Earnings Results under Review: Capri Holdings Limited (NYSE: CPRI)

On Friday, Shares of Capri Holdings Limited (NYSE: CPRI) rose 0.50% to $48.30. The stock traded total volume of 1,324,841 shares lower than the average volume of 2.80M shares.

Capri Holdings Limited (CPRI), a global fashion luxury group, recently declared its financial results for the third quarter of fiscal 2019 ended December 29, 2018.

Overview of Capri Holdings Third Quarter Fiscal 2019 Results:

  • Total revenue of $1.44B was about flat contrast to last year, counting an incremental month of Jimmy Choo revenue of $39.30M. On a constant currency basis, total revenue increased 1.1%.
  • Gross profit was $873.20M and gross margin was 60.7%, contrast to $884.00M and 61.4% in the prior year. Adjusted gross profit was $874.10M and adjusted gross margin was 60.8%, contrast to $885.60M and 61.5% in the prior year.
  • Income from operations was $290.00M and operating margin was 20.2% contrast to $313.50M and 21.8% in the prior year. Adjusted income from operations was $316.50M and operating margin was 22.0%, contrast to $345.70M and 24.0% in the prior year.
  • Net income was $199.60M or $1.33 per diluted share contrast to $219.40M, or $1.42 per diluted share in the prior year. Adjusted net income was $264.70M, or $1.76 per diluted share, contrast to $273.40M or $1.77 per diluted share in the prior year.

Michael Kors Segments Third Quarter Fiscal 2019 Results:

  • Michael Kors Retail revenue of $838.00M reduced 1.0% contrast to the prior year. Comparable store sales reduced 2.4%, which was in line with expectations. On a constant currency basis, comparable store sales reduced 1.0%.
  • Michael Kors Retail operating income was $149.90M and operating margin was 17.9%, contrast to $180.40M and 21.3% in the prior year. Adjusted operating income was $162.50M while adjusted operating margin was 19.4%, contrast to $194.00M and 22.9% in the prior year.
  • Michael Kors Wholesale revenue declined 8.3% to $394.90M contrast to the prior year.
  • Michael Kors Wholesale operating income was $108.60M and operating margin was 27.5%, contrast to $100.50M and 23.3% in the prior year. On an adjusted basis operating income was $111.20M while adjusted operating margin was 28.2% contrast to 107.80M and 25.0% in the prior year.
  • Michael Kors Licensing revenue reduced 9.9% to $43.50M contrast to the prior year.
  • Michael Kors Licensing operating income was $26.00M and operating margin was 59.8%, contrast to $26.90M and 55.7% in the prior year. On an adjusted basis operating income was $26.40M and operating margin was 60.7%, contrast to $28.20M and 58.4% in the prior year.
  • Inventory for the Michael Kors brand at December 29, 2018 was $606.20M, an 8.2% increase as contrast to the prior year.

Jimmy Choo Third Quarter Fiscal 2019 Results:

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  • Jimmy Choo revenue was $161.60M. The Company attained Jimmy Choo on November 1, 2017, and contrast to Jimmy Choo stand-alone results from the prior year, revenue increased mid single digits.
  • Jimmy Choo operating income was $5.50M and adjusted operating income was $16.40M.
  • Inventory for the Jimmy Choo brand at December 29, 2018 was $158.50M, a 35.3% increase as contrast to the prior year.

Share Repurchase Program:

During the third quarter, the Company repurchased about 2.10M of the Company’s ordinary shares for about $100.00M in open market transactions. As of December 31, 2018 the remaining availability under the Company’s share repurchase program was $442.20M.

Outlook:

For the full year, the Company anticipates total revenue to be about $5.22B. Michael Kors revenue is expected to be about $4.51B, counting a low single digit comparable store sales decline. Jimmy Choo revenue is now expected to be about $580.0M, a slight reduction from prior guidance reflecting an unfavorable foreign currency impact. Versace revenue is expected to be about $130.0M. The Company now anticipates an operating margin of about 17.3%, reflecting brand operating margins of about 19.5% for Michael Kors, 4.8% for Jimmy Choo and slightly negative for Versace. The Company is updating its full year earnings per share guidance to be in a range of $4.90 to $4.95, counting $0.15 of dilution from the Versace acquisition, partly offset by a $0.05 increase to previous guidance for the pre-acquisition business, reflecting third quarter results. This guidance continues to include dilution from Jimmy Choo of $0.05 to flat. Earnings per share guidance assumes about 152.0M weighted average diluted shares outstanding, counting the 2.40M shares issued to the Versace family in connection with the acquisition and an effective tax rate of about 13.0%.

For the fiscal fourth quarter of 2019, the Company anticipates total revenue of about $1.33B. Michael Kors revenue is expected to be about $1.07B, counting a low single digit decline in stated comparable sales close to the higher end of the range. Michael Kors constant currency comparable sales are expected to decline close to the low end of the low single digits range. Jimmy Choo revenue is expected to be about $130.0M, counting a comparable sales increase in the low single digits on a stated basis and mid single digits on a constant currency basis. Versace revenue is expected to be about $130.0M. Operating margin is expected to be about 10.3%, reflecting brand operating margins of about 13.6% for Michael Kors, negative 4.5% for Jimmy Choo and slightly negative for Versace. Diluted earnings per share are expected to be in the range of $0.56 to $0.61, which includes about $0.15 of dilution from Versace. Earnings per share guidance assume about 153.0M weighted average diluted shares outstanding and an effective tax rate of about 20.0%.

CPRI has the market capitalization of $7.43B and its EPS growth ratio for the past five years was 14.90%. The return on assets ratio of the Company was 12.50% while its return on investment ratio stands at 21.50%. Price to sales ratio was 1.46 while 92.20% of the stock was owned by institutional investors.

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