Michael Kors posted double-digit percent gains for profits and revenues in the fiscal fourth quarter. These numbers can be partially attributed to their new retail locations. Nevertheless, shares were in the red on Wed., May 28, even though the fourth-quarter earnings and revenue exceeded Wall Street’s expectations.
In comparison to the expected $816 million, Michael Kors’ revenue reached an impressive 53.6% to $917.5 million. The net sales increased 49.7% to $408.4 million, with other store sales up 26.2% in this quarter as well. As a percentage of total revenue, heir gross profit went from 59.7% in the fourth quarter of fiscal 2013, to 59.9%.
The Kors stock had over four percent following the publication of their earnings. However, this plummeted to down .8% to $94.93 in early Wed., May 28, trading. Most of Kors’ speedy growth is due to their expansive success in Europe and Japan. Nevertheless, this has concerned many about investing in the brand as this establishes some doubt in the company’s margins moving forward.
When the 2013 fourth quarter ended, Michael Kors had 405 operating retail stores. At the end of the fiscal fourth quarter this year, 2014, there are 555 stores worldwide.
John D. Idol, Michael Kors’ chairman and CEO stated that, “We believe that our expanding global brand awareness is driving continued strong demand for our luxury product and fueling our growth as a global luxury lifestyle brand.”
Despite Michael Kors’ high growth, their biggest obstacle for the KORS stock is valuation. The company trades at 33 times trailing earnings, 21 times forward earnings, and almost 7 times their sales.
During their conference call on Wed., the company expressed that it expected their first quarter gross margin for 2015 to be a little bit lower than it had been last year.
The high-end brand plans to open half of their 110 stores in Europe during the fiscal 2015 year.
Security analyst Paul Lejuez, wrote that,
“KORS posted a strong [quarter], with sales growth well above our estimates (primarily driven by the wholesale channel). With guidance for comps +20 percent in Q1, it seems that momentum has continued. Although it is tough to critique a [quarter] with a 26 percent comp and 64 percent EPS growth, one thing to note is that [gross margin] was up only 20bps compared to increases of 100bps or more in prior [quarters]. This could be a sign that markdown levels are finally beginning to normalize.”
As a relatively new brand, Michael Kors offers products at a somewhat affordable price. This has certainly contributed to the brand’s success and growth. Joseph Parsons, CFO, expressed that expanding in stores in Europe will put pressure on retail operating margins. European revenue grew by 125% during the fourth quarter, as its same-store sales rose up by 62.7%. Kors remains an American brand with over 80% of revenues coming from North America, but this may change in the near future.
Photo: About.com
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