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Capri Holdings (CPRI) Down 13.4% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have lost about 13.4% 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 Beats on Q1 Earnings, Trims Sales View
Capri Holdings Limited maintained its positive earnings surprise streak, when it reported first-quarter fiscal 2020 results. However, revenues came below the Zacks Consensus Estimate, following a beat in the preceding quarter. While the top line grew year over year, bottom line declined from the year-ago period.
Nonetheless, the company reiterated its fiscal 2020 earnings view but trimmed its full-year sales forecast due to adverse foreign currency fluctuations and lower Michael Kors revenue, related to North America wholesale.
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories delivered adjusted quarterly earnings of 95 cents a share (including dilution from Versace of about 8 cents) that surpassed the Zacks Consensus Estimate of 90 cents as well as management’s projection of 85-90 cents. However, earnings fell sharply from $1.32 reported in the year-ago period. Rise in cost of goods sold, increased operating expenses and higher interest expense acted as deterrents to the bottom line.
Total revenues of $1,346 million surged 11.9% from the prior-year period but missed the Zacks Consensus Estimate of $1,362 million. On a constant currency basis, total revenues were up 13.8%.
Capri Holdings has been steadily firming its position in the luxury fashion space, as evident from the acquisition of Jimmy Choo and Versace. These brands along with Michael Kors will help augment revenues to $8 billion in the long term.
Top line includes revenue contribution of $981 million from Michael Kors, down 4.8% and $158 million from Jimmy Choo, down 8.7% year over year. Revenue from Versace came in at $207 million.
On a constant currency basis, comparable store sales fell in low single digits for Michael Kors, however, global e-commerce benefited comparable store sales by 130 basis points. The metric remained flat for Jimmy Choo. Comparable store sales for Versace rose double digits, on a constant currency basis.
Adjusted gross profit increased 11.4% to $840 million, however, adjusted gross margin contracted 30 basis points to 62.4%. Adjusted operating income declined 18.5% to $190 million, while adjusted operating margin shrunk 530 basis points to 14.1%. Nevertheless, adjusted operating margin came better than the company’s forecast of 13%. The company expects second-quarter fiscal 2020 operating margin to be about 15%.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $160 million, long-term debt of $1,917 million and shareholders’ equity of $2,277 million, excluding non-controlling interest of $3 million. The company intends to lower debt load by roughly $500 million during the fiscal year.
On Aug 1, the company's board of directors announced a new $500 million share buyback program. As of Jun 29, 2019, there were 1,264 stores — 853 Michael Kors stores, 215 Jimmy Choo stores and 196 Versace.
Guidance
Michael Kors now envisions second-quarter revenue to be approximately $1.45 billion, indicating a double-digit increase from the prior-year period. The company now forecasts earnings in the range of $1.21-$1.26, including dilution from Versace of about 5 cents.
Management forecasts second-quarter 2020 revenues from Michael Kors to be approximately $1.1 billion with comparable store sales likely to be flat year over year. Operating margin is expected to be lower than the year-ago period. Revenue from Versace is estimated to be approximately $220 million with comparable store sales projected to increase in the mid-single digits. Jimmy Choo revenue is projected to be approximately $125 million and comparable store sales are expected to be flat with the prior-year period.
During the third quarter, the company envisions double-digit decrease in earnings per share due to lower Michael Kors’ wholesale shipments in the Americas. However, for the final quarter earnings per share are expected to be approximately double due to an additional month in the quarter for Versace, increased operating margins for Jimmy Choo and Michael Kors, and a lower tax rate.
For fiscal 2020, management projects total revenue to be approximately $5.8 billion, down from the prior view of $6 billion but still suggests year-over-year improvement. Operating margin is expected to come in at 15.5%. Management continues to envision earnings of $4.95 per share, including dilution from Versace of about 20 cents and the impact of recently announced U.S. tariffs as well as strong U.S. dollar.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Capri Holdings has an average Growth Score of C, a grade with the same score on the momentum front. However, 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
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. 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) Down 13.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have lost about 13.4% 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 Beats on Q1 Earnings, Trims Sales View
Capri Holdings Limited maintained its positive earnings surprise streak, when it reported first-quarter fiscal 2020 results. However, revenues came below the Zacks Consensus Estimate, following a beat in the preceding quarter. While the top line grew year over year, bottom line declined from the year-ago period.
