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Michael Kors (KORS) Stock Up on Q3 Earnings Beat, Upbeat View
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Michael Kors Holdings Ltd. maintained its positive earnings surprise streak for the 11th consecutive quarter, with third-quarter fiscal 2018 results. Revenues were ahead of the estimate for the fourth straight quarter. The results were driven by robust performance by the Michael Kors and Jimmy Choo brands.
Following the better-than-expected results, the company raised the fiscal 2018 guidance. Buoyed by this, the stock rallied more than 8% during pre-market trading session. In fact, its shares have gained 21.3% in the past three months, outperforming the industry’s 15.6%.
The luxury lifestyle retailer delivered quarterly earnings of $1.77 a share that surpassed the Zacks Consensus Estimate of $1.29 and rose 7.9% from the year-ago quarter. Total revenues of $1,440.1 million outpaced the Zacks Consensus Estimate of $1,375 million and improved 6.5% year over year. On a constant currency basis, total revenues were up 4.6%.
Adjusted gross profit jumped 9.9% to $885.6 million. Meanwhile, adjusted gross margin came in at 61.5%, up 190 basis points (bps) year over year. Foreign currency translation drove gross margin by nearly 10 bps. Adjusted operating income inched up 1% to $345.7 million and operating margin expanded 130 bps to 24%.
Segment Performance
Retail net sales came in at $846.3 million, up 1.1% year over year. The upside was mainly driven by 32 stores openings since the end of third-quarter fiscal 2017. It was also aided by better-than-expected performance in Europe and Americas. However, comparable sales declined 3.2%. On a constant-currency basis, retail net sales dropped 1% and comparable sales fell 5.2%.
Wholesale net sales were down 8.9% to $430.8 million, while on a constant currency basis, it declined 10.5%. Licensing revenues jumped 12.3% to $48.3 million.
Regional Performance
Total revenues in the Americas declined 5.9% to $925.5 million. European revenues jumped 11.3% to $168 million and revenues from Asia rose 17.3% to $131.7 million.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $317.1 million and shareholders’ equity of $2,076.9 million, excluding non-controlling interest of $3.4 million.
As of Dec 30, 2017, the company operated 848 retail outlets (395 in the Americas, 202 in Europe and 251 in Asia), including concessions. The company had 150 additional retail outlets, including concessions, operated through licensing partners. Thus, the total number of global Michael Kors stores was 998 at the end of the quarter under review. Jimmy Choo had 179 retail stores, including concessions, at the end of the third quarter. Further, Jimmy Choo operated 55 additional retail outlets, including concessions, through licensing partners.
Michael Kors Holdings Limited Price, Consensus and EPS Surprise
Management raised its fiscal 2018 revenue guidance to $4.66 billion from the previous $4.59 billion. Meanwhile, it continues to expect comparable sales decline in the mid-single digit range. The company’s total revenues expectation includes $225-$$230 million of incremental Jimmy Choo revenues. Operating margin projection is maintained at 18%. Management anticipates earnings per share in the band of $4.40-$4.45, up from the earlier guided range of $3.62-$3.72.
For the fiscal fourth quarter, Michael Kors forecasts total revenues between $1.11 billion and $1.13 billion and comparable sales decline in low single digits. The company’s fourth-quarter revenue projection takes into account $110-$115 million of incremental Jimmy Choo revenues. Operating margin is anticipated at 10%. Management projects earnings in the band of 50-55 cents per share for the quarter.
The Zacks Consensus Estimate for fourth-quarter and fiscal 2018 earnings is pegged at 59 cents and $3.99, respectively.
G-III Apparel Group has delivered a positive earnings surprise in the last three quarters. The company projects long-term earnings per share growth of 15%.
Delta Apparel forecasts long-term earnings growth of 15%.
Lululemon Athletica delivered an average positive earnings surprise of 8.1% in the preceding four quarters. The company estimates long-term earnings growth of 12.9%.
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Michael Kors (KORS) Stock Up on Q3 Earnings Beat, Upbeat View
Michael Kors Holdings Ltd. maintained its positive earnings surprise streak for the 11th consecutive quarter, with third-quarter fiscal 2018 results. Revenues were ahead of the estimate for the fourth straight quarter. The results were driven by robust performance by the Michael Kors and Jimmy Choo brands.
