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Michael Kors' Earnings Impresses Investors And Analysts

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Michael Kors (NYSE: KORS) on Tuesday reported its third quarter results.

The company announced an EPS of $1.11, beating the consensus estimate of $0.86. Revenue of $1 billion beat the consensus estimate of $859.4 billion. During the quarter, net income leaped to $229.6 million from $130.0 million a year ago. Gross profit as a percentage of total revenue was up 100 bps to 61.2 percent for the quarter.

Comparable-store sales increased 28 percent in the quarter to mark the company's 31st consecutive quarter of growth. Wholesale sale increased 68.2 percent year-over-year to $461 million and licensing revenue increased 59 percent to $47.4 million.

“We believe that our consistently strong performance is attributable to the creative vision of Michael Kors and his talented design team as well as the distinctive jet-set in-store experience that we provide in both our retail stores and our shop-in-shops,” said John D. Idol, Michael Kors' Chairman and Chief Executive Officer. “We remain very excited about our future growth prospects as Michael Kors continues to gain momentum as a global luxury lifestyle brand.”

Kors earnings was nothing short of a slam dunk, as it blew past estimates in a period where other retailers and brands struggled to stay in positive territory.

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Morgan Stanley: Standout performance

Kimberly Greenberger, analyst at Morgan Stanley said that Kors' results proved to be a “standout performance” in a difficult environment.

“We see solid performance across categories as evidence Kors brand continues to accelerate and take share,” said Greenberger in a note to clients. “Kors should get rewarded for exceeding expectations as other retailers negatively preannounce” and that the company “remains the best growth story in Retail in our view.

“Bears feared the promotional environment would damage gross margins. In our view KORS proved it can compete in a highly promotional environment and maintain full-price sell-through, evidence of brand strength.”

Shares are Overweight rated with a base target price of $97. he analyst has a “bull case” price target of $143, which has a “high probability of playing out.”

PiperJaffray: Raising estimates

Erinn Murphy, analyst at Piper Jaffray said that Kors' is on track for long-term success and merely proved it with its quarterly results.

“While the company should have in excess of $1B in cash by year end, the company will continue to invest in its platform for sustainable growth, which we believe is prudent,” said Murphy in a note to clients. "As we think about new category opportunities (men's, fragrance/beauty, jewelry), the company is investing behind growing the breadth of offering across its channel mix.”

Murphy is positive that, “three new distribution centers, at a minimum, will be opened within the next 24 months in the U.S., Europe, and Canada to support further growth” and that “within men's ($1 billion opportunity longer-term), the company will be adding a new head of men's and using watches, in particular, as a driver for men's brand awareness over time.”

Shares are Overweight rated with a price target increased to $114 from a previous $90.

Latest Ratings for KORS

DateFirmActionFromTo
Nov 2014BarclaysUpgradesUnderweightEqualweight
Nov 2014Canaccord GenuityMaintainsBuy
Nov 2014JefferiesUpgradesHoldBuy

View More Analyst Ratings for KORS
View the Latest Analyst Ratings

Posted-In: Erinn Murphy John IodlAnalyst Color Earnings News Price Target Retail Sales Analyst Ratings

 

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