Michael Kors, Versace Parent Company Turns $121 million Profit — Its First Gain in Three Quarters

Capri Holdings Limited’s recovery cheered Wall Street during Thursday’s early morning hours after the retailer revealed better-than-expected quarterly earnings. 

The fashion group — parent company to the Michael Kors, Versace and Jimmy Choo brands — beat quarterly sales estimates and increased profits. Company shares surged more than 14 percent during pre-market hours as a result. 

“Our performance demonstrates the power and desirability of the Versace, Jimmy Choo and Michael Kors brands,” John D. Idol, Capri’s chairman and chief executive officer, said in a statement. “Through creativity and innovation, our luxury houses inspire excitement and passion, creating an emotional connection with our consumers. We are also attracting new consumers to each of our luxury houses as evidenced by the double-digit increase in our consumer databases.”

Total company revenues for the three-month period ending Sept. 26 declined 23 percent to $1.1 billion, down from $1.4 billion the same time last year. But Capri still managed to widen its profits to $121 million, compared with $73 million a year ago. A noticeable improvement from a company that lost a combined $731 million in the last two quarters. 

In the most recent quarter, Michael Kors, Capri’s largest business, had top-line sales of $793 million, down from more than $1 billion a year ago. The brand pulled in a profit of $190 million, down from $222 million last year. Versace, which the company bought in December 2018, had revenues of $195 million, compared with $228 million a year ago. Profits were $20 million, up from just $9 million last year. At Jimmy Choo, revenues were $122 million, compared with $125 million last year. The luxury footwear brand managed to break even, compared with a loss of $10 million a year ago. 

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Meanwhile, e-commerce sales increased 60 percent during the quarter, year-over-year. Other bright spots included positive sales in Mainland China during the last three months. 

“We continue to see opportunity in [Capri] and expect upwards revisions on already inexpensive valuation to prove compelling,” Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets, wrote in a note. Notably, the Americas sales for Versace and Jimmy Choo were both up [year-over-year] as we continue to expect high end consumers to help luxury spending in the absence of travel. Additionally, management highlighted positive global retail sales at Versace. We expect revenue to continue its improving trajectory.”

The company ended the quarter with $1.5 billion in long-term debt and $238 million in cash and equivalents. Capri has 1,261 brick-and-mortar units around the globe, including 828 Michael Kors stores, 227 Jimmy Choo stores and 206 Versace stores. Capri is not providing forward-looking guidance. 

“The COVID-19 pandemic continues to profoundly impact the entire world,” Idol said. “As the world continues to emerge from this crisis, we are increasingly optimistic about the outlook for the fashion luxury industry and Capri Holdings. We have an incredible portfolio of luxury houses, each with their rich heritage, exclusive DNA and strong brand loyalty. We are uniquely positioned to drive multiple years of strong growth as we continue to execute on our strategic initiatives.”

Shares of Capri Holdings are down nearly 32 percent year-over-year.

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