The same store sales is a metric that analysts really focus on, and John Idol has said KORS is more focused on "Brand Awareness" than their same store sales. When KORS was growing same store sales at 50% management told us that the legacy stores were delivering about the same as the new stores. As KORS continues to grow and open stores at such a rapid pace we can expect their same store sales to decrease. When they only had 100 stores and were growing same store sales at 50% the media and analysts made a big deal out of it as it is pretty remarkable. But, as KORS grows and gets bigger (they will open 100 stores this year) the same store sales have "normalized" to around 20%! But, they now have nearly 500 stores around the globe.
We can assume that their new stores at probably doing better than their legacy stores now that they have so many stores, and the SSS numbers has fallen to 23%! The new stores are likely to be selling 50% - 100% better than legacy stores. If same store sales stay at 20% and with the opening of 100 new stores this year outselling that 20% metric we can expect a huge quarter and year for KORS.
I am interested to hear on the conference call how many stores have opened in Europe so far this year. I know they have opened new stores in the Netherlands, Ireland, France, Italy, and the United Kingdom, and their main focus for opening new stores this year is in that region. KORS has established dominance in North America and plans to do the same in Europe. The brand is well received there, and those new store openings will outsell the legacy stores already established predominantly in the USA.
2014-2015 should be good years for KORS if they can execute their expansion plans, and the same store
sales metric will become less of a factor.
Q: I was in Florida over the holidays and went to a few malls to check KORS stores. Traffic was good but noticed huge sale in one their outlet stores (over 50% discount). I was a bit concerned if margins will come under pressure.
There is a "Fashion Outlet Mall" in Niagara Falls , NY that I visited in late December. It had moved to a much larger store front and added a clothing section. There were some discounts but nothing that special. They were not giving any thoughout the store percentage discount. I was in the store earlty afternoon Sat 12/288 and they were staffed for major traffic. The salesperson told me they were extremely busy before and right after Christmas. I also frequent the Galeria Mall store in Buffalo, NY. KORS is now asking for name, address, so on when you make a purchase for their customer base. I dont believe they were doing this last year at the outlet store. Hopefully this will build a way to communicate with their steady customers for future sales. The Buffalo market sees major Canadian mall traffic ($$$ premium sales) thoughout the shopping season. Lets hope they knocked it out of park again this quarter. I was bit disappointed with the last quarter since we know a earnings beat is always baked into their guidance.
That was what the Wedbush note was all about. How many outlet stores do they really have though?
The margin expansion will definitely come from Europe and Japan,and that is what I am interested in hearing on the conference call this time around. Margin expansion or compression? Who knows?
It should be another beat and raise quarter.