Michael Kors Holdings Ltd. (KORS - Analyst Report) reported third-quarter fiscal 2015 earnings per share of $1.48 that came miles ahead of the Zacks Consensus Estimate of $1.34 cents per share while rising 33.3% year over year. Moreover, revenues of $1,314.7 million grew 29.9% (up 32.6% on constant currency) while easily surpassing the Zacks Estimate of $1,302 million.
However, shares fell over 7% in the pre-market trading as the company provided a soft fourth quarter outlook. The company has projected earnings in the quarter to grow in the range of 89– 92 cents whereas the Zacks Consensus Estimate is pegged at 93 cents per share.
Also, Michael Kors’ comps continue to deteriorate drastically. Comps for the quarter grew 8.6%, as against 27.8% increase reported in the prior year quarter.
Further, gross margin fell 30 basis points (bps) to 60.9% and operating margin shrunk 210 bps to 31.8% year over year.
Segment Performance
Net sales generated in the Retail segment increased 37% year over year to $689.4 million due to 114 new stores openings over the past year. Operating profit increased 25.5% to $215 million. The company’s e-commerce registered a 73% increase in sales in the quarter as against performance of the outsourced site in the prior-year quarter.
For the Wholesale segment, revenues increased 24.4% to $573.8 million while operating profit grew 21.2% to $170.5 million.
Licensing segment revenues rose 8.6% to $51.5 million while operating profit grew 5.7% to $33 million.
Regional Performance
Revenues across North America grew 22.6% to $1.1 billion while comps increased 6%.
In Europe, brand recognition and higher demand led to a whopping 72.1% rise in revenues, which came in at $241.4 million with 21.2% growth in comps.
Lastly, revenues in Japan grew 72.1% year over year to $16 million with a 35.4% rise in comps.
Other Financial Data
As of Dec 27, 2014, Michael Kors had cash and cash equivalents of $949.8 million and shareholders’ equity of nearly $2,151.5 million
At the end of the third quarter, Michael Kors, which competes with Coach Inc. (COH - Analyst Report), Hanesbrands Inc. (HBI - Analyst Report) and Ralph Lauren Corp. (RL - Analyst Report), operated 703 stores across the globe, inclusive of licensed locations. The company also repurchased 5.1 million shares worth $399.9 million in the quarter.
Guidance
Management expects fiscal 2015 revenues to be around $4.4 billion. Further, comps are projected to increase in low double digits. Earnings are expected to be in the range of $4.27–$4.30 against the earlier projection of $4.13–$4.18 per share. The Zacks Consensus Estimate is pegged at $4.17 per share, which could see an upward revision in the coming days.
Further, management expects fourth-quarter fiscal 2015 revenues to be in the range of $1.05–$1.08 billion and comps to increase in mid-single digits.
At present, Michael Kors carries a Zacks Rank #3 (Hold).
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