It has been about a month since the last earnings report for Capri Holdings (CPRI - Free Report) . Shares have added about 8.1% 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 Posts Narrower-Than-Expected Q1 Loss
Capri Holdings Limited reported better-than-expected first-quarter fiscal 2021 results. The global fashion luxury group posted narrower-than-expected loss. Further, the company’s total revenues surpassed the Zacks Consensus Estimate. However, both the top and the bottom lines declined sharply from the year-ago period thanks to the impact of the coronavirus pandemic. We note that revenues fell across the company’s three brands.
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories reported adjusted quarterly loss of $1.04 per share narrower than the Zacks Consensus Estimate of a loss of $1.10. The company had posted earnings of 95 cents in the year-ago period. The bottom line was adversely impacted by lower revenues.
Total revenues of $451 million decreased 66.5% from the prior-year period on account of stores being closed for an average of about 55% of the quarter. On a constant currency basis, total revenues were down 66.2%. However, the top line surpassed the Zacks Consensus Estimate of $431.3 million.
While retail sales declined approximately 60%, wholesale sales decreased roughly 85%. The company’s wholesale partners placed limited orders during the quarter owing to the store closures.
Top line includes revenue contribution of $307 million from Michael Kors, down 68.7% and $51 million from Jimmy Choo, down 67.7% year over year. Revenues from Versace were $93 million, down 55.1% from the prior year period.
Adjusted gross profit fell 63.9% year over year to $303 million, however, adjusted gross margin expanded 480 basis points to 67.2%. This primarily reflects gross margin expansion across Michael Kors brand driven by higher AURs and favorable channel mix. Management focuses on gross margin expansion through higher full price sell-throughs, strategic price increases and lower manufacturing costs. The company envisions gross profit margin expansion of approximately 150 basis points for the fiscal year.
The company reported adjusted operating loss of $147 million against adjusted operating income of $190 million in the year-ago period.
Management, on its last earnings call on Jul 1, had cautioned that the first-quarter fiscal 2021 will mark a low point in terms of revenues and earnings. John D. Idol, the CEO of the company, said, "Looking at our progress in the fiscal first quarter, we were encouraged by trends across all three of our luxury houses, with sales and margin performance ahead of our initial expectations. We were particularly pleased with the strong growth of our eCommerce business, as well the sequential improvement in overall revenue trends through the first quarter and into July."
Capri Holdings ended first-quarter fiscal 2021 with cash and cash equivalents of $207 million, net receivables of $183 million, total debt of $1,768 million and shareholders’ equity of $2,006 million, excluding non-controlling interest of $1 million. Total inventory at the end of the quarter under review was $948 million, reflecting a decline of 6.7% year over year.
As of Jun 27, 2020, there were 1,254 stores — 822 Michael Kors stores, 228 Jimmy Choo stores and 204 Versace stores.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -46.67% due to these changes.
At this time, Capri Holdings has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Capri Holdings has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.