Michael Kors Guidance Disappoints

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Michael Kors Holdings Ltd. (NYSE: KORS) reported second fiscal quarter 2013 adjusted diluted earnings per share (EPS) of $0.49 and $532.9 million in revenues before markets opened this morning. In the same period a year ago, the luxury apparel maker and retailer reported EPS of $0.25 on revenue of $287.9 million. Second-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.40 and $519.3 million in revenue.

Global same-store sales for the quarter rose 41.3% year-over-year, and the company says it has opened 66 new stores since the end of the second fiscal quarter of 2012.

Kors’s CEO said:

Our North America comparable store sales growth of 45.1% demonstrates the strong demand for Michael Kors products as we continue to offer a compelling assortment of luxury merchandise and exceptional service in a jet set store environment. The net sales growth of 76% in our North America wholesale segment reflects the continued successful conversion to shop-in-shops in department stores as well as exceptional comparable store sales. We continue to gain brand acceptance in Europe as evidenced by the 97% sales growth we achieved in this region.

The company also raised its third fiscal quarter revenue guidance to $525 million to $535 million, assuming an increase in same-store sales in the mid-20% range. EPS is forecast at $0.37 to $0.39 for the quarter.

For the 2013 fiscal year, Kors now estimates revenues of $1.86 to $1.96 billion, assuming a same-store sales increase of about 30%. EPS is now forecast at $1.48 to $1.50 for the full year.

The consensus estimates for the company’s third quarter call for EPS of $0.39 on revenues of $523.55 million. For the full 2013 fiscal year, the consensus estimate calls for EPS of $1.46 on revenues of $1.98 billion.

Kors has been one of the bright lights in luxury apparel business since coming public in December of last year. Shares have more than doubled since the IPO. But today’s report just does not make the grade, failing on the guidance the company provided. For a luxury retailer, revenue should never be a problem. Just raise prices, your customers can afford it, and the wannabes have credit cards. If revenues are forecast light, profits will eventually follow.

But shares are up about 2% in premarket trading, at $51.60 in a 52-week range of $23.51 to $58.62. Thomson Reuters had a consensus analyst price target of $63.10 before today’s results were announced.

Paul Ausick

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