Capri Holdings Ltd., formerly Michael Kors Holdings Ltd., reported mixed third-quarter results, but managed to beat adjusted EPS estimates by 18 cents, giving the company a reason to raise its previous adjusted earnings per share guidance.
For the three months ended Dec. 29, net income slipped 9.1 percent to $199.6 million, or $1.33 a diluted share from net income of $219.4 million, or $1.42, in the year-ago period. On an adjusted basis, net income was $264.7 million, or $1.76 a diluted share for the quarter just ended. Total revenues dipped 0.1 percent to $1.438 billion from $1.440 billion.
Wall Street’s consensus estimates were adjusted diluted EPS of $1.58 on revenues of $1.46 billion.
The company in the quarter completed its $2 billion acquisition of Italian fashion house Versace on Dec. 31. It now owns three fashion brands under its umbrella–Michael Kors, Jimmy Choo and Versace.
John D. Idol, chairman and chief executive officer, said, “For full year fiscal 2019, our luxury group is expected to deliver both double-digit revenue and adjusted earnings per share growth. Taken together, we believe our three iconic, founder-led fashion brands position Capri Holdings to accelerate revenue to $8 billion dollars and deliver multiple years of earnings growth.”
The company missed revenue estimates in part due to Michael Kors’ retail business, which saw a 1 percent decline to $838 million. Comparable-store sales fell 2.4 percent, although that was in line with company expectations. However, operating income was $149.9 million, while operating margin was 17.9 percent in the current quarter. That compares with the year-ago results in which operating income was $180.4 million and operating margin at 21.3 percent. Wholesale revenue fell 8.3 percent to $394.9 million from a year ago, but the company has also been pulling back on its department store doors and holding fewer promotions to increase quality of sale. That’s part of its Runway 2020 strategic initiatives to improve the overall business.
The company acquired Jimmy Choo on Nov. 1, 2017. Revenue for the quarter was $161.6 million, which the company said increased mid-single digits when compared with Jimmy Choo stand-alone results from 2016. Operating income for the brand was $5.5 million, and $16.4 million on an adjusted basis.
For guidance on an adjusted, non-GAAP basis, the company said it expects total revenue at $5.22 billion for the fiscal year, with EPS at between $4.90 and $4.95. The EPS range includes a 15 cents a share dilution from the Versace acquisition, partly offset by a 5 cents a share increase from its prior guidance for the business before the acquisition and reflecting third-quarter results.
For the fourth quarter, the company guided revenues to $1.33 billion, with diluted EPS in the range of 56 cent to 61 cents.