A Blockbuster Quarter for Michael Kors

Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apparel IPOs have snatched all the attention and interest of the investors this quarter by outperforming their well established peers. They have managed to buck the trend and the market sentiment, bringing back hope and delight among investors while showing signs of recovery in the industry. Sometime ago the retail boutique operator Francesca’s Holdings (NASDAQ: FRAN) posted first quarter earnings growth of 100%, topping Mr. Market’s expectations. The specialty retailer went public last July and has still managed to be among the star performers. Another luxury retailer which made its debut last December has continued to be an extraordinary performer since then. Michael Kors (NYSE: KORS) who specializes in women apparel and accessories, has posted great fourth quarter results recently. Let’s take a look.

Performance at its Best!

With 58% growth in the top line to $380 million, the high end retailer surprised investors with a multiplying effect on the bottom line which jumped 120%, registering in at 22 cents per share. This was way above the analysts’ estimates of 6 cents per share. People went gaga over its expensive and trendy watches and sunglasses giving such bright results for the company. Customers have sacrificed on the quantity which they used to buy at cheaper stores in order to buy better quality products at Michael Kors. The luxury retailer also benefitted from its 71 new store openings further pushing its revenue north.

Michael Kors experienced an amazing growth rate of 36.1% in its comparable store sales which is way above any of the industry peers. Even after witnessing weakness in the European market, the comparable store sales from the region rose 13.6% and revenue from the region more than doubled for the period which is commendable. Where other high end retailers are finding it difficult to handle the soft European market, Kors has multiplied its revenue to $36.6 million.

Apart from retail sales the wholesale business reported revenue growth of 46% and revenue from licensing royalties jumped 27% led by high sales of its licensed products.

Plans Ahead

The luxury retailer has plans to expand globally growing its operations especially in Japan in this year. The Japanese market is strong for high end brands, and Kors is expected to reap the gains with its expansion in the region in the summer season. In fact, the company has given a sparkling outlook for the year which is well above analysts’ expectations. It has projected its revenue to be in the range of $1.7 to $1.8 billion and the earnings per share in the range of $1.08 to $1.12. Despite the weak European market which constitutes 8% of its universe, Michael Kors had confidence in its potential to provide a guidance of 45% revenue growth and 38% earnings growth.

Final Views

With a skyrocketing quarter in place and plans to expand in a much awaited and hungry market like Japan, the company is faced with great expectations in the coming months. Till now the retailer has been posting awesome results topping expectations each time, and with such a track record the apparel retailer has definitely become a favorite to the investors. I think one should surely take note of this stock.


justhimanshu has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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