Capri Holdings (CPRI) Q1 Earnings Top, Revenues Up Y/Y

Capri Holdings Limited CPRI reported better-than-expected first-quarter fiscal 2023 results, despite a challenging backdrop. Both the top and the bottom lines improved 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 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.

Let's Delve Deeper

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.50 per share that showcased an improvement from adjusted earnings of $1.42 reported in the year-ago period. The quarterly earnings also handily beat the Zacks Consensus Estimate of $1.34.

Total revenues of $1,360 million comfortably surpassed the Zacks Consensus Estimate of $1,277 million and increased 8.5% year over year. On a constant-currency basis, total revenues rose 15.2%. Excluding Mainland China, revenues jumped 15% on a reported basis.

Adjusted gross profit increased approximately 5.5% year over year to $900 million. However, adjusted gross margin contracted 190 basis points (bps) to 66.2%. The company reported an adjusted operating income of $251 million, down from $261 million in the prior-year quarter. The operating margin shrunk 230 bps to 18.5%.

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 increased 14.6% year over year to $275 million during the quarter under discussion. Excluding Mainland China, revenues were up 28%. Women's accessories retail sales increased 80%. The operating margin decreased 110 bps to 18.9%.

Jimmy Choo revenues came in at $172 million, up 21.1% from the prior-year period. Excluding Mainland China, revenues rose 32%. Women's accessories retail sales grew 50%. The operating margin expanded 330 bps to 11%.

Revenues from Michael Kors grew 4.8% year over year to $913 million. Excluding Mainland China, revenues advanced 9%. The operating margin shriveled 330 bps to 24.3%.

Other Details

Capri Holdings ended the quarter with cash and cash equivalents of $221 million, net receivables of $394 million, long-term debt of $1,382 million and total shareholders' equity of $2,378 million.

During the quarter, the company repurchased roughly 6.1 million shares for approximately $300 million. As of Jul 2, 2022, the remaining availability under the share buyback program was $700 million.

As of Apr 2, 2022, the company had 1,265 retail stores, including 821 Michael Kors, 236 Jimmy Choo and 208 Versace stores.

Guidance

Capri Holdings estimates revenues to be approximately $5.85 billion for fiscal 2023. 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 and operating margin to be approximately 18%.

The fiscal 2023 top-line projection assumes revenues of approximately $1.175 billion from Versace, $650 million from Jimmy Choo and $4.025 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 second-quarter fiscal 2023 revenues to be roughly $1.4 billion. It projected earnings per share of approximately $1.55, which suggests an increase from adjusted earnings of $1.53 reported in second-quarter fiscal 2022. The company expects its operating margin to be approximately 17%.

For the second quarter, Capri Holdings anticipates revenues of approximately $300 million from Versace, $140 million from Jimmy Choo, and $960 million from Michael Kors. The company expects operating margin in the mid-teens for Versace, slightly positive for Jimmy Choo and low to mid 20% range for Michael Kors.

This Zacks Rank #3 (Hold) stock has risen 24.3% in the past three months compared with the industry's rally of 4.7%.

Pick These 3 Stocks

Here we have highlighted three better-ranked stocks, namely, Dollar General DG, Costco COST and Dollar Tree DLTR.

Dollar General, a discount retailer, currently carries a Zacks Rank #2 (Buy). DG has an expected EPS growth rate of 12.8% for three-five years. 

The Zacks Consensus Estimate for Dollar General's current financial year revenues and EPS suggests growth of 10% and 13.3%, respectively, from the year-ago reported figure. Dollar General has a trailing four-quarter earnings surprise of 2.8%, on average.

Costco, which is engaged in the operation of membership warehouses, carries a Zacks Rank #2. COST has an expected EPS growth rate of 9.2% for three-five years.

The Zacks Consensus Estimate for Costco's current financial year sales and EPS suggests growth of 15.4% and 18.2%, respectively, from the year-ago period. COST has a trailing four-quarter earnings surprise of 9.7%, on average.

Dollar Tree operates discount variety retail stores. The stock currently carries a Zacks Rank #2. DLTR has an expected EPS growth rate of 15.5% for three-five years.

The Zacks Consensus Estimate for Dollar Tree's current financial year revenues and EPS suggests growth of 6.7% and 40.5%, respectively, from the year-ago reported figure. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average.

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