Investors thought Michael Kors Holdings Ltd.’s third quarter was more than good enough.

This story first appeared in the February 3, 2016 issue of WWD. Subscribe Today.

Net income for the quarter fell 3 percent to $294.6 million, or $1.59 a diluted share, from $303.7 million, or $1.48, a year ago. That put the company’s earnings per share 13 cents ahead of the $1.46 analysts projected and drove the stock up 23.9 percent to close at $50.11 in Big Board trading.

 

Total revenues for the quarter ended Dec. 26 rose 6.3 percent to $1.40 billion from $1.31 billion.

The company said its retail sales rose 11.1 percent to $766.2 million, driven by e-commerce sales from its digital flagships in the U.S. and Canada and 114 net new store openings. Comparable-store sales, however, slipped 0.9 percent. On a constant currency basis, retail net sales rose 15.7 percent, while comps rose 2 percent.

During the conference call to Wall Street analysts, John Idol, chairman and chief executive officer, said “while mall traffic in North America declined, we saw a significant increase in conversion rates in our own retail stores.”

The ceo added that the watch category remained challenged in the quarter, but the company saw demand for “smaller-size bags, cross-bodies and small leather goods.” He said while sales in terms of dollars might have been flat, smaller-size bags have lower price points and actual unit sales have gone up since smaller bags also require purchases of different-sized accessories, such as smaller wallets.

Footwear remains one of the company’s “highest growing areas,” he said, although the warm weather hurt boot sales in the quarter.

Idol said the company is capturing the denim trend in its accessories and apparel assortments and that the men’s business is on track to open 75 men’s shop-in-shops globally. On the accessories side, Kors — in a nod to changing fashion tastes — will exit most of the fashion jewelry line in spring 2017 in its own stores and introduce more fine jewelry.

Kors also plans to add digital platforms in six European countries this fall. As for new stores, most will be overseas as the company is close to its targeted 400-unit base for the Americas.

The company has been working to manage its North American wholesale inventory. Jefferies analyst Randal J. Konik said he expects the “decision to pull back on wholesale distribution to benefit [Kors’] ability to control promotions within their stores.” Konik raised his price target for shares of Kors to $75 from $70.

For the fourth quarter, the company said it expects diluted EPS in the range of 93 cents to 97 cents, on revenues $1.13 billion to $1.15 billion. The outlook for the full year remained unchanged, with diluted EPS between $4.38 to $4.42 on revenues of $4.65 billion.