When I wrote about investor expectations for Michael Kors Holdings Ltd (NYSE:KORS) earnings earlier this week, I kind of thought that simply by my acknowledging the insane strength that the company has shown thus far, it would invariably falter. That turned out to be as far from reality as possible. Michael Kors Holdings Ltd (NYSE:KORS)’ earnings yesterday highlighted all of the good that the designer has offered without any of the weakness.
Kors grew revenue, saw a strong spike in comparable sales, and even managed to increase its already high margins. The earnings put a nice cap on a good week for the luxury sector, and Michael Kors Holdings Ltd (NYSE:KORS) investors should be happy. Shares were up more than 3% during the day, and the strength should help the company keep on running for the next fiscal year.
Making the most out of every chance
Kors’ success wasn’t an accident or a stroke of good weather — it was pure planning. The earnings started out strong, with comparable sales rising 36.7% on the back of the brand’s continued strength. That foot-traffic increase was then buoyed by a rise in operating income, which hit 26% on the quarter. All that trickled down to earnings per share of $0.50, which was a 124% increase from last year’s fourth quarter.
To manage all that growth, Michael Kors Holdings Ltd (NYSE:KORS) really had to hit every opportunity square on the head. Comparable sales growth came mainly from a few areas, with women’s handbags driving the bulk of the revenue increase. However, Kors management said that the real volume increase came from small leather goods, which both drive new customers into the store and can act as add-on items for existing customers. Along with the small goods, Michael Kors Holdings Ltd (NYSE:KORS) saw a strong increase in watch sales, which bodes well for both it and Fossil Inc (NASDAQ:FOSL), which provides Kors with timepieces.
Turning to the forecast for the next few quarters, Michael Kors Holdings Ltd (NYSE:KORS) is starting by focusing on its biggest business, North America. According to the conference call, the company is going to expand its retail store count from its current 231 locations by close to 50 new stores. That still gives the company a ways to grow, as management estimates that the North American market can handle at least 400 stores.