Capri Holdings: Revenue growth remains flat in Q3

Capri Holdings Limited, for the third quarter ended December 29, 2018, reported net income of 199.6 million dollars or 1.33 dollars per diluted share compared to 219.4 million dollars or 1.42 dollars per diluted share in the prior year. Adjusted net income was 264.7 million dollars or 1.76 dollars per diluted share compared to 273.4 million dollars or 1.77 dollars per diluted share in the prior year. The company said, total revenue of 1.44 billion dollars was approximately flat compared to last year, including an incremental month of Jimmy Choo revenue of 39.3 million dollars. On a constant currency basis, total revenue increased 1.1 percent.

Commenting on the company’s third quarter, John D. Idol, the company’s Chairman and CEO, said in a statement: “We are extremely pleased to have recently renamed our company Capri Holdings Limited and completed the acquisition of Versace. For full year fiscal 2019, our luxury group is expected to deliver both double digit revenue and adjusted earnings per share growth. Taken together, we believe our three iconic, founder-led fashion brands position Capri Holdings to accelerate revenue to 8 billion dollars and deliver multiple years of earnings growth."

Q3 performance across Capri Holdings’ core segments

Michael Kors Retail revenue of 838 million dollars decreased 1 percent compared to the prior year. Comparable store sales decreased 2.4 percent, while on a constant currency basis, comparable store sales decreased 1 percent. Retail operating income was 149.9 million dollars and operating margin was 17.9 percent compared to 180.4 million dollars and 21.3 percent in the prior year. Adjusted operating income was 162.5 million dollars while adjusted operating margin was 19.4 percent compared to 194 million dollars and 22.9 percent in the prior year.

Michael Kors wholesale revenue declined 8.3 percent to 394.9 million dollars compared to the prior year. Wholesale operating income was 108.6 million dollars and operating margin was 27.5 percent compared to 100.5 million dollars and 23.3 percent in the prior year. On an adjusted basis operating income was 111.2 million dollars while adjusted operating margin was 28.2 percent compared to 107.8 million dollars and 25 percent in the prior year.

Michael Kors licensing revenue decreased 9.9 percent to 43.5 million dollars compared to the prior year. Licensing operating income was 26 million dollars and operating margin was 59.8 percent compared to 26.9 million dollars and 55.7 percent in the prior year. On an adjusted basis operating income was 26.4 million dollars and operating margin was 60.7 percent, compared to 28.2 million dollars and 58.4 percent in the prior year.

Jimmy Choo revenue was 161.6 million dollars. The company acquired Jimmy Choo on November 1, 2017, and compared to Jimmy Choo standalone results from the prior year, revenue increased mid single digits. The segment’s operating income was 5.5 million dollars and adjusted operating income was 16.4 million dollars.

Capri Holdings announces outlook for Q4 and full year

For the full year, the company expects total revenue to be approximately 5.22 billion dollars. Michael Kors revenue is expected to be approximately 4.51 billion dollars, including a low single digit comparable store sales decline. Jimmy Choo revenue is now expected to be approximately 580 million dollars, a slight reduction from prior guidance reflecting an unfavourable foreign currency impact. Versace revenue is expected to be approximately 130 million dollars.

The company now expects an operating margin of approximately 17.3 percent, reflecting brand operating margins of approximately 19.5 percent for Michael Kors, 4.8 percent for Jimmy Choo and slightly negative for Versace. The company is updating its full year earnings per share guidance to be in a range of 4.90 dollars to 4.95 dollars, including 15 cents of dilution from the Versace acquisition, partly offset by a 5 cents increase to previous guidance for the pre-acquisition business, reflecting third quarter results.

For the fiscal fourth quarter of 2019, the company expects total revenue of approximately 1.33 billion dollars. Michael Kors revenue is expected to be approximately 1.07 billion dollars, including a low single digit decline in reported comparable sales close to the higher end of the range. Michael Kors constant currency comparable sales are expected to decline close to the low end of the low single digits range. Jimmy Choo revenue is expected to be approximately 130 million dollars, including a comparable sales increase in the low single digits on a reported basis and mid single digits on a constant currency basis. Versace revenue is expected to be approximately 130 million dollars.

Operating margin is expected to be approximately 10.3 percent, reflecting brand operating margins of approximately 13.6 percent for Michael Kors, negative 4.5 percent for Jimmy Choo and slightly negative for Versace. Diluted earnings per share are expected to be in the range of 56 cents to 61 cents, which includes approximately 15 cents of dilution from Versace.

For fiscal 2020, the company expects total revenue to be approximately 6.1 billion dollars, including approximately 900 million dollars for Versace, 650 million dollars for Jimmy Choo and 4.55 billion dollars for Michael Kors. The company expects an operating margin of approximately 15.5 percent. Diluted earnings per share are expected to be approximately 4.95 dollars. For Capri Holdings, beyond Fiscal 2020, the Company expects to deliver accelerated revenue and earnings per share growth.

Picture credit:Jimmy Choo via Business Wire

 

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