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Donatella Versace and Ralph Lauren are among the many people expecting a big rebound for parties, weddings and events.
The two designers saw their fashion and lifestyle labels get a boost from the vaccine rollout, which also raised analyst confidence in their respective companies.
“We were very encouraged to see a return of in-person red carpet events during the quarter, a wonderful sign of recovery and an opportunity for Versace to once again adorn the world’s most famous celebrities,” said John Idol, chief executive of Capri Holdings Ltd.
CPRI,
parent company to Versace, Michael Kors and Jimmy Choo.
Capri reported fiscal first-quarter earnings that blew past expectations and gave strong guidance.
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MKM Partners says Versace is on the way to becoming a “luxury powerhouse,” and upgraded Capri to buy with a $75 price target, up from $58.
“Following a string of quarters of better-than-expected sales and earnings (despite headwinds from wholesale and Europe), we have increased conviction that Capri’s playbook is working in what has been a ‘show-me story’ of its execution on acquisitions,” wrote Roxanne Meyer in a note. Michael Kors had acquired Versace in 2018.
“We believe the ‘silver lining’ from the pandemic for Capri was that it enabled an operational transformation that positions it for more profitable and sustainable growth.”
Capri was also upgraded at Cowen, up to outperform from market perform with a $75 price target, raised from $57. Analysts say the Versace label’s focus on accessories and shoes are one reason to be upbeat. Another is the execution at the Michael Kors label, which is “rationalizing stores, wholesale and inventory.”
BTIG rates Capri stock buy with a $90 price target, up from $85.
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“Given solid FQ1 results and the return of socialization driving outsize demand in fashion/dress categories, we believe Capri’s guidance appears conservative and expect the momentum the company has experienced to continue in FQ2/2H, resulting in EPS that could approach $5 this year,” wrote analysts led by Camilo Lyon.
The FactSet consensus is for fiscal year EPS of $4.53.
Capri stock has rallied 38.6% for the year to date.
Ralph Lauren Corp. earnings also reflected a post-quarantine boost.
RL,
shares jumped after it reported fiscal first-quarter earnings that beat the Street. Shares are up 9% for the week so far, and have gained 19% for 2021 to date.
“While casual styles are still resonating, we’re also seeing a progressive return to sophisticated casual,” said Patrice Louvet, chief executive of Ralph Lauren, on the earnings call, according to FactSet.
“Given the breadth of our assortment, we have the unique ability to respond to consumers’ shifting appetite, reintegrating more elevated styles into our assortments as we scale back on stay-at-home categories.”
“We believe Ralph Lauren has multiple initiatives in place that could elevate the brand and reaccelerate growth longer term, including improving quality of sales and distribution; evolving product, marketing investments and enhanced customer experience to reach new customers, including Gen Z and Millennials,” wrote Cowen in a note.
Cowen rates Ralph Lauren stock outperform with a $158 price target.
“We like stocks that are benefitting from reopening, but also, and more importantly, will continue to positively surprise in CY22,” wrote UBS in a note.
“The market is focused on lapping fiscal stimulus and unusually low inventory levels as well as the impact from inflation. We think Ralph Lauren has multiple self-help drivers which will allow it to continue delivering solid, high-quality EPS beats despite tough compares and rising costs,” UBS said.
UBS rates Ralph Lauren buy with a $172 price target.
The SPDR S&P Retail ETF
XRT,
has run up 47.2% for the year to date while the benchmark S&P 500 index
SPX,
has gained 17.7% for the period.
