Michael Kors Stock Surges on Rising Profits & Jimmy Choo Goals

Michael Kors Spring 2018 New York
A close up of Michael Kor's spring '18 flip-flops.
REX Shutterstock

Michael Kors Holdings Ltd. is back in the saddle — and has a plan to stay there.

The recent Jimmy Choo acquirer today posted better-than-expected second-quarter results, sending its shares soaring. As of 12:30 p.m. ET, Kors’ stock remained up nearly 15 percent at $54.64.

The company posted Q2 net sales growth of 5.4 percent to $1.15 billion, besting market forecasts for sales of $1.04 billion.

Surpassing the company’s bets as well as analysts’, profits advanced 26 percent during the period to $202.9 million, or $1.32 per diluted share. Adjusted profits were $204.5 million, or $1.33 per diluted share, handily topping estimates for earnings per diluted share of 83 cents.

Our second-quarter results were better than expected, and we are pleased with our continued progress executing on our strategic plan, Runway 2020,” CEO and chairman John Idol said. “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. While we continue to expect fiscal 2018 to be a transition year for the Michael Kors brand, ultimately we believe that these efforts will drive improved financial performance.

Among its Q2 accomplishments, the company increased new fall offerings by 40 percent, reduced its promotions and experienced higher average unit retails across multiple categories and saw double-digit global comparable sales growth in women’s footwear and ready-to-wear categories.

Overall, Michael Kors’ retail net sales increased 8 percent to $645 million, driven in large part by 56 net new store openings since the end of the second quarter of fiscal 2017, as well as the increase in e-commerce sales in Europe and Asia. Comparable sales decreased 1.8 percent, wholesale net sales increased 2.5 percent to $463.6 million, and licensing revenue decreased 2.1 percent to $38 million.

Total revenue in the Americas increased 1 percent to $751.9 million; European revenue increased 9.2 percent to $270.7 million, and revenue in Asia increased 30.4 percent to $124 million.

Describing the current season as a “transformative time” for the company, Idol said he looks forward to reaping the benefits of the Jimmy Choo acquisition as well as the company’s larger quest to build an international luxury fashion group.

We believe that bringing together these two iconic brands further strengthens our growth opportunities, increases our product and geographic diversification and, importantly, creates a platform for future acquisitions,” Idol said. “We look forward to capitalizing on the great opportunities that lay ahead for our brands and believe that we are well-positioned to drive long-term growth as we expand our global fashion luxury group.”

For fiscal 2018, the company expects total revenue of $4.59 billion, including between $215 million and $225 million of incremental Jimmy Choo revenue. Comparable sales for the Michael Kors brand are expected to decline in the mid-single digits. Diluted earnings per share are expected to be in the range of $3.85 to $3.95, including the anticipated dilution from Jimmy Choo of approximately 8 cents.