Michael Kors (KORS) wowed Wall Street Tuesday with blowout earnings on huge holiday sales, sending the fashion house's stock to a new high.
The luxury lifestyle brand said earnings for the fiscal third quarter ended in December surged 129% to 64 cents a share, sailing past views for 41 cents a share. Revenue leapt 70% to $636.8 million, well above the Street's forecast for $540.3 million.
Michael Kors, a longtime member of the IBD 50 list of top stocks, has consistently topped sales and earnings forecasts since its December 2011 IPO.
Holiday Sales Boom
Same-store sales for stores in North America shot up 41% vs. a year earlier amid strong demand over the holiday season. Despite Europe's weak economy, comps in that region surged 58%, reflecting growing acceptance of the brand and continued expansion at retail and wholesale.
"Overall, the report was fantastic," said Piper Jaffray analyst Erinn Murphy. "The beat in terms of the bottom line was driven by very solid top-line growth as it continued to see strong wholesale gains and very strong retail comp growth. It speaks to the aspirational nature of this growing global lifestyle brand.
Kors retail sales surged 67% to $332.6 million. Wholesale sales popped 77.4% to $274.3 million.
"It saw tremendous acceleration in the third quarter in its wholesale business, including watches, giftable items and accessories in addition to handbags," said Citi Research analyst Oliver Chen. "That's a good sign because the momentum is likely to continue in the new year.
Shares rose nearly 9% to 62.01 in the stock market Tuesday, but closed in the lower half of its trading range after reaching a record 64.80 intraday.
Another hot accessories brand, Fossil (FOSL), also delivered a solid report for its holiday fourth quarter Tuesday. The IBD 50 stock rose 3% to 110.65. It hit a nine-month peak of 115.19 intraday.
The watch and accessory designer and retailer saw earnings rise 21% to $2.27 a share, 1 cent ahead of views and the third straight quarter of accelerating growth. Sales rose 14% to $947.7 million, which topped forecasts for $930.43 million.
Michael Kors stores sell Fossil watches.
"It was a very good beat on revenue because this is a growth story," said Chen.
He said expectations for Fossil were "cautious" coming into the quarter because the company had a "volatile" 2012.
The profit growth it did achieve was very impressive, he adds. Chen says Fossil is one of his top stock picks for 2013.
Fossil, he says, benefits from a leading market share in $200 to $300 watches.
The company enjoyed growing demand for its watches across the globe in Q4. Proprietary watch brands include Fossil, Relic and MW Michele. It also has licensing pacts with many premium brands, including Michael Kors.
It got a nice lift from last year's acquisition of Skagen Designs, a maker of contemporary Danish-design watches and other accessories.
Separately Tuesday, Fossil said it signed a licensing pact with designer Tory Burch. The companies will design Tory Burch watches. The Tory Burch timepiece collection's global launch is scheduled for late 2014.
"I'm pretty excited they're adding Tory Burch to their licensed watch portfolio," said Chen. "It's an outstanding license and a great brand."
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