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Bull of the Day: Capri Holdings (CPRI)

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Capri Holdings (CPRI - Free Report) is a luxury retail holding company that specializes in men’s and women’s ready-to-wear apparel, accessories, and footwear. Its brand portfolio includes Michael Kors, Jimmy Choo, and Versace, each making up 75%, 10%, and 15% of total revenue, respectively.

Q2 Earnings Impress

Shares of Capri rose over 8% after the retailer reported better-than-expected second quarter results.

Revenue fell 23% to $1.11 billion but handily beat estimates of $924.9 million. The company’s top line benefitted from e-commerce growth, which solidly increased quarter-over-quarter, and positive sales growth in China.

Jimmy Choo was the best performing brand, with revenue down only 2.4%.

Additionally, Capri succeeded in controlling costs in Q2 thanks to initiatives like limiting advertising spending; adjusted operating margin rose 240 basis points to 16.4%.

Because of this, the company reported a strong profit of $0.90 per share compared to estimates of $0.04 per share.

As the world continues to emerge from this crisis, we are increasingly optimistic about the outlook for the fashion luxury industry and Capri Holdings,” said CEO John Idol.

CPRI is Surging

In the past one year, shares of Capri have climbed about 16.5%, and over the past six months, the stock gained 162% compared to the S&P 500’s 17.7% increase. Estimates have been rising too, and CPRI is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, one analyst has revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has held steady at $1.21 per share. Earnings are expected to decline for the current fiscal year, but in 2021, CPRI’s bottom line is expected to see triple-digit year-over-year growth.

CPRI does report fiscal 2021 third-quarter earnings in a few weeks, so these estimate figures could change. Additionally, the retailer didn’t provide guidance for Q3 or the rest of the fiscal year due to the pandemic and related uncertainty.

But Capri is well-positioned as the coronavirus pandemic continues. Q2’s results showed that it can generate much-needed profits in trying times, utilizing all three of its brands’ popularity in China (where the economy has bounced back and consumers are shopping at pre-pandemic levels) as well as its overall digital strength.

If you’re an investor searching for a luxury retail stock to add to your portfolio, make sure to keep CPRI on your shortlist.

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