Michael Kors Holdings Limited (KORS) Soars on Higher than Expected Earnings

Shares of London (UK) based Michael Kors Holdings Limited (KORS) rose on Tuesday, against the backrop of a broad selloff in stocks overall. Kors stock was up 23.91%, rising $9.67 per share, to close at $50.11, on volume of 28,355,380 shares. The company's fiscal third quarter earnings beat analysts estimates by a significant margin.

Founded in 1981, Michael Kors Holdings Limited operates in the design and distribution of sportswear, accessories, footwear and apparel of branded women's apparel and accessories and men's apparel, as well as offering a full line of fragrance products, under the Michael Kors trade name.
Retail operations includes collection stores and lifestyle stores, including concessions and outlet stores located primarily in the United States, Canada, Europe and Japan. The company also sells at the wholesale level, selling it's products to department stores, specialty retail stores and travel shopping locations. Kors also has a licensing segment that licenses its trademarks on products such as fragrances, cosmetics, eyewear, leather goods, jewelry, watches, coats, men's suits, swimwear, furs and ties. The company's stock trades on the New York Stock Exchange.

On Tuesday, the company announced its results for the fiscal third quarter of 2016, ended December 26, 2015. The company disclosed that total revenue for the quarter was $1.40 billion, up from $1.31 billion for the same period a year earlier. This represented a 9.9% increase in revenue on a constant currency basis.

Earnings came in at $294.6 million, or $1.59 per diluted share, based on 184.9 million weighted average diluted shares outstanding and a 28% tax rate. This compares with net income for the third quarter a year earlier of $303.7 million, or $1.48 per diluted share, based on 205.6 million weighted average diluted shares outstanding and a 27.2% tax rate. Analysts had been expecting revenue of $1.35 billion, and earnings per share of $1.46.

Increased revenue was driven by an 11.1% increase in retail net sales, to $766.2 million. That increase was primarily the result of increased e-commerce sales from Kors' digital flagships as well as the 114 net new stores opened since the end of the fiscal third quarter of 2015. Same store sales showed a decrease of 0.9%, however they showed an increase of 2.0% based on constant currency basis, with retail net sales growing at a rate of 15.7%.

Meanwhile, net sales from the company's wholesale operations increased 0.3%, rising to $575.5 million, however on a constant currency basis they grew by 3.0%. Licensing revenue grew to $55.8 million, an increase of 8.4%. Total revenue in the Americas increased 0.4% to $1.06 billion, or 1.4% on a constant currency basis. Revenue from Europe and online operations rose to $276.0 million, rising 14.3% on a reported basis, but 29.1% on a constant currency basis. Though much smaller, revenue in Japan increased to $25.5 million, rising 59.1% on a reported basis, but 68.0% on a constant currency basis.

“We are pleased with our third quarter results, as we delivered revenue, comparable store sales and earnings growth ahead of our expectations," said John D. Idol, Kors Chairman and Chief Executive Officer. "In addition, we remain focused on further developing our digital flagship strategy as we offer our customers a seamless omni-channel experience, the build-out of our men’s business, and leveraging our strong brand awareness to expand our business globally. We believe that the continued execution of these strategic initiatives positions us well to deliver long term growth.”

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Published on Feb 3, 2016
By Kevin Mercadante

Copyrighted 2016. Content published with author's permission.

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