Michael Kors’ earnings climb on strong sales, brand recognition

Michael Kors Holdings Limited blew past Wall Street expectations to post a 56 percent gain in net income in the fiscal fourth quarter on strong sales that reflected a growing global share of the luxury retail market.

The Michael Kors store on the Magnificent Mile is shown. The fashion retailer had fourth-quarter earnings that beat expectations, the company said Wednesday.
The Michael Kors store on Chicago’s Magnificent Mile. The fashion retailer had fourth-quarter earnings that beat expectations, the company said Wednesday.

The Hong Kong-based fashion company posted net income of $161 million, or 78 cents per diluted share for the period ended March 29, up from $101 million, or 50 cents per diluted share in the year-ago period.  The luxury maker of handbags, watches and other accessories far outstripped the expectation of 68 cents per diluted share, according to Zacks Investment Research.

“We continued to see strength across the business in the fourth quarter, with significant revenue growth in each of our retail, wholesale and licensing segments as well as in our both North American and international markets,” chairman and CEO John D. Idol said in a release.

“People like the brand and they have been very effective in communicating what the brand is all about,” said Dorothy Lakner, an analyst at Topeka Capital Markets Inc.

Fourth-quarter revenue was $917.5 million, up 53.6 percent from the 597.2 million earned in 2013’s fourth quarter. North American revenue rose 43 percent and sales at stores open for more than a year increased 20.6 percent, driven by accessories and watches, the company said.

Kors has opened over 100 new retail stores over the last year.

European sales accounted for most of Kors’ success. Revenue across the pond surged 125 percent in the fourth quarter, which Kors credited to “growing brand awareness and demand across regions.”

Net income for the whole-year period increased 66.3 percent, from $661.5 million or $3.22 per diluted share, compared with $397.6 million, or $1.97 per diluted share in 2012.

The fashion retailer expects to have revenue between $840 million and $850 million for the first quarter of fiscal 2015, above the consensus estimate of $836 million, according to Bloomberg LP. Diluted earnings per share are expected to be between 78 and 80 cents.

“We are expecting that the guidance is conservative and they could do even better [in the next quarter],” Lakner said.

Leave a Reply