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Michael Kors is a Safe Bet
Posted by: abirk (IP Logged)
Date: June 29, 2014 06:48AM
Michael Kors (KORS) is a global lifestyle brand. The Company designs, materials and craftsmanship with a jet-set aesthetic that combines stylish elegance and a sporty attitude. The Company is an American sportswear house to a global accessories, footwear and apparel company with a presence in over 85 countries.
Also, 56 new stores were opened during the quarter to bring its total store count to 533 worldwide, which also brought it closer to its long-term expansion goals. In the fourth quarter, Michael Kors delivered a revenue gain of 53.6%, a comps gain of 26.2%, and diluted earnings-per-share improvement of 56% year over year. All three segments -- retail, wholesale, and licensing -- delivered significant net sales gains: 49.7%, 55.5%, and 79.1%, respectively.
If you break the quarter down geographically, North America revenue increased 43%, with comps popping 20.6%. This was primarily thanks to strength in accessories and watches in retail and strength in footwear and shop-in-shop locations in department stores in wholesale. In Europe, revenue skyrocketed 125%, with comps shooting 62.7% higher. This was primarily due to increased brand awareness.
One of the major contributors to Michael Kors' impressive bottom line was its strong revenue, but the company also saw modest cost reductions year over year. As an example, the business saw its cost of goods sold fall from 40.3% of sales to 40.1%, while its operating expenses declined from 33.6% of sales to 33.1%. These improvements, however, were partially offset by the company's share count, which rose almost 2% over the past year.
Michael Kors' revenues are projected to grow at a greater pace in 2014 as US consumers continue to the boost sales of the top luxury companies. The CEOs of these luxury brands expect the market to be grow by an average of 9% in 2014 and reach $260 billion in the coming years.
Besides the North American market, the company will receive a boost from the Western and Eastern European markets as they are also projected to grow in 2014 at a healthy rate. But to keep the revenue growth healthy, Michael Kors needs to continuously upgrade its product portfolio by considering consumers' tastes and preferences, otherwise it will be facing Coach's current challenges.
Michael Kors plans to increase its global presence in non-established international markets. Kors opened seven stores in the Asia-Pacific region, bringing the total count to 94 stores. The company announced the opening of its new flagship store in China, which is intended to be the premier destination for the Michael Kors brand in China. Management expects around 200 retail locations in the Asia-Pacific region. Kors also opened two stores in Brazil, expanding its presence in Latin America. The company currently has seven locations in Latin America and expects it can support 40 retail locations over the next several years.
Michael Kors, the world-renowned designer and retailer of handbags, apparel, and accessories, has watched its stock outperform the overall market in 2014 and earnings have played a key role in its rise. The recovering US economy and booming stock market brought luxury spending back in 2013. This healthy spending on luxury items brought prosperity for Michael Kors as the company's top line activities grew 39% year-over-year during its second quarter of FY14 that ended September 28, 2013.
Michael Kors has managed to pick up its pace in the luxury retail industry once again, leaving me bullish about its long-term future. The company's jet-set image is crucial to its success, and it has been successfully employing social media to promote this air of luxury with photos of celebrities wearing its outfits. Michael Kors now has some 13 million followers on Facebook (FB).
Stocks Discussed: KORS, FB,