John Idol is looking past the headwinds in the economy.
Capri Holdings, which Idol leads as chairman and chief executive officer, just capped off its strongest fiscal year on record and is planning to extend its gains this year and keep growing despite broad worries over the pandemic, war and a possible recession.
The company’s fourth-quarter net income tallied $81 million, or 54 cents a diluted share, and compared with losses of $183 million, or $1.21 a year ago.
Adjusted earnings of $1.02 a share came in 20 cents ahead of the 82 cents analysts projected. Shares of Capri rose 1.1 percent to $49.27 after the quarterly update.
Revenues for the three months ended April 2 increased 24.6 percent to $1.5 billion from $1.2 billion. Revenues in the Americas grew 30 percent, and 33 percent in Europe, the Middle East and Africa. However, Capri saw revenues increase just 2 percent in Asia given the COVID-19 lockdowns in mainland China that had about 40 percent of the company’s stores there closed or operating with reduced hours at the end of the quarter.
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The growth came from across the Capri brand portfolio.
- Michael Kors’ revenue rose 21.8 percent to $1 billion, driving operating income of $210 million.
- Versace’s revenues increased 34 percent to $315 million with operating income of $50 million.
- Jimmy Choo’s revenues increased 25.8 percent to $156 million with an operating loss of $15 million.
For the full year, Capri logged earnings of $822 million, or $5.39 a share, with sales increasing 39 percent to $5.7 billion.
Idol said: “Looking back on fiscal 2022, I am proud of the progress we made across all our luxury houses. Revenue and earnings results significantly exceeded our original expectations. Capri Holdings achieved the highest revenue, gross margin and earnings per share in the company’s history. Additionally, we generated strong free cash flow and returned $650 million to shareholders in fiscal 2022. Our ability to deliver record results while navigating the challenges of an unprecedented global pandemic is a testament to the strength of our brands and the success of our strategic growth initiatives.”
And Idol is looking to keep growing this year, projected that Capri would push revenues up another 5 percent to $6 billion with earnings per share of $6.85.
“[In the] longer term, we are confident in our ability to resume double-digit revenue increases as we move beyond the impact of current macro headwinds,” Idol said. “The power of Versace, Jimmy Choo and Michael Kors as well as the proven resilience of the luxury market reinforce our optimism for the future and our ability to achieve $7 billion in revenue and a 20 percent operating margin over time.”
On a conference call with analysts, Idol was clear that there are plenty of challenges on the macroeconomic landscape, but he said Capri was positioned to take advantage of the dynamics in the market and keep gaining share.
“We’re feeling quite optimistic about the North American consumer,” the CEO said, responding to an analyst’s question. “Obviously, you’re all reading a lot of things in the paper about various impacts that may be facing the consumer as we go forward as it relates to inflation, etc., and we’ll have to see how that plays out.
“But for the moment, we feel quite strong about all three of the luxury houses in North America through the balance of this fiscal year,” he said. “Regarding Europe, we see a very strong rebound over the last two quarters….In Asia, the lockdown, while Shanghai is coming out of lockdown and certain areas of Beijing are meant to come out shortly. We think that is going to be a longer-term rebound. Again, when the first lockdown and reopening happened, there was a lot of…revenge buying. We’re not exactly sure how that’s going to play out right now.”
Idol also said the company is positioned to keep gaining as trends shift along with consumer behavior.
“One could only hope that we have the pandemic behind us and that this level of dress up or this level of social engagement is back and will resume its pre-pandemic path,” Idol said. “Yes, there’s probably a little bit of extra lift right now going on. But I don’t think it will just all of a sudden go away next year. I think it’s here to stay. And I think oddly enough, I think the fashion trend would have changed anyway. I think that while casualwear is certainly something that’s been a trend, you see trends in fashion always change and they swing back and forth.”
He noted that some luxury companies drive as much as half of their footwear revenues from sneakers.
“Now we are not quite at those levels at Versace or Jimmy Choo, but it’s an enormous opportunity for us when we look at our competitors and how much total revenues they’re doing in that category,” Idol said.
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