Please ensure Javascript is enabled for purposes of website accessibility

Why Capri Holdings Stock Jumped Wednesday

By Howard Smith – Nov 3, 2021 at 10:53AM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Better-than-expected results point to a resurgence in the demand for luxury goods.

What happened

Shares of Capri Holdings (CPRI 3.23%) soared at the open Wednesday morning after the luxury goods retailer reported its fiscal 2022 second-quarter earnings. As of 10:25 a.m. EDT today, shares were up 12.8%. 

So what

The parent company of the Michael Kors, Versace, and Jimmy Choo brands said the results beat its expectations, with revenue growth of 17% and strength across all three luxury brands. CEO John Idol summed up the quarter saying, "We are pleased with our second quarter results with revenue, gross margin, operating margin, and earnings per share all exceeding our expectations."

luxury handbags, shoes, and black gloves on display.

Image source: Getty Images.

Now what

While all three brands notched double-digit year-over-year revenue growth, Versace was the big winner for the company. Its sales soared 45% compared to the prior-year period. Strength in that brand prompted Capri to estimate that fiscal year 2022 sales for Versace alone will exceed $1 billion. 

The strong quarter also resulted in the company raising guidance for full fiscal year diluted earnings per share (EPS) for the second time in as many quarterly reporting periods. After its fiscal first-quarter report on July 30, Capri raised its EPS outlook to $4.50 per share for the 2022 fiscal year. It has now boosted that again after this fiscal second quarter to an estimate of $5.30 

Many retailers have cited supply chain constraints and increased logistics expenses for affecting results. Capri said its strategic initiatives have helped to offset those headwinds. It said the successful execution of those initiatives helped drive greater-than-anticipated margin expansion, allowing the company to increase guidance. 

With shares up 50% year to date, investors have already been rewarding the company for that execution. But if its business success continues, the valuation still looks appealing with a price-to-earnings ratio below 12 after today's boost in fiscal 2022 guidance. 

Howard Smith 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.