We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Michael Kors (KORS) Beats on Q2 Earnings, Outlook Bleak
Read MoreHide Full Article
Michael Kors Holdings Ltd. continued with its positive earnings surprise streak for the sixth consecutive quarter, when it posted second-quarter fiscal 2017 results. Total revenue also surpassed the estimate for the fifth quarter in row. However, despite witnessing better-than-expected results, investors’ sentiments were hurt by the year-over-year decline in both the top and the bottom line, along with bleak outlook. As a result, stock lost over 4% during after-market trading on Nov 10.
The luxury lifestyle retailer delivered quarterly earnings of 95 cents a share that outperformed the Zacks Consensus Estimate of 88 cents but fell about 6% from the year-ago period. Total revenue of $1088.2 million came ahead of the Zacks Consensus Estimate of $1,082 million but declined 3.7% from the prior-year quarter. On a constant currency basis, total revenue decreased by an equivalent rate.
Further, we observed that Michael Kors’ second-quarter revenue and earnings results came above management’s earlier projection. The company had anticipated revenue in the range of $1.07–$1.085 billion and earnings between 84 cents and 88 cents a share.
During the quarter under review, the company introduced the Michael Kors ACCESS line of smartwatches and fitness trackers, the new Wonderlust fragrance and new fall handbag collections, and expanded men’s offerings. Moreover, it enhanced its online penetration with the launch of digital flagships in most of the European countries. However, management pointed out that results were persistently hurt by sluggish mall traffic and fall in tourism along with reduced sell-in of inventory to the U.S. wholesale channel.
Although gross profit fell 3% to $644.7 million, gross margin expanded 40 basis points to 59.2% due to the favorable impact of foreign currency translation and transaction. Operating income declined 25.4% to $203.7 million and operating margin contracted 550 basis points to 18.7%.
Segment Performance
Retail net sales came in at $597.2 million, up 12.1% year over year. The upside was mainly driven by 198 net new stores openings since the end of second-quarter fiscal 2016, which includes 137 outlets related to the company's buyout in Greater China and South Korea. Comparable sales declined 5.4%. On a constant currency basis, retail net sales increased 12.1%, while comparable sales fell 5.6%.
Wholesale net sales plunged 18.4% to $452.2 million, while on a constant currency basis, it plummeted 18.5%. Licensing revenue tumbled 10.2% to $38.8 million.
Regional Performance
Total revenue in the Americas declined 11.1% to $745.1 million on a reported basis and by the same rate on a constant-currency basis. European revenues increased 1.9% to $248 million on a reported basis and 3.5% on a constant currency basis. Revenues in Asia soared 96.5% to $95.1 million on a reported basis and 87.5% on a constant currency basis.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $186.4 million, short-term debt of $384.4 million and shareholders’ equity of $1,680.5 million, excluding non-controlling interest of $2.8 million.
As of Oct 1, 2016, the company operated 787 retail outlets (392 in the Americas, 188 in Europe and 207 in Asia), including concessions. The company had 118 additional retail outlets, including concessions, operated through licensing partners. Thus, the total number of Michael Kors stores globally stood at 905 at the end of the quarter under review.
During the second quarter, Michael Kors bought back 5,019,083 shares for approximately $250 million. As of Oct 1, 2016, the company still had $350 million remaining under its share buyback program.
Guidance
Michael Kors envisions fiscal 2017 total revenue to be approximately $4.55 billion and comparable sales to decrease in the mid-single-digit range. Operating margin is projected to be about 20.7% on a non-GAAP basis. Management anticipates non-GAAP earnings in the band of $4.37–$4.43 per share for the fiscal year.
Earlier, management had projected fiscal 2017 revenue to be about $4.71 billion and earnings in the range of $4.56–$4.64 per share on a non-GAAP basis.
For the third quarter, Michael Kors forecast total revenue between $1.365 billion and $1.380 billion and expects comparable sales to decline in the mid-single-digit range. Operating margin is anticipated to be approximately 25%. Management projects earnings in the range of $1.61 to $1.65 per share for the third quarter.
The Zacks Consensus Estimate for the third quarter and fiscal 2017 is currently pegged at $1.77 and $4.56, respectively, which may witness a downward revision in the coming days.
Dick's Sporting Goods delivered an average positive earnings surprise of 4.7% in the trailing four quarters and has a long-term earnings growth rate of 12.3%.
Hibbett Sports delivered an average positive earnings surprise of 3.9% in the trailing four quarters and has a long-term earnings growth rate of 11.1%.
ULTA Salon, Cosmetics & Fragrance delivered an average positive earnings surprise of 7.7% in the trailing four quarters and has a long-term earnings growth rate of 19.5%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Michael Kors (KORS) Beats on Q2 Earnings, Outlook Bleak
Michael Kors Holdings Ltd. continued with its positive earnings surprise streak for the sixth consecutive quarter, when it posted second-quarter fiscal 2017 results. Total revenue also surpassed the estimate for the fifth quarter in row. However, despite witnessing better-than-expected results, investors’ sentiments were hurt by the year-over-year decline in both the top and the bottom line, along with bleak outlook. As a result, stock lost over 4% during after-market trading on Nov 10.
