Capri (CPRI) Tops Q1 Earnings, Withdraws Guidance on Merger Deal
Capri Holdings Limited CPRI reported better-than-expected first-quarter fiscal 2024 results. However, the top and bottom lines declined on a year-over-year basis. A tough operating environment weighed on the company’s performance.
Separately, Capri Holdings announced that it has entered into a merger agreement with Tapestry, Inc. (TPR). The deal, valued at $8.5 billion, will involve Capri Holdings merging its entire business with Tapestry and creating a global house of leading luxury and fashion brands across consumer segments. Per the transaction terms, shareholders of Capri Holdings will be entitled to obtain $57.00 per share in cash. The transaction is expected to be completed in 2024, subject to certain regulatory approvals and customary closing conditions.
CPRI has surged 41.6% in the past three months compared with the industry’s growth of 9.8%.
Capri Holdings’ Q1 Results
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of 74 cents per share, showcasing a decline from the adjusted earnings of $1.50 reported in the year-ago period. However, the metric surpassed the Zacks Consensus Estimate of 69 cents.
Total revenues of $1,229 million beat the Zacks Consensus Estimate of $1,200 million but decreased 9.6% year over year. On a constant-currency basis, total revenues declined by 9.3%.
The adjusted gross profit decreased approximately 9.8% year over year to $812 million. The adjusted gross margin contracted 10 basis points (bps) to 66.1%. We had expected an adjusted gross margin of 66.8% in the quarter under review.
The company reported an adjusted operating income of $111 million, down from $251 million in the prior year’s quarter. The operating margin shrunk by 950 bps to 9% but fared better than our estimate of 8.5%.
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 decreased 5.8% year over year to $259 million during the quarter under discussion. The segment’s revenues came ahead of our estimate of $245.2 million. The operating income was $3 million, down 94.2% year over year, while its margin contracted 1,770 bps to 1.2%.
Jimmy Choo’s revenues came in at $183 million, up 6.4% from the prior-year period. Our estimate for revenues from this segment was pegged at $180.6 million. The operating income was $16 million in the quarter, down 15.8%. The operating margin was 8.7% compared with 11% in the prior-year quarter.
Revenues from Michael Kors fell 13.8% year over year to $787 million but fared better than our estimate of $775.5 million. The operating income was $130 million, down 41.4% year-over-year, while its margin contracted 780 bps to 16.5%.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $238 million, net receivables of $300 million, long-term debt of $1,924 million and total shareholders’ equity of $1,812 million.
As of Jul 1, 2023, the company had 1,271 retail stores. These include 810 Michael Kors, 237 Jimmy Choo and 224 Versace stores.
Guidance
With the planned merger agreement, Capri Holdings restrained from providing financial guidance for the upcoming quarter and fiscal 2024. The company also withdrew its previously issued financial guidance.
Zacks Rank & Stocks to Consider
Capri Holdings currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks are Tecnoglass TGLS, Skechers U.S.A., Inc. SKX and Arhaus, Inc. ARHS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries.
The Zacks Consensus Estimate for Tecnoglass’ upcoming quarter’s sales and earnings per share suggests growth of 9.8% and 4%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 21%, on average.
Skechers is a worldwide producer and distributor of footwear for men, women and children.
The Zacks Consensus Estimate for Skechers’ current financial-year sales suggests growth of 8.3%, while earnings per share are expected to rise 39.5% from the corresponding year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 39.1%, on average.
Arhaus is a lifestyle brand and omnichannel retailer of premium home furnishings.
The Zacks Consensus Estimate for Arhaus’ current financial-year sales suggests growth of 2.6%, while earnings per share are expected to decline 22.6% from the corresponding year-ago reported figures. ARHS has a trailing four-quarter earnings surprise of 46.6%, on average.
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