Michael Kors Continues Bullish Run - Analyst Blog

Michael Kors Holdings Limited KORS has continued its growth momentum in 2014. Year-to-date, shares of the luxury retail company have surged 19.2%.

Our bullish stance is based on the company's stellar performance over the past few years and its earnings streak in the past nine quarters and comparable-store sales growth in 31 successive quarters. The company's third-quarter fiscal 2014 results were also robust, with earnings of $1.11 per share beating the Zacks Consensus Estimate by 29% and surging 73.4% year over year.

Aided by robust performance across all segments and geographies, the retailer's revenues for the first time surpassed the $1 billion mark, at $1.01 billion, which handily beat the Zacks Consensus Estimate of $860 million and increased nearly 59% year over year.

Robust third-quarter performance prompted management to provide an upbeat fourth-quarter and full-year 2014 guidance. Management expects fourth-quarter revenues in the $790–$800 million range, comparable-store sales to increase 15%–20% and earnings per share to be 63–65 cents.

The encouraging results and a favorable outlook triggered an upward thrust in the Zacks Consensus Estimate. For fiscal 2014, our estimate escalated 10.2% to $3.12 a share over the last 60 days and for 2015, it escalated 9.8% to $3.82.

Michael Kors is leaving no stone unturned to capitalize on opportunities arising from its increasing popularity. The company is on a store expansion spree across the globe with particular focus on Europe.

The recovering European market has provided a boost to the company, as reflected in a 140% rise in sales in the third quarter of fiscal 2014. Fashion-conscious Europe presents considerable opportunities and hence, management has been right in seeking to open 36 stores in Europe in fiscal 2014. Moreover, it intends to take the count to 200 over the long term.

Further, to ensure that its brand gets maximum visibility, Michael Kors has been growing its Wholesale business to attract department store customers through collaboration with leading department/specialty retail stores.

In addition to its watch and handbag collection, Michael Kors is now focusing on enhancing apparel, footwear and other miscellaneous categories to compete better with peers like Coach Inc. COH, Hanesbrands Inc. HBI and Ralph Lauren Corp. RL.

Currently, Michael Kors sports a Zacks Rank #1 (Strong Buy).