The luxury lifestyle retailer delivered quarterly earnings of 95 cents a share that outperformed the Zacks Consensus Estimate of 88 cents but fell about 6% from the year-ago period. Total revenue of $1088.2 million came ahead of the Zacks Consensus Estimate of $1,082 million but declined 3.7% from the prior-year quarter. On a constant currency basis, total revenue decreased by an equivalent rate.
Further, we observed that Michael Kors’ second-quarter revenue and earnings results came above management’s earlier projection. The company had anticipated revenue in the range of $1.07–$1.085 billion and earnings between 84 cents and 88 cents a share.
During the quarter under review, the company introduced the Michael Kors ACCESS line of smartwatches and fitness trackers, the new Wonderlust fragrance and new fall handbag collections, and expanded men’s offerings. Moreover, it enhanced its online penetration with the launch of digital flagships in most of the European countries. However, management pointed out that results were persistently hurt by sluggish mall traffic and fall in tourism along with reduced sell-in of inventory to the U.S. wholesale channel.
Although gross profit fell 3% to $644.7 million, gross margin expanded 40 basis points to 59.2% due to the favorable impact of foreign currency translation and transaction. Operating income declined 25.4% to $203.7 million and operating margin contracted 550 basis points to 18.7%.
Segment Performance
Retail net sales came in at $597.2 million, up 12.1% year over year. The upside was mainly driven by 198 net new stores openings since the end of second-quarter fiscal 2016, which includes 137 outlets related to the company's buyout in Greater China and South Korea. Comparable sales declined 5.4%. On a constant currency basis, retail net sales increased 12.1%, while comparable sales fell 5.6%.
Wholesale net sales plunged 18.4% to $452.2 million, while on a constant currency basis, it plummeted 18.5%. Licensing revenue tumbled 10.2% to $38.8 million.
Regional Performance
Total revenue in the Americas declined 11.1% to $745.1 million on a reported basis and by the same rate on a constant-currency basis. European revenues increased 1.9% to $248 million on a reported basis and 3.5% on a constant currency basis. Revenues in Asia soared 96.5% to $95.1 million on a reported basis and 87.5% on a constant currency basis.
Other Details
Michael Kors ended the quarter with cash and cash equivalents of $186.4 million, short-term debt of $384.4 million and shareholders’ equity of $1,680.5 million, excluding non-controlling interest of $2.8 million.
As of Oct 1, 2016, the company operated 787 retail outlets (392 in the Americas, 188 in Europe and 207 in Asia), including concessions. The company had 118 additional retail outlets, including concessions, operated through licensing partners. Thus, the total number of Michael Kors stores globally stood at 905 at the end of the quarter under review.
During the second quarter, Michael Kors bought back 5,019,083 shares for approximately $250 million. As of Oct 1, 2016, the company still had $350 million remaining under its share buyback program.
Guidance
Michael Kors envisions fiscal 2017 total revenue to be approximately $4.55 billion and comparable sales to decrease in the mid-single-digit range. Operating margin is projected to be about 20.7% on a non-GAAP basis. Management anticipates non-GAAP earnings in the band of $4.37–$4.43 per share for the fiscal year.
Earlier, management had projected fiscal 2017 revenue to be about $4.71 billion and earnings in the range of $4.56–$4.64 per share on a non-GAAP basis.
For the third quarter, Michael Kors forecast total revenue between $1.365 billion and $1.380 billion and expects comparable sales to decline in the mid-single-digit range. Operating margin is anticipated to be approximately 25%. Management projects earnings in the range of $1.61 to $1.65 per share for the third quarter.
The Zacks Consensus Estimate for the third quarter and fiscal 2017 is currently pegged at $1.77 and $4.56, respectively, which may witness a downward revision in the coming days.
MICHAEL KORS Price and EPS Surprise
MICHAEL KORS Price and EPS Surprise | MICHAEL KORS Quote
Zacks Rank and Key Picks
Michael Kors currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector include Dick's Sporting Goods Inc. (DKS - Free Report) , Hibbett Sports, Inc. (HIBB - Free Report) and ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dick's Sporting Goods delivered an average positive earnings surprise of 4.7% in the trailing four quarters and has a long-term earnings growth rate of 12.3%.
Hibbett Sports delivered an average positive earnings surprise of 3.9% in the trailing four quarters and has a long-term earnings growth rate of 11.1%.
ULTA Salon, Cosmetics & Fragrance delivered an average positive earnings surprise of 7.7% in the trailing four quarters and has a long-term earnings growth rate of 19.5%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>