a reported basis but increased 12% in constant currency, reflecting increases in Japan and Southeast Asia, partially offset by an expected decline in China.
Revenues from Michael Kors grew 9.2% year over year to $962 million. Women’s accessories retail sales grew in the mid-single digits. The operating margin expanded 80 bps to 25.8%. By geography, total revenue in the Americas increased 16%. Revenue in EMEA was flat on a reported basis but increased 15% in constant currency. Revenue in Asia decreased 5% on a reported basis but increased 7% in constant currency, reflecting strong growth in Japan and Southeast Asia, partially offset by an expected decline in China.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $215 million, net receivables of $441 million, long-term debt of $1,585 million and total shareholders’ equity of $2,143 million.
During the quarter, the company repurchased roughly 7.1 million shares for approximately $350 million. On Nov 9, 2022, Capri Holdings’ board of directors authorized a new share repurchase program of up to $1 billion. This new two-year program will replace the existing $1-billion share buyback program, which had $250 million of availability remaining.
As of Oct 1, 2022, the company had 1,276 retail stores. These include 821 Michael Kors, 238 Jimmy Choo and 217 Versace stores.
Guidance
Capri Holdings estimates revenues of approximately $5.7 billion for fiscal 2023, down from the prior projection of $5.85 billion. The current projection represents an approximate 1% jump over prior year on a reported basis, while on a constant currency basis, the metric is expected to increase approximately 7%. The company had reported revenues of $5.654 billion in fiscal 2022.
It reaffirmed the earnings per share guidance of approximately $6.85, which indicates an increase from the adjusted earnings of $6.21 reported in fiscal 2022.
Management projected a gross margin expansion of 50 basis points and an operating margin to be approximately 18.3% (versus 19% in fiscal 2022).
The fiscal 2023 top-line projection assumes revenues of approximately $1.15 billion from Versace, $640 million from Jimmy Choo and $3.91 billion from Michael Kors. Management anticipates an operating margin of approximately 16%, 5% and 25% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.
Management envisions third-quarter fiscal 2023 revenues to be roughly $1.53 billion compared with revenues of $1.609 billion reported in the year-ago period. It projected earnings per share of approximately $2.20 compared with the adjusted earnings of $2.22 reported in the third quarter of fiscal 2022. The company expects its operating margin to be approximately 20.5% compared with 22.3% in the prior-year quarter.
For the third quarter, Capri Holdings anticipates revenues of approximately $240 million from Versace, $180 million from Jimmy Choo and $1.11 billion from Michael Kors. The company expects the operating margin in the high-single-digit range for Versace and Jimmy Choo and a mid-to-high 20% range for Michael Kors.
For the fourth quarter, the company expects revenues of $1.40 billion and adjusted earnings of $1.35 per share, with an adjusted operating margin of 14%. This compared with revenues of $1.492 billion, adjusted operating margin of 14.2%, and adjusted earnings of $1.02 per share in the year-ago period.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -9.17% due to these changes.
VGM Scores
Currently, Capri Holdings has a poor Growth Score of F, 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 quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.