Strong accessories and footwear sales lifted Michael Kors Holdings Ltd. to a first-quarter surprise, beating Wall Street estimates on both sales and earnings per share.
But the news wasn’t entirely positive as net income for the three months ended June 27 fell 7.1 percent to $174.4 million, or 87 cents a diluted share, from $187.7 million, or 91 cents, a year ago. Despite the lower profits, the company managed to beat Wall Street’s EPS estimates by 12 cents.
As for revenues, Wall Street was expecting $944 million, while Kors posted a 7.3 percent gain to $986 million from $919.2 million. Net sales rose 6.8 percent to $947.3 million from $887 million. By business component, wholesale sales rose 4.2 percent to $424 million, while retail net sales rose 9 percent to $523.3 million. Retail sales were significantly boosted by 107 net new store openings since the end of the year-ago first quarter, as well as e-commerce sales. On a comparable-store basis, sales actually dropped 9.5 percent.
By geography, revenues followed what other vendors have generally been reporting about foreign tourists heading to countries to take advantage of the currency wars to get more bang for their buck. Total revenue for Kors inched up 1.2 percent in North America to $727.3 million, while European revenue rose 16.9 percent to $216.8 million and revenues in Japan grew 32.7 percent to $19.6 million. The strong dollar has generally hurt North American sales, while the euro and Japanese yen have depreciated.
John D. Idol, chairman and chief executive officer, said, “Our first-quarter performance reflects better-than-expected results in both our top and bottom line, with growth across our North America, Europe and Asia regions.”
Idol said the company saw “solid growth” in accessories and footwear as the categories performed well in its retail stores and has “strong sell-through in our wholesale channel.”
Nomura Securities analyst Simeon A. Siegel said, “This is yet another ‘handbag’ retailer that has posted a positive surprise this quarter. Although from our discussions, it is clear that investor appetite for the group has been decimated, we believe this week’s data points may serve to begin stirring dormant interest.”
Siegel said shares of Kors were down 47 percent year-to-date, and expectations had grown increasingly negative over concern that the company would be unable to stem the downward trajectory. Given where the stock is trading at, Siegel said earlier this week that this might be the time for investors to jump back in. He has a “Buy” rating on shares of Kors.
Shares of Kors traded up 7.8 percent to $42.96 in pre-market trading.