John Idol is either nicely teeing up Capri Holdings for Joshua Schulman to take the top job next year — or going out strong, and leaving a tough act to follow.
Shares of Capri — parent to Versace, Michael Kors and Jimmy Choo — shot up 15.7 percent to $64.25 on Wednesday as the company topped fiscal second-quarter estimates, rolled out a big new share repurchase plan, raised its outlook and generally outperformed the constraints of the pandemic supply chain tangle.
“As the world continues to recover from the pandemic, we are encouraged by the progress of all three of our luxury houses,” Idol told analysts on a conference call, which also served as an introduction of sorts for Schulman, who is now heading up the Michael Kors brand, but will succeed Idol as chief executive officer in September.
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Idol said that over the past year, Capri’s brands have added 11 million customers to their databases with “revenue growth and margin expansion above our expectations.”
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Capri’s second-quarter profits rose 64 percent to $200 million, or $1.30 a diluted share, from $122 million, or 81 cents, a year earlier. Adjusted earnings per share came in at $1.53, easily beating the 95 cents Wall Street analysts forecast.
Revenues for the three months ended Sept. 25 increased 17.1 percent to $1.3 billion compared with $1.1 billion.
The top line was rising and exceeding the company’s expectations in the Americas and in Europe, the Middle East and Africa.
But revenues were flat in Asia, due to COVID-19 restrictions in Japan, Southeast Asia and Australia, although sales rose in Mainland China despite greater restrictions.
• Versace’s overall revenues rose 45 percent to $282 million in the quarter and Idol said the brand was “making significant progress in our goal to expand accessories revenue to $1 billion over time.”
• Jimmy Choo’s revenues increased 12 percent to $137 million and the brand is working to expand accessories and signed on Hailey Bieber to front the autumn campaign.
• Michael Kors’ revenues advanced 11 percent to $881 million with Idol touting men’s as “an incremental $300 million revenue opportunity” annually.
The Kors brand was held back by the supply chain troubles that across the industry saw Vietnam factories shut down, ships queuing up outside ports, trucks lacking drivers and shipping containers piling up in the U.S. when they needed to be in China.
The company estimated that inventory constraints had a mid-single digit impact on Michael Kors’ growth rate in the quarter.
“The biggest inventory issue is Michael Kors, and it is global because the supply chain issue is one that’s quite challenging, predominantly with shipping product around the globe,” Idol said. “So it’s not just a North America issue. It’s impacting us in all regions of the world. And let’s just first start with the timing piece of that.
“That has clearly added somewhere between 45 and 60 days on to our deliveries on a global basis,” he said. “Sometimes, a little bit more than that. And then, of course, we have the issue with Vietnam shutting down, which we did not anticipate in our planning.”
Idol said the company will “not be in the inventory position that we would have wanted to be in” for the holiday season, but that goods have been flown in and that there was enough supply to hit sales targets.
Capri upped its outlook for the year and is looking for a much bigger boost to profits, which are now tagged to be $5.30 a diluted share compared with the $4.50 previously projected. Revenues were also adjusted upward and are now forecast for $5.4 billion instead of the $5.3 billion previously seen.
Those results will roll in next spring, and by fall, Idol will be handing the torch over to Schulman and become executive chairman.
“He is an outstanding leader with broad industry experience and a proven track record of successfully operating and growing global fashion luxury brands,” Idol said of Schulman. “We do not believe we could have found a better leader and are thrilled to have him join our team. Importantly, Josh’s appointment as part of a thoughtful leadership succession plan. Over the next year, Josh will serve as CEO of the Michael Kors brand… He is rapidly immersing himself in the business and learning all facets of the brand.”
And then Schulman can turn to wrestling with Wall Street as well.
BMO analyst Simeon Siegel said Capri remains one of his “top ideas” with ongoing earnings upside and a stock target price of $75.
“We believe industry-wide fears over ‘inflation’ equate to ‘lower promos,’ proving a boon across this earning cycle, and Capri continues to capitalize and drive higher gross margins,” Siegel said.
But not everyone was so bullish.
Zachary Warring, a stock analyst CFRA Research, kept his hold recommendation on the stock and cut his 12-month target price by $1 to $65 a share.
“The company announced a massive new share repurchase program of up to $1 billion over the next two years, representing over 10 percent of its market cap of $9.5 billion,” Warring said. “Versace and Michael Kors are driving significant growth for the company while Jimmy Choo is underperforming, and the company guided for negative operating margin in fiscal year 2022.”
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