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Michael Kors Q2 Results Beat, But Forecast Falls Well Short

Thursday, November 10, 2016 15:33
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Luxury apparel and handbag maker Michael Kors Holdings Ltd (NYSE:KORS) late Thursday posted better than expected fiscal Q2 earnings results, but its forecast was much lower than estimates, sending its shares falling in late trading.

The London-based company reported Q2 EPS of $0.95, which was 7 cents better than Wall Street’s $0.88 estimate. Revenue fell 3.7% from last year to $1.09 billion, matching analysts’ expectations.

Retail net sales rose 12.1% to $597.2 million in the period, rising mostly due to 198 net new store openings since the same time last year. Comparable sales, which are considered a key indicator for retailers, fell 5.4%.

Wholesale net sales plunged 18.4% to $452.2 million, while licensing revenue decreased 10.2% to $38.8 million.

Looking ahead, KORS forecast Q3 EPS of $1.61-1.65, which is well short of Wall Street’s $1.79 estimate. Q3 revenues are projected at $1.365 to $1.380 billion, also below expectations for $1.4 billion.

Full-year guidance wasn’t much better. Michael Kors expects 2017 EPS of $4.37-4.43, below the $4.58 analysts were looking for, and revenues of $4.55 billion, lower than Wall Street’s $4.64 billion estimate.

The company commented via press release:

“Our second quarter revenue and earnings results were above our expectations, as we continued to deliver innovative luxury fashion product and further expand our footprint worldwide. During the quarter, we continued to execute on our growth strategies with the successful launch of our Michael Kors ACCESS line of smartwatches and fitness trackers, the debut of our new Wonderlust fragrance, our new fall handbag collections, and the further expansion of our men’s offering. We also expanded our online presence, with the launch of digital flagships in several countries in Europe. That said, our results continued to be impacted by the declines in mall traffic and tourism in certain major cities, as well as our strategic decision to reduce sell-in of inventory to the U.S. wholesale channel. Despite these near term challenges, we remain confident in our ability to drive long term growth and increase shareholder value.”

Michael Kors shares fell $1.91 (-3.69%) to $49.85 in after-hours trading Thursday. Prior to today’s report, KORS had gained 29.16% year-to-date.

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