Astounding Report: Michael Kors Profit Up 77%, Sales Hit $1 Billion

MkorsHong Kong—For rivals that have seen their market shares decrease as the Michael Kors brand expands, today’s report wouldn’t be surprising: the designer’s third quarter profit jumped 76.7% as sales grew 59%.

Already a darling of Wall Street, Michael Kors Holdings Ltd.’s share rose as much as 21% in early trading today on the good report. And according to Bloomberg News, the increase in share value made Michael Kors, the chief creative officer of the company, into a billionaire.

Noted Jefferies & Co. analyst Randal Konik: “Once upon a time, Coach was the go-to brand in accessible luxury, a superlative Michael Kors now holds.”

For the quarter ended Dec. 28, Michael Kors posted net income of $229.6 million, or $1.11 a share, compared with $130 million, or 64 cents a share, a year earlier. The earnings sailed past analysts’ average estimate expecting 86 cents a share.

Full Year Forecast Upgraded

Net revenue increased 59% to $1.01 billion from $636.8 million in the third quarter last year, ahead of analysts’ estimate for $806 million.

“Michael Kors enjoyed an outstanding holiday season, as global brand awareness continued to drive strong demand for our luxury product,” said John Idol, chairman/ceo. “Comparable stores sales increased 28% which exceeded our expectation and represents our 31st consecutive quarter of growth. We believe that our consistently strong performance is attributable to the creative vision of Michael Kors and his talented design team as well as the distinctive jet-set in-store experience that we provide in both our retail stores and our shop-in-shops.”

Retail sales in North America rose 51.3% to $503.4 million while wholesale increased 86.2% to $461.4 million. Licensing revenue was up 59% to $47.4 million with “continued demand in watches and eyewear.”

In North America, the wholesale segment generated another quarter of strong sales growth, particularly in our accessories and footwear categories, and we continued to benefit from shop-in-shop conversions in department stores,” Idol added.

Gross profit increased 61.6% to $619.5 million, and as a percentage of total revenue increased to 61.2% compared to 60.2% in the third quarter last year.

Sales were strong in Europe, too, where revenue grew 144% in the third quarter, with “exceptional comparable store sales growth of 73%.”

The strong momentum in sales resulted in an increase in the company’s fiscal full year profit forecast. Now the company expects earnings of $3.09 a share, up from its previous forecast for $2.81 a share. Analysts’ consensus expects $2.82 a share.

Although he declined to comment on the report, designer Michael Kors can now be considered a billionaire. Two year ago, he had more than 15 million shares in his namesake company but now he owns about 4 million share, which as of today are worth about $360 million.

“The bulk of his remaining net worth is in investments stemming from the hundreds of millions of dollars worth of Michael Kors stock that he sold in the last couple of years,” Bloomberg reported.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com