Where Michael Kors Is Returning to Growth
Strong performance across geographies drive fiscal 2Q18 growth
Michael Kors (KORS) reported a 5.4% YoY (year-over-year) improvement in its fiscal 2Q18 sales, which stood at $1.5 billion. Behind this improvement were 1%, 9.2%, and 30.4% YoY improvements in the company’s North America, European, and Asia operations, respectively.
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Michael Kors’ revives consumer demand in America
Initiatives undertaken by KORS under its Runway 2020 plan paid off, as revenues in North America rose 1% YoY to $752 million in fiscal 2Q18. The company returned to growth in North America after five quarters of revenue declines.
Growth in the region was primarily driven by higher AUR (average unit retail) in the wholesale channel as consumers responded positively to KORS’s revamped product lines. Retail sales in the Americas remained flat as retail sales comps (same-store sales) declined by mid-single digits due to the negative impact of lower promotional discounts.
Europe and Asia also contributed to growth
KORS’s recent facelift across product offerings contributed to a 9.2% YoY rise in revenues in Europe. The company posted an improvement in sales after witnessing three weak quarters. Retail net sales rose 17.5% YoY in fiscal 2Q18, while wholesale remained flat.
Reductions in shipments to improve KORS’s overall brand positioning caused wholesale net sales to remain flat during the quarter. European sales comps also stood flat, but after including the e-commerce sales, comps increased at a low single-digit rate (on constant currency terms).
In Asia, mid-single digit comparable sales growth coupled with new store openings led to 30.4% YoY growth in net sales in Asia. Continued strength in Mainland China and Japan has been driving growth in the region.
ETF investors looking for exposure to KORS can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.25% of its portfolio in the company.