Michael Kors Beats Q1 Earnings on Growth Across All Regions - Analyst Blog

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Michael Kors Holdings Ltd. ( KORS ) reported yet another strong quarterly performance. The company's first-quarter fiscal 2015 earnings per share of 91 cents came miles ahead of the Zacks Consensus Estimate of 81 cents per share while rising 49.2% year over year. Earnings also came much ahead of the company's own guided range of 78-80 cents.

The company's quarterly revenues of $919.2 million handily surpassed the Zacks Consensus Estimate of $850 million and grew nearly 43.4% year over year.

Consistent robust performance across all segments and geographies facilitated this growth.

Comparable store sales (comps) increased 24.2% in the quarter, making this the 33rd straight quarter of comps growth.  

Gross profit surged 43.9% year over year to $571.6 million, while gross margin grew 20 basis points (bps) to 62.2%. Operating profit increased 40.1% year over year to $276.8 million whereas operating margin shrunk 70 bps to 30.1%.

Segment Performance

Net sales generated in the Retail segment increased 47.5% year over year to $480.2 million aided by a comps rise of 24.2% along with 115 new stores openings over the past year. Operating profit increased 38.4% to $142.7 million.

For the Wholesale segment, revenue increased 40% to $406.8 million while operating profit grew 45.2% to $117.7 million.

Licensing segment revenues rose 30.5% to $32.1 million while operating profit grew 22.6% to $16.4 million.

Regional Performance

Revenues across North America (U.S. and Canada) grew 30.3% to $718.9 million while comps jumped 18.7%. Additionally, the region's wholesale also contributed to the rise with improved sales in accessories and footwear as well as the ongoing transformations of shop-in-shops into department stores.

In Europe, increasing brand recognition and demand led to a whopping 128% rise in revenues, which came in at $185.5 million. Comps in the region stood out registering a 54.2% growth over the past year.

Lastly, revenue grew 88.7% year over year to $14.8 million in the Other Regions, including the markets of Japan, Latin America and the Far East.

Other Financial Data

As of Jun 28, 2014, Michael Kors had cash and cash equivalents of $1,125 million and shareholders' equity of nearly $2,029.4 million.

At the end of first quarter, Michael Kors operated 605 stores across the globe, inclusive of licensed locations.

Guidance

Driven by stellar first quarter results, management raised fiscal 2015 guidance. For the full year, revenues are likely to be in the range of $4.25-$4.35 billion as against earlier projection of $4.0-$4.1 billion. Comps are projected to increase in the high teens. Earnings are expected to be in the range of $4.00-$4.05 against the earlier projection of   $3.85-$3.91 per share. The Zacks Consensus Estimate is pegged at $3.92 per share, which could see an upward revision in the coming days.

Further, management expects second-quarter fiscal 2015 revenues to be $950-$960 million, comps to increase in the high teens and earnings per share to be 85-87 cents. The tax rate is likely to be around 32.5%. The Zacks Consensus Estimate is pegged at 88 cents per share.

Our Take

Michael Kors has performed impressively in the last few quarters. This Zacks Rank #3 (Hold) stock is seeking to carve a niche in the high-end retail sector by broadening its footprint in strategic markets and offering merchandise that caters to the tastes of fashion elites.

In addition to its watch and handbag collection, Michael Kors is now focused on enhancing its apparel, footwear and other miscellaneous categories to compete better with peers like Coach Inc. ( COH ), Hanesbrands Inc. ( HBI ) and Ralph Lauren Corp. ( RL ).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: COH , RL , HBI , KORS

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