Nonetheless, the company reiterated its fiscal 2020 earnings view but trimmed its full-year sales forecast due to adverse foreign currency fluctuations and lower Michael Kors revenue, related to North America wholesale.
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories delivered adjusted quarterly earnings of 95 cents a share (including dilution from Versace of about 8 cents) that surpassed the Zacks Consensus Estimate of 90 cents as well as management’s projection of 85-90 cents. However, earnings fell sharply from $1.32 reported in the year-ago period. Rise in cost of goods sold, increased operating expenses and higher interest expense acted as deterrents to the bottom line.
Total revenues of $1,346 million surged 11.9% from the prior-year period but missed the Zacks Consensus Estimate of $1,362 million. On a constant currency basis, total revenues were up 13.8%.
Capri Holdings has been steadily firming its position in the luxury fashion space, as evident from the acquisition of Jimmy Choo and Versace. These brands along with Michael Kors will help augment revenues to $8 billion in the long term.
Top line includes revenue contribution of $981 million from Michael Kors, down 4.8% and $158 million from Jimmy Choo, down 8.7% year over year. Revenue from Versace came in at $207 million.
On a constant currency basis, comparable store sales fell in low single digits for Michael Kors, however, global e-commerce benefited comparable store sales by 130 basis points. The metric remained flat for Jimmy Choo. Comparable store sales for Versace rose double digits, on a constant currency basis.
Adjusted gross profit increased 11.4% to $840 million, however, adjusted gross margin contracted 30 basis points to 62.4%. Adjusted operating income declined 18.5% to $190 million, while adjusted operating margin shrunk 530 basis points to 14.1%. Nevertheless, adjusted operating margin came better than the company’s forecast of 13%. The company expects second-quarter fiscal 2020 operating margin to be about 15%.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $160 million, long-term debt of $1,917 million and shareholders’ equity of $2,277 million, excluding non-controlling interest of $3 million. The company intends to lower debt load by roughly $500 million during the fiscal year.
On Aug 1, the company's board of directors announced a new $500 million share buyback program. As of Jun 29, 2019, there were 1,264 stores — 853 Michael Kors stores, 215 Jimmy Choo stores and 196 Versace.
Guidance
Michael Kors now envisions second-quarter revenue to be approximately $1.45 billion, indicating a double-digit increase from the prior-year period. The company now forecasts earnings in the range of $1.21-$1.26, including dilution from Versace of about 5 cents.
Management forecasts second-quarter 2020 revenues from Michael Kors to be approximately $1.1 billion with comparable store sales likely to be flat year over year. Operating margin is expected to be lower than the year-ago period.
Revenue from Versace is estimated to be approximately $220 million with comparable store sales projected to increase in the mid-single digits. Jimmy Choo revenue is projected to be approximately $125 million and comparable store sales are expected to be flat with the prior-year period.
During the third quarter, the company envisions double-digit decrease in earnings per share due to lower Michael Kors’ wholesale shipments in the Americas. However, for the final quarter earnings per share are expected to be approximately double due to an additional month in the quarter for Versace, increased operating margins for Jimmy Choo and Michael Kors, and a lower tax rate.
For fiscal 2020, management projects total revenue to be approximately $5.8 billion, down from the prior view of $6 billion but still suggests year-over-year improvement. Operating margin is expected to come in at 15.5%. Management continues to envision earnings of $4.95 per share, including dilution from Versace of about 20 cents and the impact of recently announced U.S. tariffs as well as strong U.S. dollar.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Capri Holdings has an average Growth Score of C, a grade with the same score on the momentum front. However, 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
Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Capri Holdings has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.