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Capri (CPRI) Earnings Preview

by | May 23, 2021

Capri Holdings (CPRI) reporting earnings on Wednesday before the Open with the Street looking for $0.01 on $1.01B in sales. Next quarter is guided to $0.55 and $1.01B while the FY is $1.51 and $3.88B. Shares have a strong history closing higher in each of the last three and four of the last five with an average closing move of 8.4% and a max move of 11.4%. The $7.45B company trades 14.2X earnings, 1.84X sales, and 14.7X FCF. CPRI has seen strength in all three of their main luxury brands while citing strength in Q3 from the America’s and Asia. The company should benefit in Q4 from better conditions in EMEA which was hit hard by closures in late 2020. CPRI should also see better margins as they execute on initiatives to limit promotions and markdowns as well as selectively raising prices. They also should have a positive read-through from other luxury names this quarter which have continued to show demand standing out among the apparel segment. Analysts have an average target for shares of $47 with a Street High $75. BMO raising estimates on 5/3 as the stock has been a top intra-COVID-19 performer but it also remains near the bottom relative to its group on a multi-year basis in spite of the material self-help-driven earnings upside and the reopening/stimulus benefits. OTR Global upgrading to Positive on 4/15 as the firm’s checks indicate Michael Kors same-store-sales year-over-year improved dramatically in China during FYQ3 and FYQ4, while U.S. outlet sales received a boost from stimulus checks. Short interest is 3.3%, the lowest since August 2019. Hedge fund ownership fell 7% in Q1, Junto Capital adding a new position. CPRI has seen a lot of bullish flow including buyers in the June $55 calls and the June $60/$65 call spread last week. The June $57.50 calls have also been bought 3,000X while the November $75 calls with 3,500 in OI from buyers. On the chart, CPRI has upside to $58.50 on the chart while support is below around $48 which is VWAP for the year.

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