Following the better-than-expected results, the company raised the fiscal 2018 guidance. Buoyed by this, the stock rallied more than 8% during pre-market trading session. In fact, its shares have gained 21.3% in the past three months, outperforming the industry’s 15.6%.
The luxury lifestyle retailer delivered quarterly earnings of $1.77 a share that surpassed the Zacks Consensus Estimate of $1.29 and rose 7.9% from the year-ago quarter. Total revenues of $1,440.1 million outpaced the Zacks Consensus Estimate of $1,375 million and improved 6.5% year over year. On a constant currency basis, total revenues were up 4.6%.
Adjusted gross profit jumped 9.9% to $885.6 million. Meanwhile, adjusted gross margin came in at 61.5%, up 190 basis points (bps) year over year. Foreign currency translation drove gross margin by nearly 10 bps. Adjusted operating income inched up 1% to $345.7 million and operating margin expanded 130 bps to 24%.
Segment Performance
Retail net sales came in at $846.3 million, up 1.1% year over year. The upside was mainly driven by 32 stores openings since the end of third-quarter fiscal 2017. It was also aided by better-than-expected performance in Europe and Americas. However, comparable sales declined 3.2%. On a constant-currency basis, retail net sales dropped 1% and comparable sales fell 5.2%.
Wholesale net sales were down 8.9% to $430.8 million, while on a constant currency basis, it declined 10.5%. Licensing revenues jumped 12.3% to $48.3 million.
Regional Performance
Total revenues in the Americas declined 5.9% to $925.5 million. European revenues jumped 11.3% to $168 million and revenues from Asia rose 17.3% to $131.7 million.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $317.1 million and shareholders’ equity of $2,076.9 million, excluding non-controlling interest of $3.4 million.
As of Dec 30, 2017, the company operated 848 retail outlets (395 in the Americas, 202 in Europe and 251 in Asia), including concessions. The company had 150 additional retail outlets, including concessions, operated through licensing partners. Thus, the total number of global Michael Kors stores was 998 at the end of the quarter under review. Jimmy Choo had 179 retail stores, including concessions, at the end of the third quarter. Further, Jimmy Choo operated 55 additional retail outlets, including concessions, through licensing partners.
Michael Kors Holdings Limited Price, Consensus and EPS Surprise
Michael Kors Holdings Limited Price, Consensus and EPS Surprise | Michael Kors Holdings Limited Quote
Guidance
Management raised its fiscal 2018 revenue guidance to $4.66 billion from the previous $4.59 billion. Meanwhile, it continues to expect comparable sales decline in the mid-single digit range. The company’s total revenues expectation includes $225-$$230 million of incremental Jimmy Choo revenues. Operating margin projection is maintained at 18%. Management anticipates earnings per share in the band of $4.40-$4.45, up from the earlier guided range of $3.62-$3.72.
For the fiscal fourth quarter, Michael Kors forecasts total revenues between $1.11 billion and $1.13 billion and comparable sales decline in low single digits. The company’s fourth-quarter revenue projection takes into account $110-$115 million of incremental Jimmy Choo revenues. Operating margin is anticipated at 10%. Management projects earnings in the band of 50-55 cents per share for the quarter.
The Zacks Consensus Estimate for fourth-quarter and fiscal 2018 earnings is pegged at 59 cents and $3.99, respectively.
Michael Kors carries a Zacks Rank #2 (Buy).
Other Key Picks
Other top-ranked stocks which warrant a look in the retail sector include G-III Apparel Group (GIII - Free Report) , Delta Apparel (DLA - Free Report) and Lululemon Athletica (LULU - Free Report) . All three of them carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
G-III Apparel Group has delivered a positive earnings surprise in the last three quarters. The company projects long-term earnings per share growth of 15%.
Delta Apparel forecasts long-term earnings growth of 15%.
Lululemon Athletica delivered an average positive earnings surprise of 8.1% in the preceding four quarters. The company estimates long-term earnings growth of 12.9%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>