Michael Kors Reports Stellar Q1 Sales, Profit

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Michael Kors Fall/Winter 2012 ad campaign

New York—Shares of Michael Kors Holdings Ltd. shot up more than 14% on Tuesday after the apparel and accessories company reported a stellar first quarter: net income leaped 185% and sales jumped 71%.

For the quarter ended June 30, Michael Kors’ company posted net income of $68.6 million, or 34 cents a share, compared with a profit of $24.1 million, or 13 cents, a year ago. That beat analysts’ estimates for 20 cents a share.

Total revenue gains were equally impressive, climbing 71% to $414.9 million from $243.1 million a year ago. Again, the figure beat analysts’ average estimate for $367.96 million in sales.

The company’s wholesale net sales increased 66% to $182.4 million and licensing revenue, which includes the Michael Kors watch line—increased 61% to $17.5 million.

At the company’s retail division, which included 321 Michael Kors stores worldwide, net sales jumped 76% to $215 million “driven by a 37.3% increase in comparable store sales and 76 new store openings.

“Our results demonstrate the strong momentum of the Michael Kors brand and the continued execution of our key growth strategies,” said John Idol, chairman/ceo. “We are extremely excited about the long-term growth potential of our company.”

An Example of ‘Brandsformation’

Commenting on specific results, Idol said the comparable store sales gain in North America reflected “the strong appeal of the Michael Kors brand, our consistent delivery of a compelling assortment of luxury products, and our exciting jet-set in-store experience. The 66% growth in our wholesale segment is the result of the continued conversions to shop-in-shops in department stores.

“Our strong revenue growth in Europe demonstrates the growing momentum of the Michael Kors brand which led to a 24.2% increase in comparable store sales and strong performance in our wholesale operations. The 61% growth in our licensing revenue was led by strong sales in the Michael Kors watch line.”

Given the company’s performance, it’s no surprise that the company increased its full year outlook. It now expects earnings per share of $1.32 to $1.34 with total revenue of $1.8 billion to $1.9 billion and with comparable store sales increasing in the “mid- to high-twenty percent range.” Analysts’ estimates expect earnings of $1.12 a share on sales of $1.79 billion.

As for its second quarter, the company expects earnings of 33 to 35 cents a share with total revenue hitting $490 million to $500 million—assuming comparable store sales increase of nearly 30%.

“The company is in the midst of the critical and lucrative transformation from fashion designer to authentic global lifestyle brand, and it is precisely during such evolutions when shareholders are most rewarded for taking risk investing in this type of ‘brandsformation’ stock,” Omar Saad, an analyst with International Strategy & Investment Group, told clients on Tuesday.

Michael Kors Holdings Ltd. made its debut on the New York Stock exchange last December with shares prices at $20, which have more than doubled in less than a year.


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