Kors Back in Action: Revenue Growth after a Year of Slowdown



Michael Kors’s fiscal 2Q18 results

Michael Kors (KORS) enjoyed a strong fiscal 2Q18, reporting a rise in revenues for the first time in the past five quarters. KORS’ top line grew 5.4% YoY (year-over-year) to $1.15 billion, beating Wall Street’s revenue expectation of $1.05 billion and outdoing its own guidance of between $1.0 billion and $1.1 billion in revenues.

CEO (chief executive officer) John D. Idol stated: “Our second quarter results were better than expected, and we are pleased with our continued progress executing on our strategic plan, Runway 2020. The positive signs that we are seeing in our business illustrate that our efforts across product innovation, brand engagement and our customer experience are beginning to take hold.”

Competitor Tapestry (TPR), the owner of brands like Coach and Kate Spade, reported results one day after Kors. The handbag maker posted a 24% YoY rise in sales to $1.29. However, this increase was mostly a result of Kate Spade’s integration. Coach brand sales plunged 3% YoY during the quarter, driving the company to a top-line miss of $10 million.

What drove Michael Kors 2Q top line?

While the wholesale channel recorded a 2.5% YoY rise in sales to $463.6 million, retail sales improved 8% to $645.0 million. However, the growth in retail sales was fueled mostly by new stores openings and strong e-commerce sales.

Comparable sales fell 1.8% during the quarter. North America e-commerce business benefited comps by 260 basis points. The company opened 56 new stores during the quarter.

ETF investors looking for exposure to KORS can consider the First Trust Consumer Discretionary AlphaDEX Fund (FXD), which invests 1.1% of its portfolio in the company.

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