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Factors to Know Ahead of Michael Kors (KORS) Q1 Earnings

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Michael Kors Holdings Limited (KORS - Free Report) is scheduled to report first-quarter fiscal 2019 results on Aug 8, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 5%.

Let’s see how things are shaping up prior to this announcement.

Which Way Are Top & Bottom-Line Estimates Headed?

The Zacks Consensus Estimate for the quarter under review stands at 94 cents, reflecting year-over-year growth of 17.5%. The consensus estimate lies near the high end of company’s guided range of 90-95 cents. We note that the Zacks Consensus Estimate has remained unchanged in the last 30 days.

Michael Kors has a remarkable history, at least in terms of the bottom line. The company’s fourth-quarter fiscal 2018 results marked the 12th consecutive quarter of earnings beat. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 32.9%.

Michael Kors Holdings Limited Price and EPS Surprise

Well, the obvious question that comes to mind is whether Michael Kors will be able to sustain its positive earnings surprise streak in the first quarter of fiscal 2019. Though the past trend indicates a positive surprise, it will not be wise to jump to a conclusion without analyzing the factors at play.

Factors at Play

Michael Kors has recently made efforts to renovate its product lines, shut underperforming stores and offer fewer discounts online. The company remains committed toward deploying resources to expand product offerings, build “shop-in-shops”, and upgrade its information system and distribution infrastructure that should drive sales in the to-be-reported quarter. Its “Runway 2020” plan focuses on product innovation, brand engagement, fleet modernization, digital innovation and customer experience.

Additionally, accretive buyouts, such as that of Jimmy Choo, will drive international growth and create a strong base in the luxury footwear segment, along with diversifying its product portfolio. Moreover, Michael Kors is also expanding its product mix beyond handbags, into men’s footwear and women’s ready to wear.

Such efforts to diversify and innovate product offerings along with strategic acquisitions are likely to drive Michael Kors’ top line.  The Zacks Consensus Estimate for sales is pegged at $1.14 billion, reflecting a year over year growth of 19.7%.

Nevertheless, lackluster sales in the wholesale and licensing segments remain concerns for the company. Michael Kors has been strategically slowing down its promotional activity, which has resulted in lower shipments within the wholesale channel. Also, consumers shift to a more elevated jewelry line and fashion watch trends is likely to impact licensing sales.

What the Zacks Model Unveils

Our proven model shows that Michael Kors is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold).   You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Michael Kors has an Earnings ESP of +0.64% and carries a Zacks Rank #3. This makes us reasonably confident of an earnings beat.

Other Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Urban Outfitters (URBN - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Foot Locker, Inc. (FL - Free Report) has an Earnings ESP of +6.51% and a Zacks Rank #2.

Nike (NKE - Free Report) has an Earnings ESP of +9.84% and a Zacks Rank #3.

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