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Capri Holdings (CPRI) Poised to Gain on Improving Market Trends

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Capri Holdings Limited (CPRI - Free Report) is looking well placed as consumers are upgrading their wardrobes and splurging on luxury products, owing to easing of pandemic-led restrictions. Favorable retail market conditions and improving sales trends have prompted this renowned fashion retailer to chalk down ambitious growth plans for its brands. Moreover, the company is gaining from sturdy growth in the digital wing. Let’s take a closer look.

Solid Plans to Tap Growth

Return to active social lifestyle, events and occasions have been boosting demand for apparel products. During the virtual investor’s day held last week, Capri Holdings highlighted that it is witnessing better-than-expected sales trends in first-quarter fiscal 2022. In fact, its three iconic fashion houses — Micheal Kors, Versace and Jimm Choo  —  are doing quite well.

To continue tapping the improved market conditions and drive sales, Capri Holdings highlighted that it will focus on maximizing the potentials of Versace, Jimmy Choo and Micheal Kors brands through expanded products and categories. Designing innovative fashion products across brand banners will be a priority. While exploring growth opportunities in apparel is an important target for the company, it will also emphasize on boosting its accessories business including leather goods and handbags.

Moreover, the company will continue to focus on restructuring its store base. In this context, it is on track with renovation of Michael Kors stores, closing underperforming stores in North America and opening new stores in Asia. Additionally, the company has been deploying resources to upgrade distribution infrastructure.

Capri Holdings’ e-commerce business continues to witness sturdy performance, thanks to increasing number of customers shopping online. In fact, strong e-commerce sales across brands were a key upside for the company during fourth-quarter fiscal 2021. The company will continue leveraging omni-channel capabilities to accelerate revenue growth as well as enhancing consumer engagement through improved communications.

The company estimates capital investments of approximately $200 million per year, which will be mainly utilized for expanding and renovating store fleet, boosting digital technology capabilities as well as creating common corporate platforms. Apart from investing in strategic growth of its business, the company will utilize funds for debt reduction. It will also boost shareholders’ returns and carry out acquisitions, as part of its long-terms strategic priorities.

Zacks Investment ResearchImage Source: Zacks Investment Research

Optimistic View

As the overall market conditions improve, Capri Holdings highlighted that it now has better visibility and is more confident regarding its future. Accordingly, the company raised its fiscal 2022 view. It now expects revenue to be approximately $5.15 billion for fiscal 2022 compared with previous guidance of nearly $5.10 billion. The raised top-line projection indicates a 26.8% rise from $4.06 billion reported in the prior year. Additionally, the company expects adjusted earnings for fiscal 2022 in the band of $3.80-$3.90 compared with prior projection of $3.70-$3.80. The Zacks Consensus Estimate for revenues and earnings for the fiscal year are currently pegged at $5.16 billion and $3.82, respectively. Further, the company continues to expect operating margin of approximately 14%, reflecting year-over-year operating margin improvement across all brands.

Clearly, the company is quite optimistic regarding its growth in the forthcoming periods. We note that shares of this Zacks Rank #3 (Hold) company have gained 10.8% in the past six months compared with the industry’s rise of 8.3%.

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