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Good Picture: Organic and Inorganic Growth in Retail Revenue

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Organic growth in retail sales

Michael Kors’s (KORS) (XLY) revenue grew by 6.3% to $1.40 billion. On a constant currency basis, it grew by 9.9%. This is a substantial number to achieve. However, the highlight of the earnings was that the company pulled off a mix of organic and inorganic growth. The company’s retail sales grew by 15.7% on a constant currency basis. It included 2.0% growth in comparable store sales. This was negative in the first two quarters of 2016. According to the company’s CEO, John Idol, the conversion rate in North American and Europe helped the company achieve low single-digit organic growth in the region and high double-digit growth in Japan.

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Increasing the store count internationally

Michael Kors has been continuously increasing its footprint around the globe—mainly in Europe and Asia where it sees a high opportunity for penetration. The company added 114 stores worldwide from 3Q15. This includes 46 store in Europe and another 13 stores in Japan. Combined, this is more than the 55 stores that it opened in North America. In calendar 2016, the trend will likely continue. The company will try to penetrate the international markets more. It will compete against some of its closest domestic peers like Ralph Lauren (RL), Kate Spade & Co. (KATE), and Coach (COH) in the international arena, as indicated by the company’s CEO.

In the next part, we’ll look at the company’s stock.

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