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On Feb 7, 2014, Zacks Investment Research upgraded Michael Kors Holdings Limited (KORS - Analyst Report), the global luxury lifestyle brand, to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Michael Kors has been witnessing rising earnings estimates on the back of strong fiscal third-quarter 2014 results and an enhanced guidance. The company’s spectacular results were driven by an impressive holiday sales season owing to strong demand for its luxury brands.

Facilitated by robust performance across all segments and geographies, the retailer’s revenues surpassed the $1 billion mark for the first time, coming in at $1.01 billion and handily beating the Zacks Consensus Estimate of $860 million. Also, it escalated nearly 59% year over year.

The company’s earnings per share came in at $1.11, cruising ahead of the Zacks Consensus Estimate of 86 cents and surging 73.4% year over year. Not only in this quarter, but Michael Kors has performed impressively in the last few quarters, as on an average, the company has delivered a positive earnings surprise of roughly 43.1% over the last 9 quarters and it also has long-term EPS growth of 25.4%.

Robust third-quarter performance prompted management to provide an upbeat fourth quarter and full-year 2014 guidance. Management expects fourth-quarter revenues to be $790–$800 million, comparable store sales to increase 15%–20% and earnings per share to be 63–65 cents. The Zacks Consensus Estimate is pegged at 65 cents that dovetails with the upper end of the company’s guidance range.

Moreover, the company is seeking to carve a niche in the high-end retail sector by broadening its footprint in strategic markets and offering merchandise that caters to the elite. 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 - Analyst Report).

The improved guidance triggered an uptrend in the Zacks Consensus Estimates, as analysts became more constructive on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that jumped 10.2% to $3.12 for 2014 and 8.9% to $3.79 per share for 2015 in the past 7 days.

Other Stocks to Consider

Other stocks in the textile-apparel sector that warrant a look include Hanesbrands Inc. (HBI - Analyst Report) with a Zacks Rank #1 (Strong Buy) and G-III Apparel Group, Ltd. (GIII - Snapshot Report) sporting a Zacks Rank #2 (Buy).

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