Michael Kors Stock Climbs On Modest Q4 Beat

michael kors spring 2016
Michael Kors Claudia flat.
Courtesy image.

Shares for Michael Kors Holdings Ltd. continue to rally after the brand posted better-than-expected fourth-quarter sales and profit on Wednesday.

As of 11:10 a.m. EDT, the company’s stock had gained 7 percent but soared as much as 8 percent in early morning trading.

Michael Kors said its Q4 net income decreased 3 percent, to $177 million, or 98 cents per diluted share, from $182.6 million, or 90 cents per diluted share in the comparable period. On a constant-currency basis, diluted earnings per share were $1.00. Analysts had predicted diluted EPS of 97 cents.

Fourth-quarter sales advanced 11 percent, to $1.16 billion, from $1.10 billion in the comparable period. On a constant currency basis, total revenue increased 11.7 percent.

Market watchers had forecast revenues of $1.15 billion.

Retail net sales increased 22 percent to $572.6 million, driven primarily by e-commerce sales and 142 new store openings during the year, the company said. Comp sales in the quarter improved 0.3 percent. 

Despite the difficulties many brands and retailers faced during the past two or more quarters, Michael Kors president, chairman and CEO John Idol said the company’s initiatives have helped to rejuvenate the brand in recent months.

We are pleased with our financial and operational accomplishments during the fourth quarter and fiscal year 2016, as we delivered continued growth across regions despite the challenging retail environment. In addition, we elevated our product offerings and refreshed our marketing campaigns, both of which were met with positive response from our customers,” Idol said in a release. “We also continued to make strategic investments in our business that will pay meaningful dividends for years to come. As these initiatives began to take hold, we ended the year on a strong note, with revenue and earnings per share ahead of our expectations in the fourth quarter, as well as for the full year.”

For the full year, total revenue increased 7.8 percent to $4.7 billion from $4.4 billion in the prior year. On a constant currency basis, total revenue increased 11.7 percent. Total net income declined 5 percent, to $839 million, or $4.44 per diluted share, from $881 million, or $4.28 per diluted share, in the previous year.

Idol said international expansion continues to be a priority for the brand, which simultaneously announced on Wednesday that it completed the acquisition of its Greater China licensee on May 31 for $500 million in cash.

Looking ahead, we see multiple growth opportunities, including the expansion of our international markets, the growth of our digital e-commerce flagships, the build-out of our men’s business, the launch of Michael Kors Access wearable technology line, and the continued design innovation of our luxury fashion product, which we believe will enable us to deliver sustainable earnings growth and continue to return value to our shareholders,” Idol said.

For fiscal year 2017, the company expects total revenue to be flat versus the prior year and comparable sales to decrease in the low-single-digit range. Diluted EPS are expected to be in the range of $4.56 to $4.64 on a non-GAAP basis and $4.47 to $4.55 on a GAAP basis.

For the first quarter, the firm expects total revenue to be between $940 million and $950 million. Diluted EPS are expected to be in the range of 70 to 74 cents on a non-GAAP basis, and 62 to 66 cents on a GAAP basis.