Shares for Michael Kors Holdings Ltd. took a nosedive this morning — remaining in the red nearly 16 percent to $48.52 as of 11 a.m. ET.
The sell-off follows an arguably solid second-quarter earnings release, which showed the firm’s profits blow past forecasts — while sales were close to in line — and an improved outlook for the fiscal year.
Still, investors may have expected stronger top-line growth and were likely spooked by a sluggish performance by the Michael Kors brand, where sales fell less than 1 percent and comps tumbled low single digits — likely viewed as proof the firm has a ways to go to lure in larger scores of luxury clientele. (The company’s planned acquisition of Versace, announced in September, is expected to bolster that goal.)
Overall, Q2 revenues advanced 9 percent year over year to $1.25 billion, just shy of the $1.26 billion analysts had expected and including a $116.7 million contribution from Jimmy Choo, with footwear sales continuing to clock double-digit gains.
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“For Jimmy Choo, we continue to implement our strategy and believe that the brand is on track to achieve its $1 billion revenue target,” Michael Kors chairman and CEO John Idol told investors during a conference call. “Since the acquisition, we have grown Jimmy Choo’s store base from 150 to just over 200 stores. We see a clear runway to achieve 250 stores globally, with an emphasis in Asia.”
The firm’s total net income fell 32 percent year over year to $137.6 million, or 91 cents per diluted share. Adjusted net income fell 6 percent to $192.5 million, or $1.27 per diluted share, but handily topped market watchers’ forecasts of $1.10 per diluted share.
Looking ahead, the company improved its fiscal year profit guidance and now expects earnings per share to range from $4.95 to $5.05, compared with its previous outlook of $4.90 to $5. It continues to expect total revenue of $5.13 billion, including between $580 million and $590 million of incremental Jimmy Choo revenue.
“As we enter the second half of fiscal 2019, we look forward to welcoming Versace into our group,” Idol said. “With the acquisition of Versace, we have built one of the world’s leading fashion luxury groups in just one year, setting the stage for accelerated revenue and earnings growth. This is a truly remarkable and historic moment for our company and we look forward to completing this transformational acquisition in the coming months.”
Unimpressed Investors Send Michael Kors Shares Tumbling Despite Earnings Win