Aug 8, 2017
Michael Kors profit drops 15% as sales to department stores dip
, Reuters
Michael Kors Holdings Ltd (KORS.N) reported better-than-expected quarterly results on Tuesday and lifted its annual revenue forecast as it opened more stores and benefited from strong demand in China, sending its shares soaring 18 per cent.
The U.S. fashion accessories maker also for the first time provided an estimate of revenue from its recently announced deal to buy upscale shoemaker Jimmy Choo Plc.
Once the hottest name in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online.
Over-distribution of its products and a reliance on promotions to boost sales also eroded some of Kors's brand value, losing its appeal with customers.
Kors's same-store sales result in its latest quarter capped an eight-quarter streak of declines, but the drop was lower than anticipated as the company cut back on discounting and also attracted tourists from China and Russia.
Same-store sales fell 5.9 per cent in the first quarter ended July 1, compared with the 8.9 per cent decline analysts polled by Consensus Metrix had expected.
Total revenue dipped 3.6 per cent to US$952.4 million, but handily beat analysts' average expectation of US$918.6 million, according to Thomson Reuters I/B/E/S.
Revenue was boosted by the opening of 67 new stores worldwide as well as a 60 per cent surge in sales in Asia helped largely by the acquisition of a Greater China licensee.
Net income attributable to Kors fell 15 per cent to US$125.5 million, or 80 cents per share. Analysts had expected 62 cents.
Kors, which agreed to buy Jimmy Choo last month, said it expects the deal to add about US$275 million to revenue in the second half of the year ending March 2018. The estimate assumes that the deal will close by the third fiscal quarter.
Kors said it now expects fiscal 2018 revenue of about US$4.28 billion, slightly higher than the US$4.25 billion it had expected earlier. The forecast does not include results from Jimmy Choo.
Shares of Kors, down about 13 per cent this year, were up 17.6 per cent at $43.80 in premarket trading. The stock was on track to hit its highest level since January.
