In spite of a challenging backdrop, Capri Holdings Limited CPRI reported stronger-than-anticipated fourth-quarter fiscal 2021 results. The company was encouraged by the performance of all three luxury brands. While the top line remained almost flat year over year, bottom line increased meaningfully. Also, management provided an upbeat view for fiscal 2022.
Shares of Capri Holdings were up during the pre-market trading session on May 26. This Zacks Rank #2 (Buy) stock has surged 47% in the past six months compared with the industry’s rally of 33.9%.
Quite apparent, the fashion and apparel space is brimming with optimism, courtesy of rapid inoculation drive and coronavirus relief package. The return to active social lifestyle, events and occasions are likely to spur demand, and Capri Holdings looks well-poised to tap the same.
John D. Idol, chairman and CEO, said, “As the world starts to recover from the pandemic, we are confident in our growth opportunities for Versace, Jimmy Choo and Michael Kors. We believe our three luxury houses position Capri Holdings to deliver multiple years of revenue and earnings growth, as well as increase shareholder value.”
Let’s Delve Deep
This designer, marketer, distributor and retailer of branded apparel and accessories reported adjusted quarterly earnings of 38 cents a share that increased sharply from 11 cents posted in the year-ago period. The quarterly earnings also compared favorably with the Zacks Consensus Estimate of loss of 1 cent. Better revenue performance and gross margin expansion across all three luxury brands resulted in higher-than-anticipated earnings.
Revenues amounted to $1,197 million that comfortably surpassed the Zacks Consensus Estimate of $1,032 million but remained approximately flat year over year. On a constant-currency basis, total revenues were down 3.8%.
During the quarter, the company witnessed temporary door closures in geographies impacted by lockdowns owing to the ongoing pandemic. Management informed that on average, about 60% of the company's retail stores in EMEA and roughly 40% of the company’s retail stores in Canada were shuttered during the quarter.
The company’s e-commerce business was strong with sales up 80% on a sequential basis. Retail sales grew 13% year over year driven by an improvement in both e-commerce and store sales. Further, the company witnessed double digit retail sales increase in Asia, thanks to triple digit growth in Mainland China.
Adjusted gross profit increased 5.1% year over year to $760 million, while adjusted gross margin expanded 280 basis points to 63.5%. The company reported adjusted operating income of $143 million, up significantly from $99 million in the prior-year quarter. Notably, adjusted operating margin increased 360 basis points to 11.9%.
Capri Holdings Limited Price, Consensus and EPS Surprise
Capri Holdings Limited price-consensus-eps-surprise-chart | Capri Holdings Limited Quote
Revenues from Versace increased 10.3% year over year to $235 million. Retail sales were robust, up double digits. The brand witnessed double digit growth in Asia and the Americas. Notably, e-commerce sales were up triple digits. Operating income came in at $29 million versus an operating loss of $2 million in the year-ago period.
Jimmy Choo revenues were $124 million, up 15.9% compared with the prior year. Retail sales increased in high single digits with double digit growth in Asia and the Americas. Again, e-commerce sales improved sequentially, rising more than 50%. The segment posted operating loss of $18 million compared with operating loss of $23 million in the prior-year quarter.
Revenues from Michael Kors declined 3.9% year over year to $838 million. Retail sales were up mid-teens with double digit growth in Asia and the Americas. Markedly, e-commerce sales surged 75% sequentially. Operating income rose 23.7% year over year to $172 million, whereas operating margin expanded 460 basis points to 20.5%.
Capri Holdings ended the quarter with cash and cash equivalents of $232 million, net receivables of $373 million, long-term debt of $1,219 million and shareholders’ equity of $2,157 million. Net inventory as of Mar 27, 2021 was $736 million, down 11% year over year.
Management estimates capital expenditures of approximately $200 million for fiscal 2022. The company has reinstated its share repurchase program. It has $400 million remaining under its authorization.
As of Mar 27, 2021, the company had 1,257 retail stores, which included 820 Michael Kors stores, 227 Jimmy Choo stores and 210 Versace stores.
Capri Holdings anticipates revenues of approximately $5.1 billion and earnings in the bracket of $3.70-$3.80 per share for fiscal 2022. We note that the company had reported revenues of $4,060 million and earnings of $1.90 per share for fiscal 2021. The company anticipates gross margin expansion of about 50 basis points, reflecting benefits from strategic endeavors, partly offset by increased transportation expenses. Management expects operating margin of approximately 14%.
For the first quarter, the company anticipates total revenues of approximately $1.1 billion. It guided about 100 basis points contraction in gross margin, mainly due to higher wholesale channel mix. The company projected operating margin of approximately 12%. It expects earnings to be 75 cents a share.
Management envisions second-quarter revenues to be roughly $1.2 billion. It projected operating margin of approximately 11% and guided earnings in the band of 70-75 cents a share.
For the third quarter, Capri Holdings anticipates total revenues of approximately $1.4 billion and operating margin of approximately 20%. It estimates earnings in the range of $1.65-$1.70 per share.
For the final quarter, the company expects total revenues of about $1.4 billion and operating margin of approximately 12%. It anticipates earnings between 55 cents and 60 cents a share.
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