Michael Kors Q1 Profit Up 82%, Sales Up 55%

In What's New, Industry News by Jeff Prine

MICHAEL Michael Kors large Tippi pebbled satchel

MICHAEL Michael Kors
large Tippi pebbled satchel

New York—When you’re hot, you’re hot. No fashion company is experiencing that phenomenon more today than Michael Kors Holdings, which reported its first quarter profit nearly double a year ago.

For the quarter ended June 29, the apparel and accessories company posted a net income increase of 82% to $125 million, or 61 cents a share, compared with $68.6 million, or 34 cents a share, in the year-ago period. The results sailed past analysts’ average estimate for 49 cents a share.

Net revenue surged 55% to $640.9 million from $414.9 million, again beating analysts’ forecast for $567.8 million in sales. Gross margin widened to 62% from 60.5%.

The company’s sales were lifted by strong demand both in North America and in Europe. Its retail sales increased 51.5% to $325.7 million driven by a 27.3% increase in comparable store sales and 75 net new stores in the last year. Wholesale sales increased 59.3% to $290.6 million while licensing revenue increased 40.7% to $24.6 million driven mostly by watches and eyewear.

Retail in Europe Surprisingly Strong

“The strong performance in our retail, wholesale and licensing segments as well as across geographies led to record operating profits,” said John Idol, chairman/ceo. North American comparable store sales increased 25%, as our luxury accessories and ready-to-wear offering and jet-set in-store experience continue to resonate strongly with consumers. Sales in our North America wholesale segment increased 50%, driven by comparable store sales growth as well as the continued successful conversion of shop-in-shops in department stores. In Europe, sales grew 144% in the first quarter, as growing brand awareness led to comparable store sales growth of 56%.”

Michael Kors Holdings now has 249 of its own stores in North America and Idol suggested that could increase to as many as 400.

The company’s expansion in Europe also may prove profitable in the future, too.  Noting the 56% comparable store sales increase in Europe, analysts at Seeking Alpha commented today: “In light of the difficult economic situation of the European consumer, this performance and growth should be recognized as great marketing and execution. If Europe continues to improve economically, it can offer Kors even more growth as more and more consumers get money in their pockets.”

Shares of Michael Kors Holdings rose in trading today boosted by the earnings report and the company lifting its full year outlook again. Now the company expects to earn $2.67 to $2.69 a share, up from a range of $2.43 to $2.47 per share. It also expects revenue between $2.8 billion and $2.9 billion, up from its previous forecast for $2.65 billion to $2.75 billion.

Analysts’ consensus expects annual earnings of $2.57 a share on sales of $2.85 billion.





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