Capri Holdings (CPRI) Q4 Earnings Beat, Revenues Up 24.6% Y/Y
Capri Holdings Limited CPRI reported stronger-than-anticipated fourth-quarter fiscal 2022 results, despite a challenging backdrop. 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.
Consumers’ return to active social lifestyles has spurred demand for luxury apparel and accessories, and Capri Holdings has benefited from the same. The company has been deploying resources to expand offerings, upgrade distribution, create seamless omni-channel and digital capabilities, and deepen customer engagement.
John D. Idol, chairman and CEO, said, “Looking forward in fiscal 2023 we expect to achieve another year of record revenue and earnings per share. Longer term we are confident in our ability to resume double digit revenue increases as we move beyond the impact of current macro headwinds. The power of Versace, Jimmy Choo and Michael Kors as well as the proven resilience of the luxury market reinforce our optimism for the future and our ability to achieve $7 billion in revenue and a 20% operating margin over time.”
Let’s Delve Deeper
This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.02 per share that showcased a sharp improvement from adjusted earnings of 38 cents reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of 82 cents. Better revenue performance and margin expansion aided bottom-line results.
Total revenues of $1,492 million comfortably surpassed the Zacks Consensus Estimate of $1,402 million and surged 24.6% year over year. On a constant-currency basis, total revenues rose 28.4%.
Adjusted gross profit increased approximately 25.1% year over year to $951 million, while adjusted gross margin expanded 20 basis points (bps) to 63.7%. The company reported an adjusted operating income of $212 million, up from $143 million in the prior-year quarter. Markedly, the operating margin increased 230 bps to 14.2%.
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 34% year over year to $315 million. The operating margin increased 360 bps to 15.9%. Global retail AUR jumped high-single digits. Accessories sales soared 75%.
Jimmy Choo revenues came in at $156 million, up 25.8% from the prior-year period. The segment operating loss was $15 million compared with an operating loss of $18 million in the year-ago period. Global retail AUR increased high teens. Accessories sales jumped 30%.
Revenues from Michael Kors grew 21.8% year over year to $1,021 million. The operating margin came in at 20.6% versus 20.5% in the year-ago period. Global retail AUR rose low double digits. Signature represented 45% of the assortment across all categories.
Other Details
Capri Holdings ended the quarter with cash and cash equivalents of $169 million, net receivables of $434 million, long-term debt of $1,131 million and total shareholders’ equity of $2,558 million.
During the quarter, the company repurchased roughly 5.1 million shares for approximately $300 million. The company’s board of directors authorized a new share repurchase program of up to $1 billion on Jun 1, 2022. This new two-year program will override the existing $1 billion share repurchase program, which had $500 million remaining.
As of Apr 2, 2022, the company had 1,271 retail stores, including 825 Michael Kors, 237 Jimmy Choo and 209 Versace stores.
Guidance
Capri Holdings estimates revenues to be approximately $5.95 billion for fiscal 2023. This suggests a year-over-year increase of 5% on a reported basis and approximately 10% on a constant-currency basis. It guided earnings per share of approximately $6.85, which indicates an increase from adjusted earnings of $6.21 reported in fiscal 2022.
Management projected gross margin to be roughly flat, reflecting benefits from strategic initiatives, offset by increased transportation expenses and higher input costs. It expects an operating margin of approximately 18%. The company anticipates capital expenditures of approximately $300 million for fiscal 2023.
The fiscal 2023 top-line projection assumes revenues of approximately $1.225 billion from Versace, $650 million from Jimmy Choo and $4.075 billion from Michael Kors. Management anticipates an operating margin of approximately 16%, 5% and 24% for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.
Management envisions first-quarter fiscal 2023 revenues to be roughly $1.3 billion. This indicates a year-over-year increase of 4% on a reported basis and approximately 9% in constant currency. It projected earnings per share of approximately $1.35, which suggests a decline from adjusted earnings of $1.42 reported in first-quarter fiscal 2022. The company expects its operating margin to be approximately 16.5%.
For the first quarter, Capri Holdings anticipates revenues of approximately $265 million from Versace, $155 million from Jimmy Choo, and $880 million from Michael Kors. The company expects operating margin in the low double-digit range for Versace, the mid-single-digit range for Jimmy Choo and low to mid 20% range for Michael Kors.
This Zacks Rank #3 (Hold) stock has lost 22.7% in the past six months compared with the industry’s decline of 39.9%.
Pick These 3 Stocks
Here we have highlighted three top-ranked stocks, namely, Steven Madden SHOO, G-III Apparel GIII and Boot Barn Holdings BOOT.
Steven Madden is a leading designer and marketer of fashion-forward footwear, accessories and apparel for women, men and children. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Steven Madden’s current financial year revenues and EPS suggests growth of 15.2% and 19.6%, respectively, from the year-ago reported figure. SHOO has a trailing four-quarter earnings surprise of 44%, on average.
G-III Apparel designs, sources and markets apparel and accessories under owned, licensed and private label brands. The stock currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for G-III Apparel’s current financial year revenues and EPS suggests growth of 10% and 5.4%, respectively, from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 160.6%, on average.
Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, carries a Zacks Rank #2. BOOT has an expected EPS growth rate of 20% for three-five years.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and EPS suggests growth of 17% and 4.4%, respectively, from the year-ago period.
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