Consumer Products

Does Michael Kors Deserve More for This Earnings Beat?

When Michael Kors Holdings Ltd. (NYSE: KORS) reported its fiscal first-quarter financial results before the markets opened on Wednesday, the apparel maker said that it had $1.32 in earnings per share (EPS) and $1.2 billion in revenue. The consensus estimates from Thomson Reuters had called for $0.95 in EPS on revenue of $1.14 billion. The same period of last year reportedly had EPS of $0.80 and $952.4 million in revenue.

During the latest quarter, Michael Kors brand revenues grew 8%, with performance above expectations. Although comparable store sales were flat as a whole, there were positive comps in the Americas and in Accessories, Footwear and Women’s Ready to Wear.

In terms of its segments, the company reported:

  • MK Retail revenue increased 3.2% to $639.5 million driven in large part by 9 net new store openings since the end of the first quarter.
  • MK Wholesale revenue increased 19.5% to $362.8 million, driven by improvements in the underlying business, as well as a shift in timing of certain wholesale shipments from second quarter into first quarter.
  • MK Licensing revenue decreased 4.8% to $27.5 million.

Looking ahead to the fiscal 2019 year, the company expects to see EPS in the range of $4.90 to $5.00 and total revenue to be roughly $5.125 billion. The consensus estimates are $4.77 in EPS and $5.09 billion in revenue for the full fiscal year.

John D. Idol, the company’s board chair and chief executive, commented:

We are encouraged by our first quarter performance, with growth in revenues, gross margin, operating margin as well as earnings per share all exceeding our expectations. Our fashion leadership remains strong, which drove consumers to respond favorably to both new fashion introductions and core products. Our global fashion luxury group continues to see the benefits of our long term growth strategy which is driven by both the Michael Kors and Jimmy Choo brands. Looking ahead we remain optimistic about our business for the remainder of fiscal 2019 and beyond.

Shares of Michael Kors traded up 6.6% Wednesday morning to $69.95. The consensus analyst price target is $73.12 and the 52-week trading range is $41.47 to $70.00.

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