Capri Holdings (CPRI) Raises FY22 View, Outlines Growth Plans

With pandemic-led restrictions being eased and society gradually moving toward the old normal, consumers are focusing on upgrading their wardrobes and are splurging on luxury products. In fact, store reopening have acted as key catalysts in the resumption of consumers’ indulgence in high-end retail products, especially apparel and accessories. Gaining confidence from such trends, the well-known global fashion company — Capri Holdings Limited CPRI — raised its fiscal 2022 view. Along with this, the company provided a broader view of its business vision as well as long-term growth strategies, by holding a virtual investor day on Jun 29. That said, let’s take a closer look at some of the strategic commitments and goals highlighted by the company.


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Encouraging View led by Favorable Market Trends

As the overall market conditions improve, Capri Holdings highlighted that it now has better visibility and is more confident regarding its future. Moreover, the company believes that its three big-banner fashion brands — Micheal Kors, Versace and Jimm Choo — are well positioned to drive growth and help attain strong revenues and earnings.

Capri Holdings now expects revenue to be approximately $5.15 billion for fiscal 2022 compared with previous guidance of nearly $5.10 billion. The raised top-line projection indicates a 26.8{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} rise from $4.06 billion reported in the prior year. The view takes into account better than anticipated first-quarter sales trends. Management highlighted that the company is witnessing improved performance across its three iconic fashion houses. Backed by a better-than-expected first-quarter outlook, the company now expects adjusted earnings for fiscal 2022 in the band of $3.80-$3.90 compared with prior projection of $3.70-$3.80. Further, the company continues to expect operating margin of approximately 14{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0}, reflecting year-over-year operating margin improvement across all brands.

Markedly, Versace, Jimmy Choo and Micheal Kors are expected to account for 19{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0}, 10{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} and 71{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} of the expected revenue in fiscal 2022, respectively. By region, Asia, EMEA and the Americas are expected to generate 22{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0}, 24{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} and 54{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} of projected revenues in the fiscal, respectively. Channel-wise licensing, wholesale and retail are expected to contribute 4{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0}, 25{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} and 71{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} to estimated revenues in fiscal 2022, respectively.  The company expects to end the year with 1260 stores, comprising 210 Versace stores, 240 Jimmy Choo stores and 810 Micheal Kors stores.

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Speaking of the company’s strategic growth plans, Capri Holdings highlighted that it will focus on maximizing the potentials of Versace, Jimmy Choo and Micheal Kors brands through expanded products and categories as well as restructuring its store base. Designing innovative fashion products across brand banners will also be a priority. While exploring growth opportunities in apparel is an important focus for the company, it will also emphasize on boosting its accessories business including leather goods and handbags. Moreover, the company will continue to focus on renovation of Michael Kors stores, closing underperforming stores in North America as well as opening new stores in Asia. Additionally, it will continue leveraging omni-channel capabilities to accelerate revenue growth as well as deepening consumer engagement through improved communications.

The company estimates capital investments of approximately $200 million per year, which will be mainly utilized for expanding and renovating store fleet, boosting digital technology capabilities as well as creating common corporate platforms. Apart from investing in strategic growth of its business, the company will utilize funds for debt reduction. It expects net debt of approximately $0.8 billion in fiscal 2022, down from $1.1 billion in the prior year. In fiscal 2023, it expects to reduce net debt to $0.3 billion. The company will also enhance shareholder returns and carry out prudent acquisitions, as part of its long-terms strategic priorities.

Clearly, the company’s ambitious plans keep it well-poised for growth in the forthcoming periods. We note that shares of this Zacks Rank #3 (Hold) company gained 29.1{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0} in the past six months, compared with the industry’s rise of 31.8{028e8b43b440f88d50a94b0ac799d5b93a220d942414697744f001bd74eb64d0}.

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