Michael Kors Lifts Full-Year Guidance As Q1 Blasts Views

Investor's Business Daily

Michael Kors Holdings (KORS) hit the Wall Street runway with head-turning first-quarter profit Tuesday as its chic luxury goods continued to win over shoppers in North America and Europe.

The high-end clothing and accessories seller said earnings in its June 29 quarter soared 79% to 61 cents a share, sailing past a consensus forecast of 49 cents from analysts polled by Thomson Reuters. Total revenue climbed 54% to $640.9 million, topping forecasts for $570.5 million.

The high-end fashion house also raised its full-year earnings guidance and forecast strong comparable-store sales gains for its second quarter and the year. Michael Kors shares rose 4% in the stock market Tuesday.

Retail net sales rose 52% to $325.7 million, fueled by a 27% rise in comparable-store sales and 75 new store openings in the past year. Wholesale net sales grew 59% to $290.6 million.

In North America, same-store sales soared 25% and wholesale sales surged 50%, partly on the continued shop-in-shop concept in department stores.

Europe was even stronger. Sales soared 144% as growing brand awareness led to 56% comp-store growth.

Kors' gross margin rose 150 basis points from a year earlier.

Kors has consistently topped analysts' sales and earnings forecasts since its IPO on Dec. 15, 2011. Currently on the IBD Leaderboard list of top growth stocks, it's up 38% this year.

"The quarter was excellent across the board," said William Blair & Co. analyst Amy Noblin. "They beat on comps, revenue and gross margin, and saw strength across all channels and geographies.

Results reflected the strength of the brand and its products and growing brand awareness and distribution, Noblin says.

"The leadership of Michael Kors and the design team have been critical to the brand's success, given they have delivered on-trend products across multiple categories," added Citi Research analyst Oliver Chen. "And Kors has cornered the jet-set traveler imagery at accessible price points. It sells handbags for $300 to $500 while its premium-luxury competitors can top $1,200.

Kors sees second-quarter sales of $695 million to $705 million, with comps rising 15% to 20%. It expects earnings of 62-64 cents.

For the full year, Kors sees revenue of $2.8 billion to $2.9 billion, in line with Wall Street forecasts of $2.84 billion. It sees comps up about 20% and earnings of $2.67-$2.69 a share, above the Street's projections for $2.57.

"A comp gain of 20% for the full year is industry-leading comp growth," said Chen. He thinks Kors brand awareness can grow further, especially in Europe, where "there's no strong multicountry brand at this price point.

Another big stock mover Tuesday was Fossil (FOSL), which shot up 18%. The fashion accessories designer and retailer makes watches sold under its namesake label and other brands, including Michael Kors. It posted Q2 EPS of $1.15 vs. the Street's view for 93 cents. Revenue popped 11% to $706 million, over forecasts for $691.2 million.

Wholesale sales were strong in Europe and Asia Pacific, and Fossil notched double-digit growth in its watches and jewelry. It raised full-year EPS guidance to $6.15-$6.35, from $6-$6.26.

But teen apparel retailer American Eagle Outfitters (AEO) sank 12% Tuesday. It lowered its second-quarter earnings outlook late Monday due to weaker-than-expected sales and margins.

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