Michael Kors beats estimates as Americas sales rebound, benefits from Jimmy Choo

Handbag maker Michael Kors Holdings Ltd beat second-quarter profit and revenue estimates as its turnaround efforts helped reverse a decline in Americas sales for the first time in a year, sending its shares up 12 percent in early trading.

The company also lifted its full-year revenue forecast on Monday to reflect additional sales from its $1.2 billion acquisition of upscale shoemaker Jimmy Choo.


The company has forecast revenue of $4.59 billion for the year ending April 2018 - Photo: Michael Kors

The company, however, now expects Jimmy Choo to contribute up to $225 million to sales for the rest of the year, down from its earlier estimate of about $275 million.

Once the hottest name in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online. Over-distribution and a reliance on promotions to boost sales also eroded its brand value and appeal.

To reverse a more-than two-year slump in same-store sales, Kors is pursuing a multi-brand strategy for growth. In July, the maker of the popular Mercer and Hamilton handbags announced the deal to buy Jimmy Choo.

The company has also pulled back heavily-discounted inventory from department stores and off-price channels, refreshed its line of bags and shut underperforming stores.

The efforts helped the company post a smaller-than-expected 1.8 percent drop in same-store sales in the second quarter, compared with a 4.6 percent decline expected by analysts polled by research firm Consensus Metrix.

Sales also got a fillip as the company boosted new products and high-end accessories by 40 percent for the fall season and sold more bags at full-price, helping it overturn a one-year slide in total revenue for the first time.

“This is the first time in over a year that sales in the Americas, for example, have grown - proof the company is clawing back some of the ground it has lost,” Neil Saunders, managing director of research firm GlobalData Retail said.

Total revenue rose 5.4 percent to $1.15 billion in the quarter, beating the $1.05 billion expected by analysts, according to Thomson Reuters I/B/E/S.

Kors lifted its fiscal 2018 revenue forecast to $4.59 billion from $4.28 billion.

For the key holiday quarter, the company expects Jimmy Choo sales to sum up to $105 million to $110 million.

Excluding one-time items, Kors earned $1.33 per share, beating the analysts’ average estimate of 83 cents per share, mainly due to a much lower tax rate.

The company’s shares were up 11.5 percent at $53.09 in early trading.
 

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