Michael Kors’s Earnings Surprised Wall Street Analysts



3Q16 earnings

Michael Kors (KORS) reported its earnings on February 2, 2016. It sent the company’s stock 24% higher. The earnings beat Wall Street analysts’ estimates by quite a margin. The company reported an EPS (earnings per share) of $1.59. Wall Street analysts estimated the EPS to be around $1.46. This was a substantial surprise of 9.0%. The company’s revenue rose by 6.3% to $1.4 billion from $1.31 billion in 3Q15. This was taken as a sign of reviving growth.

In 3Q16, the company’s net income was $294.6 million. When it’s compared to 3Q15, it fell by 3.0% due to foreign exchange headwinds and higher operating expenditure. However, it still managed to be above Wall Street analysts’ expectations of $273.5 million due to higher sales.

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International business drove 3Q16 results

Michael Kors’s 3Q16 results were driven by the company’s better-than-expected performance in international regions like Europe and Japan. The e-commerce platform also drove the company’s top line. In 3Q16, the total sales in Europe grew by 14.3%. This included growth in both retail and wholesale. In contrast, the total sales in Japan grew by 59.0%.

The company’s CEO, John Idol, stated in the conference call that he sees a lot of penetration opportunities in Europe and Asia. The company will be moving to tap that in the future. We’ll dig deeper into the company’s performance in this series.

An investor wanting to invest in Michael Kors and other retailers like Coach (COH), Ralph Lauren (RL), and Under Armour (UA) can invest in the Consumer Discretionary Select Sector SPDR Fund (XLY).


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