Capri Holdings Ltd (NYSE:CPRI) was one of the few stocks to buck a broad Wall Street sell-off on Friday, with shares surging nearly 16% after the luxury fashion group reported better-than-expected quarterly earnings and raised its full-year financial outlook.
The company, which owns Michael Kors and Jimmy Choo, reported second-quarter revenue of US$809 million, down 5.5% from a year earlier. Excluding approximately US$20 million in wholesale orders shipped ahead of schedule, revenue would have fallen 7.8%.
However, improved pricing and fewer promotional discounts helped lift gross margin by 2.3 percentage points to 63.3%.
Adjusted earnings per share came in at US$0.42, more than double the approximately US$0.20 the company had planned and ahead of the US$0.03 reported a year earlier.
Chief executive John D Idol raised Capri's full-year revenue forecast by US$20 million to approximately US$3.42 billion, although that would still represent a 1.6% decline from the previous year.
Analysts at Jefferies described the results as solid, noting that both Michael Kors and Jimmy Choo benefited from wholesale shipments being brought forward from the third quarter.
Underlying revenue trends were also ahead of expectations, while management indicated that trading improved at both brands throughout the quarter.
The brokerage noted that Capri lifted its full-year forecasts for revenue, operating earnings and adjusted earnings per share.
The company now expects full-year adjusted earnings per share of US$2.20, up from US$2.15 previously and ahead of the US$2.11 analyst consensus. Operating earnings are forecast at US$175 million, compared with an earlier estimate of US$170 million.
However, the outlook for the current quarter was more mixed.
Capri forecast third-quarter revenue of approximately US$1.005 billion, below the US$1.02 billion expected by analysts, with operating earnings of US$90 million compared with the US$110 million consensus.
The shortfall partly reflects the timing of wholesale shipments, with approximately US$20 million of orders shifted from the third quarter into the second.
Jefferies said its focus remains on a return to growth in the fourth quarter, while investors will be looking for further evidence that improving trends at both brands can be sustained.
Despite Friday's rally, Capri faces the challenge of stabilising sales at Michael Kors and restoring growth across its portfolio.
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