Capri Holdings Limited (NYSE: CPRI) reported stronger-than-expected fiscal Q4 results, topping both earnings and revenue estimates, driven by robust performance across each of the luxury brand segments.
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However, on the downside, the parent company of the luxury brands Versace, Jimmy Choo, and Michael Kors provided FY2023 guidance that fell short of analysts’ expectations.
Despite the blowout quarterly beat, shares of Capri closed 1% higher due to mixed investor sentiments.
Robust Q4 Beat
The company reported stellar quarterly earnings of $1.02 per share, significantly higher than analysts’ estimates of $0.82 per share and much higher than the earnings of $0.38 per share reported for the prior-year period.
To add to that, revenue climbed 24.6% to $1.49 billion compared to the prior-year period and outpaced the Street’s estimate of $1.41 billion.
The outstanding revenue growth is attributed to higher revenues across each of the three luxury houses: Versace (34%), Jimmy Choo (25.8%) and Michael Kors (21.8%).
Increased Buybacks
Concurrent with the earnings, the Board also authorized a new $1 billion share repurchase program.
The current two-year program replaces the existing $1 billion share repurchase program, which had $500 million of shares remaining to be purchased.
During the fourth quarter, the company repurchased 5.1 million shares worth $300 million.
FY2023 Outlook
Despite robust Q4 results, management provided lower-than-expected financial guidance for FY2023.
The company forecasts FY23 revenues to grow 5% year-over-year to $5.95 billion, lower than the consensus estimate of $6.08 billion.
Adjusted earnings are forecast to be $6.85 per share, while gross margin is expected to remain flat.
CEO’s Comments
Capri Holdings CEO, John D. Idol, commented, “Looking forward in fiscal 2023 we expect to achieve another year of record revenue and earnings per share.”
Longer-term, he added, “We are confident in our ability to resume double digit revenue increases as we move beyond the impact of current macro headwinds.”
Wall Street’s Take
Following a muted outlook, Citigroup analyst Paul Lejuez decreased the price target on Capri Holdings to $72 (46.1% upside potential) from $82 and reiterated a Buy rating.
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on nine Buys and four Holds. The average Capri Holdings stock forecast of $71.15 implies 44.4% upside potential to current levels.
TipRanks’ Smart Score
CPRI scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Bottom-Line
It is extremely laudable that Capri Holdings reported all-time high revenue, gross margin, and EPS in the company’s history during FY2022 when other stocks are tumbling due to global uncertainties.
The rising inflation did not affect demand for popular its brands such as Versace, Jimmy Choo, and Michael Kors. Likewise, the company looks confident to achieve a whopping $7 billion in revenue and a 20% operating margin in the coming years.
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