Nearly every analyst covering Michael Kors Holdings Ltd. (KORS) has raised earnings estimates in the past 7 days, following a strong fiscal second-quarter report for the global accessories, footwear and apparel company. KORS beat by more than 20% in the period; its fourth straight quarter with a positive earnings surprise. Shares of this Zacks #1 Rank (Strong Buy) have surged 78.6% year-to-date.
Earnings Momentum Climbs
All 9 estimates for the fiscal year ending March 2013 have advanced in the past week, sending the Zacks Consensus Estimate higher by 5.5% to $1.52 per share. This represents year-over-year growth of nearly 90%. Meanwhile, the fiscal year ending March 2014 has seen 8 of 9 estimates advance, boosting the Zacks Consensus Estimate by nearly 5% to $1.95.
Fiscal Q2 Earnings Soar
The spark for this earnings momentum was Michael Kors' fiscal second-quarter report on November 13. Earnings per share of 49 cents beat the Zacks Consensus Estimate by 22.5% and soared 96% year over year.
Total revenue surged 74% from last year to $532.9 million, surpassing the Zacks Consensus Estimate of $520 million. Sturdy sales growth in each of the company's business segments and across all geographies drove the upside.
Sales at the retail segment grew 82% on the back of a 45.1% rise in comparable store sales and the opening of 66 new stores. On the other hand, net sales at the wholesale and licensing segments grew 75% and 13%, respectively.
Gross profit was up 80% to $315.9 million, while gross margin expanded 200 basis points to 59.3%. Operating income totaled $157.9 million, significantly up from $70.0 million in the year-ago quarter, with operating margin rising 670 basis points to 29.6%.
Michael Kors projects earnings for the fiscal third quarter between 37 cents and 39 cents per share and sales at $525 million to $535 million. Comparable store sales are expected to rise by mid-20%. For fiscal 2013, the company expects earnings between $1.48 and $1.50 per share on net sales of about $1.86 billion to $1.96 billion, based on a rise of about 30% in comparable store sales.
Michael Kors currently trades at a forward P/E of 31.9x, reflecting a significant premium to the peer group average of 16.5x. Similarly, on a price-to-book basis, shares are trading at a premium of 17.4x compared with 3.6x for the peer group.
However, given the company's compelling fundamentals, the premium is justified and well supported by its long-term estimated EPS growth rate of 30.7%. Moreover, the company's trailing 12-month ROE of 54.7%, against 19.7% for the peer group, suggests that it actively and efficiently reinvests earnings compared to its peer group.
Michael Kors has been surging since the start of calendar year 2012. Shares have gained 78.6% year-to-date. Additionally, this newly listed stock is currently trading above its 200-day moving average of $45.73.
Moreover, Michael Kors has consistently outperformed the S&P 500 year-to-date. It has a market cap of $9.69 billion, while average trade volumes are a decent 3,883K.
Founded in 1981 and headquartered in Tsim Sha Tsui, Hong Kong, Michael Kors is a well-known designer of luxury accessories and ready to wear products. The company sells branded women's apparel and accessories, and men's apparel. The company markets its products primarily under the MICHAEL KORS, MICHAEL MICHAEL KORS, and KORS MICHAEL KORS labels. Products under these labels include accessories, footwear, watches, jewelry, men's and women's ready to wear, and a full line of fragrance products. As of September 29, 2012, the company operated a total of 349 stores worldwide, comprising 269 company-operated retail stores and 80 retail stores operated by licensing partners.
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