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Capri Holdings (CPRI) Q4 Earnings Beat Estimates, Fall Y/Y

Capri Holdings Limited CPRI reported better-than-expected fourth-quarter fiscal 2023 results. However, the top and bottom lines declined on a year-over-year basis. A tough operating environment weighed on the company’s performance.

Capri Holdings provided its sales and earnings view for first-quarter fiscal 2024 and fiscal 2024. In the long run, the company remains optimistic about strength in its Versace, Jimmy Choo and Michael Kors brands along with the solid trends in Asia and continued growth in EMEA.

This Zacks Rank #4 (Sell) stock has fallen 19.7% in the past three months compared with the industry’s decline of 18.2%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Let’s Delve Deeper

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of 97 cents per share, which showcased a decline from the adjusted earnings of $1.02 reported in the year-ago period. However, its quarterly earnings surpassed the Zacks Consensus Estimate of 94 cents.

Total revenues of $1,335 million beat the Zacks Consensus Estimate of $1,275 million but decreased 10.5% year over year. On a constant-currency basis, total revenues declined 3%.

The adjusted gross profit decreased approximately 9.3% year over year to $863 million. However, the adjusted gross margin expanded 90 basis points (bps) to 64.6%.

The company reported an adjusted operating income of $121 million, down from $212 million in the prior year’s quarter. The operating margin shrunk by 510 bps to 9.1%.

Capri Holdings Limited Price, Consensus and EPS Surprise

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 decreased 13% year over year to $274 million during the quarter under discussion. The operating income was $14 million, down 72% year over year, while its margin contracted 1,080 bps to 5.1%.

Jimmy Choo’s revenues came in at $151 million, down 3.2% from the prior-year period. The operating loss was $7 million in the quarter compared with an operating loss of $15 million. The operating margin was 4.6% compared with 9.6% in the prior-year quarter.

Revenues from Michael Kors fell 10.9% year over year to $910 million. The operating income was $147 million, down 30% year-over-year, while its margin contracted 440 bps to 16.2%.

Other Details

Capri Holdings ended the quarter with cash and cash equivalents of $249 million, net receivables of $369 million, long-term debt of $1,822 million and total shareholders’ equity of $1,849 million. During the fourth quarter, the company repurchased roughly 8.5 million shares for approximately $400 million.

As of Apr 1, 2023, the company had 1,272 retail stores. These include 812 Michael Kors, 237 Jimmy Choo and 223 Versace stores.

Guidance

Capri Holdings estimates revenues of approximately $5.7 billion for fiscal 2024 compared with $5.8 billion projected earlier. This current view indicates an increase from $5.6 billion reported in fiscal 2023. Its guided earnings per share of approximately $6.40 is in line with its earlier projection. The current view indicates an increase from the adjusted earnings of $6.13 reported in fiscal 2023.

The Zacks Consensus Estimate for fiscal 2024 revenues and earnings currently stands at $5.6 billion and $6.09 per share, respectively. Management projected a modest gross margin expansion and an operating margin of approximately 16.5%.

The fiscal 2024 top-line projection assumes revenues of approximately $1.2 billion from Versace, $700 million from Jimmy Choo and $3.8 billion from Michael Kors. Management anticipates an operating margin in the mid-teens, high-single-digits and low-20% range for Versace, Jimmy Choo and Michael Kors, respectively, for the fiscal year.

Management envisions first-quarter fiscal 2024 revenues of roughly $1.2 billion. It projects earnings per share in the band of 70 cents compared with adjusted earnings of $1.50 reported in the first quarter of fiscal 2023. The company expects its operating margin to be approximately 8.5%.

For the first quarter of 2024, Capri Holdings anticipates revenues of approximately $245 million from Versace, $180 million from Jimmy Choo and $775 million from Michael Kors.

3 Key Picks

Some better-ranked stocks are Tecnoglass TGLS, Skechers U.S.A., Inc. SKX and The Kroger Co. KR.

Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS 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 Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.

Skechers, a worldwide producer and distributor of footwear for men, women and children, currently carries a Zacks Rank #1.

The Zacks Consensus Estimate for Skechers’ current financial-year sales suggests growth of 7.8%, while earnings per share are expected to rise 31.9% from the corresponding year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 18.8%, on average.

Kroger Co. operates in the thin-margin grocery industry. It currently carries a Zacks Rank #2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for Kroger’s current financial year sales and earnings suggests growth of 2.5% and 6.6%, respectively, from the prior-year reported numbers.

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