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Capri Holdings (CPRI) Beats on Q1 Earnings, Raises FY22 View

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In spite of a challenging backdrop, Capri Holdings Limited (CPRI - Free Report) reported stronger-than-anticipated first-quarter fiscal 2022 results, wherein both the top and the bottom lines improved meaningfully on a year-over-year basis. The company was encouraged by the performance of all three luxury brands. Impressively, management raised fiscal year revenues and earnings view.

Shares of Capri Holdings were up during the pre-market trading session on Jul 30. This Zacks Rank #3 (Hold) stock has increased 20.2% in the past six months compared with the industry’s rise of 15.1%.

Quite apparent, the fashion and apparel space is brimming with optimism, courtesy of rapid inoculation drive and relaxation in pandemic-induced restrictions. The gradual return to active social lifestyle, events and occasions have spurred demand, and Capri Holdings looks well-poised to tap the same.

John D. Idol, chairman and CEO, said, "Looking forward, we are confident in the growth opportunities for Versace, Jimmy Choo and Michael Kors as the world continues to recover from the impact of the global pandemic. As we execute on our strategic initiatives, Capri Holdings is positioned to deliver multiple years of revenue and earnings growth."

Let’s Delve Deep

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.42 per share that improved sharply from a loss of $1.04 reported in the year-ago pandemic-hit quarter. The quarterly earnings also handily beat the Zacks Consensus Estimate of 79 cents. Better revenue performance and margin expansion aided bottom-line results.

Total revenues came in at $1,253 million that comfortably surpassed the Zacks Consensus Estimate of $1,122 million and soared approximately 178% year over year. On a constant-currency basis, total revenues surged 164%.

Adjusted gross profit increased approximately 182% year over year to $853 million, while adjusted gross margin expanded 90 basis points to 68.1%. The company reported adjusted operating income of $261 million against an operating loss of $147 million in the prior-year quarter.

Capri Holdings Limited Price, Consensus and EPS Surprise

Capri Holdings Limited Price, Consensus and EPS Surprise

Capri Holdings Limited price-consensus-eps-surprise-chart | Capri Holdings Limited Quote

Segment Details

Revenues from Versace increased 158% year over year to $240 million. Notably, e-commerce sales were up triple digits. Operating income came in at $48 million versus an operating loss of $41 million in the year-ago period.

Jimmy Choo revenues came in at $142 million, up 178% compared with the prior year. We note that e-commerce sales increased triple digits. The segment posted operating income of $11 million against an operating loss of $29 million in the prior-year quarter.

Revenues from Michael Kors surged 184% year over year to $871 million. E-commerce sales increased double digits. The segment posted operating income of $240 million against an operating loss of $48 million in the prior-year quarter.

Other Details

Capri Holdings ended the quarter with cash and cash equivalents of $356 million, net receivables of $382 million, long-term debt of $1,206 million and shareholders’ equity of $2,450 million. Net inventories as of Jun 26, 2021 was $760 million, down 20% year over year.

During the quarter, the company repurchased roughly 0.9 million shares for approximately $50 million. As of Jun 26, 2021, the company had $350 million remaining under its share repurchase authorization.

As of Jun 26, 2021, the company had 1,261 retail stores, which included 820 Michael Kors stores, 233 Jimmy Choo stores and 208 Versace stores.

Outlook

Capri Holdings now envisions revenues to be approximately $5.3 billion for fiscal 2022 compared with the previous forecast of $5.15 billion. The company also raised earnings guidance to $4.50 per share from its prior view of $3.80-$3.90. We note that the company had reported revenues of $4,060 million and earnings per share of $1.90 in fiscal 2021. Management expects operating margin of approximately 16% for fiscal 2022.

Fiscal 2022 top-line projection assumes revenues of approximately $1.025 billion from Versace, $550 million from Jimmy Choo, and $3.725 billion from Michael Kors. Management anticipates operating margin in the low-double-digit range for Versace, in the negative low single digit range for Jimmy Choo, and in the mid 20% range for Michael Kors.

Management envisions second-quarter revenues to be roughly $1.25 billion. It projected operating margin of approximately 13% and guided earnings of 90 cents a share.

For the second quarter, Capri Holdings anticipates revenues of approximately $260 million from Versace, $120 million from Jimmy Choo, and $870 million from Michael Kors. The company expects operating margin in the low-double-digit range for Versace, in the negative low double-digit range for Jimmy Choo, and in the low 20% range for Michael Kors.

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