Capri Holdings Surges 9% On Upbeat Earnings Despite Covid-19 Challenges

Shares of luxury fashion house Capri Holdings spiked 8.6% on Thursday as the company posted-better-than expected results for the second quarter of fiscal 2021 (ended Sept. 26) even as the pandemic continues to hurt sales.

Capri Holdings (CPRI), which owns Michael Kors, Jimmy Choo and Versace brands, generated revenue of $1.11 billion, which fell 23% year-over-year but exceeded analysts’ expectation of $925 million. The company experienced a 60% growth in e-commerce sales. As for brands, Jimmy Choo fared better with a 2.4% revenue decline compared to the 14.5% and 27.2% fall in revenue at Versace and Michael Kors, respectively.

Moreover, 2Q FY21 adjusted EPS of $0.90 crushed analysts’ EPS forecast of $0.04 driven by gross margin expansion and strong expense management. However, adjusted EPS was still down 22% year-over-year on weak sales.  

On the conference call, the company stated that it now expects full-year revenue to decline about 30%. For 3Q FY21, the company anticipates a modest sequential improvement in revenue though it still predicts a double-digit year-over-year sales decline. (See CPRI stock analysis on TipRanks)

Following the print, Guggenheim analyst Robert Drbul increased the price target for Capri Holdings to $28 and $25 and reiterated a Buy rating saying:

“We are increasing FY21/FY22 revenue and EPS forecasts to reflect the upside in F2Q21 and our expectation for a continued solid recovery in the luxury and handbag category globally. Our increased outlook also reflects improving e-commerce and retail trends for the company, which is helping offset a relatively more challenging wholesale picture; this mix shift is also gross margin accretive. Our FY21/FY22 EPS estimates move to $1.00/$3.50 from $0.60/$3.00, respectively; our F3Q21 remains $0.99.”

Meanwhile, the Street remains sidelined on Capri Holdings with 2 Buys and 7 Holds. Shares have declined 34% year-to-date and the average analyst price target of $24.29 indicates further downside potential lies ahead.

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