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Why Capri Holdings Was Gaining Today

By Jeremy Bowman – Jul 30, 2021 at 1:28PM

Key Points

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A better-than-expected earnings report lifted the diversified fashion stock.

What happened

Shares of Capri Holdings (CPRI 3.23%) were climbing after the fashion company turned in better-than-expected results in its fiscal first-quarter earnings report. 

As of 12:25 p.m. EDT, the stock was up 11.3%. 

Handbags on display in a store

Image source: Getty Images.

So what

Capri Holdings, which is the parent of Versace, Jimmy Choo, and Michael Kors, nearly recouped all of its lost sales from the lockdown quarter a year ago and easily beat its own guidance for the period. The company posted revenue of $1.25 billion in the quarter, ahead of estimates of $1.11 billion. That was up 178% from 2020 levels, but still down 7% from its performance two years ago.  

Profits were strong with its operating margin at 20.8% and adjusted EPS of $1.42, which was well ahead of the consensus at $0.79 and also topped its results from two years ago at $0.95.

"All of our luxury houses significantly exceeded our revenue and earnings expectations for the quarter, as they continued to deepen consumer desire and engagement," CEO John Idol said. "As a result of this encouraging start to the year, we are raising our fiscal 2022 revenue and earnings outlook."

Now what

For the current fiscal year, the company now expects revenue of $5.3 billion, up from a previous forecast of $5.15 billion, and an operating margin of 16%. On the bottom line, it sees adjusted earnings per share of $4.50, up from its earlier projection of $3.80 to $3.90.

Though the company now has three "fashion houses," Michael Kors remains the main driver of both revenue and profits. The results point to a recovery in that brand; its sales had been sliding coming into the pandemic as it seemed to have become oversaturated.

Based on the strong quarterly results and the increase in guidance it's not surprising to see the stock jumping today. Using its EPS guidance for the year, the stock now trades at a price-to-earnings ratio of just 12, meaning there could be more upside ahead.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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