Capri Holdings shares rose nearly 16% in Friday trading after the luxury fashion company reported a quarterly profit above its internal plan and increased its financial outlook for the year. The company owns the Michael Kors and Jimmy Choo brands.
Capri posted second-quarter revenue of US$809 million, a decrease of 5.5% from the same period a year earlier. The result included about US$20 million in wholesale orders that were delivered earlier than scheduled. Without those shipments, revenue would have declined by 7.8%, according to the company’s reported figures.
The quarter’s adjusted earnings per share came to US$0.42, more than twice the approximately US$0.20 Capri had planned and above the US$0.03 recorded a year earlier. The result was supported in part by improved pricing and reduced promotional activity. Gross margin increased 2.3 percentage points to 63.3%.
Full-year forecast moves higher
Chief executive John D Idol raised Capri’s full-year revenue forecast by US$20 million to approximately US$3.42 billion. Even with the increase, the projection would represent a 1.6% decline from the prior year.
| Measure | Updated forecast | Previous or comparison figure |
|---|---|---|
| Full-year revenue | Approximately US$3.42 billion | US$20 million below the updated forecast |
| Full-year adjusted EPS | US$2.20 | US$2.15 previously; US$2.11 analyst consensus |
| Full-year operating earnings | US$175 million | US$170 million previously |
Capri now expects full-year adjusted earnings per share of US$2.20, compared with its previous forecast of US$2.15 and analyst consensus of US$2.11. The company also lifted its operating-earnings projection to US$175 million from US$170 million.
Next-quarter outlook trails estimates
The company’s forecast for the coming quarter was less favorable than its full-year revision. Capri projected revenue of approximately US$1.005 billion, below the US$1.02 billion expected by analysts. It forecast operating earnings of US$90 million, compared with analyst expectations of US$110 million.
The difference partly reflects the timing of wholesale deliveries. Jefferies said both Michael Kors and Jimmy Choo benefited during the quarter from orders that had been moved forward from the third quarter. The brokerage also said underlying revenue trends exceeded expectations and that management reported improving trading at both brands as the quarter progressed.
- Revenue: US$809 million, down 5.5% year over year.
- Adjusted EPS: US$0.42, versus approximately US$0.20 planned and US$0.03 a year earlier.
- Full-year adjusted EPS outlook: US$2.20, up from US$2.15 previously.
Capri’s results therefore combined a stronger quarterly profit and higher annual projections with a decline in reported sales and a below-consensus forecast for the next quarter. The company’s share move came as the broader market was selling off, leaving the stock among the few reported gainers during Friday’s session.
