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Capri Holdings (CPRI) Q3 Earnings Miss Estimates, Decline Y/Y

Capri Holdings Limited CPRI came up with third-quarter fiscal 2024 results, wherein both the top and bottom lines not only missed the Zacks Consensus Estimate but also declined on a year-over-year basis. Softness in demand for luxury fashion items hurt the company’s performance. While Capri Holdings continued to face challenges in the wholesale channel, the retail outlets performed better.

Impressively, Versace, Jimmy Choo and Michael Kors brands continued to resonate well with consumers. Better customer engagement resulted in the addition of 10.7 million new consumers joining the database, marking 13% growth compared to the last year.

Q3 Results

This designer, marketer, distributor and retailer of branded apparel and accessories posted adjusted quarterly earnings of $1.20 per share, showcasing a decline from the adjusted earnings of $1.84 reported in the year-ago period. Also, the metric fell short of the Zacks Consensus Estimate of $1.74.

Total revenues of $1,427 million missed the Zacks Consensus Estimate of $1,474 million and decreased 5.6% year over year. On a constant-currency basis, total revenues declined 6.6%.

The adjusted gross profit decreased approximately 7.5% year over year to $928 million. The adjusted gross margin contracted 130 basis points to 65% due to lower full-price sell-throughs.

Adjusted operating expenses increased 1.2% year over year to $756 million. The metric, as a percentage of total revenues, rose by 360 basis points to 53%.

The company reported an adjusted operating income of $172 million, down from $256 million in the prior year’s quarter. The adjusted operating margin shrunk 480 basis points to 12.1%. This decline can be attributed to several factors, including a soft gross margin, an unfavorable channel mix, increased store-related costs and expense deleverage resulting from lower revenues.

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 8.8% year over year to $227 million during the quarter. The decline stemmed from sluggish consumer demand in the Americas and EMEA regions, partly mitigated by higher revenues in Asia. Retail sales experienced a low-single-digit decline, while wholesale revenues saw a double-digit decrease. Revenues dropped 14% and 13% in the Americas and EMEA, respectively, but improved 10% in Asia. Versace's global database expanded by 1.5 million new entries, indicating remarkable 25% growth compared to the previous year.

Jimmy Choo’s revenues came in at $166 million, down 1.2% from the prior-year period. The decline was due to a slowdown in consumer demand, particularly in the Americas. However, this was partially offset by higher revenues in Asia. Retail sales remained relatively stable, while wholesale revenues saw a mid-single-digit decrease. Specifically, revenues in the Americas dropped 11%, while in the EMEA, the metric remained unchanged. Revenues in Asia grew 9%. Additionally, Jimmy Choo's global database expanded by 0.7 million new entries, marking notable 13% growth compared to the previous year.

Revenues from Michael Kors fell 5.6% year over year to $1,034 million. This decline can be attributed to a softening consumer demand, particularly in the Americas. Furthermore, the results were affected by the implementation issues with the Michael Kors Americas E-commerce platform discussed in the preceding quarter. However, as expected, improvements in E-commerce trends in the Americas began to materialize in the third quarter following functional changes aimed at addressing the issues.

Retail sales experienced a mid-single-digit decline, while wholesale revenues decreased in the low double digits. Specifically, revenues in the Americas dropped by 7%, while in the EMEA, the metric fell 2%. Revenues in Asia declined 2%. Michael Kors' global database expanded by 8.5 million new entries, representing significant 12% growth compared to the previous year.

Other Details

Capri Holdings ended the quarter with cash and cash equivalents of $249 million, long-term debt of $1,383 million and total shareholders’ equity of $1,935 million.

As of Dec 30, 2023, Capri Holdings had 1,270 retail stores. These include 800 Michael Kors, 237 Jimmy Choo and 233 Versace stores.

Shares of this Zacks Rank #3 (Hold) company have risen 0.9% in the past three months compared with the industry’s growth of 21.3%.

Stocks to Consider

Here, we have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, American Eagle Outfitters AEO and Deckers Outdoor Corporation DECK.

Abercrombie & Fitch, an omnichannel specialty retailer of apparel and accessories for men, women and kids, 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 Abercrombie & Fitch’s current financial-year revenues suggests growth of 14.9% from the year-ago reported figures. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 713%, on average.

American Eagle Outfitters, a specialty retailer that provides clothing, accessories and personal care products, currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal sales and earnings calls for growth of 5% and 45.4% from the year-ago reported figure. AEO delivered a trailing four-quarter earnings surprise of 23%, on average.

Deckers, a global leader in designing, marketing and distributing innovative footwear, apparel and accessories, currently sports a Zacks Rank #1.

The Zacks Consensus Estimate for Deckers’ current fiscal sales and earnings suggests growth of 15.3% and 37.3% from the year-ago reported figure. DECK delivered a trailing four-quarter earnings surprise of 32.1%, on average.

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