Capri Holdings Limited (NYSE:CPRI), a global fashion luxury group, today announced its financial results for the second quarter of fiscal 2020 ended September 28, 2019.

 

Second Quarter Fiscal 2020 Highlights

• Second quarter revenue growth of 15.1%
• Michael Kors comparable sales increased low single digits
• Second quarter adjusted earnings per share of $1.16

 

Reiterate Fiscal 2020 revenue guidance of $5.8 billion and adjusted earnings per share guidance of $4.95.

 

John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “For the second quarter, we were pleased to deliver a double digit increase in revenue, driven by the addition of Versace and growth from Jimmy Choo. Michael Kors revenue was in line with our expectations and we are extremely pleased to report that the brand returned to positive comparable store sales during the quarter, led by our successful efforts across product innovation, brand engagement and customer experience. Second quarter earnings per share were below our expectations, reflecting higher expenses due to timing, as well as greater than anticipated challenges related to the situation in Hong Kong.”

 

Mr. Idol continued, “For Fiscal 2020, we remain focused on executing on our strategic growth initiatives and are reiterating our guidance for revenue of approximately $5.8 billion and adjusted earnings per share of approximately $4.95. From a longer-term perspective, we are encouraged with the progress we are making developing our global fashion luxury group. The integration of Versace is going smoothly, and Jimmy Choo continues to advance its strategic initiatives. Additionally, the Michael Kors brand repositioning efforts are resonating with customers. With continued focus on execution and investment to support our growth plans, we are confident that Capri Holdings remains on track to grow revenue to $8 billion dollars over time and deliver multiple years of earnings growth."

 

Second Quarter Fiscal 2020 Results

• Financial Results and non-GAAP Reconciliation
• The Company’s results are reported in this press release in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and on an adjusted, non-GAAP basis.

 

Overview of Capri Holdings Second Quarter Fiscal 2020 Results:

• Total revenue of $1.442 billion increased 15.1% compared to last year. On a constant currency basis, total revenue increased 16.1%.
• Gross profit was $874 million and gross margin was 60.6%, compared to $763 million and 60.9% in the prior year. Adjusted gross profit was $879 million and adjusted gross margin was 61.0%, compared to $765 million and 61.1% in the prior year.
• Income from operations was $75 million and operating margin was 5.2% compared to $190 million and 15.2% in the prior year. Adjusted income from operations was $202 million and operating margin was 14.0%, compared to $218 million and 17.4% in the prior year.
• Net income was $73 million, or $0.47 per diluted share compared to $138 million, or $0.91 per diluted share in the prior year. Adjusted net income was $177 million, or $1.16 per diluted share, compared to $192 million or $1.27 per diluted share in the prior year.
• Net inventory at September 28, 2019 was $1.073 billion, a 39.7% increase compared to the prior year, primarily reflecting incremental Versace inventory.

 

Versace Second Quarter Fiscal 2020 Results:

Versace revenue was $228 million and comparable store sales were flat on a constant currency basis compared to stand-alone results from the prior year. Versace continued to deliver double digit comparable sales growth in the Americas and EMEA, but experienced declines in Asia as the region was affected by greater than anticipated challenges related to the situation in Hong Kong and consumer reaction in China to a incorrectly labeled product.

• Versace operating income was $9 million and operating margin was 3.9%. Adjusted operating income was $14 million and adjusted operating margin was 6.1%.

 

Jimmy Choo Second Quarter Fiscal 2020 Results:

Jimmy Choo revenue of $125 million increased 7.8% compared to the prior year. On a constant currency basis, total revenue increased 9.5%. On a constant currency basis, comparable store sales declined in the mid-single-digits. Comparable store sales were impacted by weaker performance in Hong Kong and a decline in Japan as the brand lapped a highly successful 10th anniversary campaign in the prior year. Excluding Hong Kong and Japan, comparable stores would have been flat.

 

Jimmy Choo operating loss was $10 million and operating margin was (8.0)%, compared to an operating loss of $9 million and operating margin of (7.8)% in the prior year. Adjusted operating loss was $7 million and adjusted operating margin was (6.0)% in the prior year.

 

Michael Kors Second Quarter Fiscal 2020 Results:

Michael Kors revenue of $1.089 billion decreased 4.2% compared to the prior year. On a constant currency basis, total revenue decreased 3.3%. On a constant currency basis, comparable store sales increased in the low single digits.

 

Michael Kors operating income was $222 million and operating margin was 20.4%, compared to $248 million and 21.8% in the prior year.

 

Outlook

The following guidance is provided on an adjusted, non-GAAP basis. All comparable store sales guidance is provided on a constant currency basis.

 

Full Year Fiscal 2020 Outlook

• For Capri Holdings expects the following:
• Total revenue of approximately $5.8 billion
• Operating margin of approximately 15.0%
• Interest expense in a range of $15 million to $25 million
• Weighted average diluted shares outstanding of approximately 153 million
• Effective tax rate of approximately 11%
• Diluted earnings per share of approximately $4.95, including approximately $0.20 per share of dilution from Versace

 

Third Quarter Fiscal 2020 Outlook

Capri Holdings expects the following:

• Total revenue of approximately $1.53 billion
• Operating margin of approximately 17.5%
• Interest expense of approximately $5 million
• Weighted average diluted shares outstanding of approximately 153 million
• Effective tax rate of approximately 8%
• Diluted earnings per share of $1.55 to $1.60, including approximately $0.15 per share of dilution from Versace

 

For Versace, Capri expects the following:

• Revenue of approximately $180 million
• Comparable store sales approximately flat to prior year
• Negative operating margin reflecting normal seasonality and increased investments to support growth initiatives

 

For Jimmy Choo, the Company expects the following:

• Revenue of approximately $165 million
• Comparable store sales approximately flat to prior year
• Positive operating margin reflecting normal seasonality
• For Michael Kors, the Company expects the following.
• Revenue slightly below $1.2 billion
• Comparable store sales growth in the low single digits
• Operating margin to be below prior year