Michael Kors (KORS, Financial), a luxury lifestyle brand, recently released decent results for the second quarter. The company showed an impressive improvement in revenue and earnings. However, the company also fell short of analysts’ estimates. But, management is expecting better customer traffic in the stores in the upcoming holiday season. Also, the upbeat guidance by the company is a sign of better things to come. Management is also undertaking efforts to enhance its performance in the coming quarter. Let us have a look at Michael Kors’ performance and prospects.
A look at the performance
Kors’ total revenue increased by an impressive 42.7% last quarter, beating the Street’s estimates of $978 million. Further, net income came in at $207 million, which was better than the $145.8 million as compared to what it posted in the same quarter last year. It posted EPS of $1.00 per share, also beating analysts’ estimates of $0.88 per share.
So, Kors delivered good results in the recently reported quarter. The company is confident of performing better in the coming quarters. It is focusing on several initiatives to address its growth strategy. Kors is focused on improving its global retail presence. It is expanding its reach by opening new stores in key locations. Further, it is focusing upon increasing its comparable store sales at retail stores.
For this, it is including new fashion products. Moreover, Kors is also focusing on enhancing the overall customer experience in its stores, expecting this move to drive more customers. It is also lined up to convert the department stores to shop-in-shops. Michael Kors is planning to launch its e-commerce platform that will further help it to grow its business.
New offerings will be catalysts
The company is focusing on adding new offerings to its stores that can drive its market share in the future. It is looking to expand its market share across categories such as women’s ready to wear, women’s footwear, jewelry and men’s wear. This will further attract more customers to its stores in the coming quarters.
Kors, on the other hand, is strategically expanding its select stores with a view to penetrate more markets, specifically women’s foot wear, watches, and jewelry. Its watch business is also contributing meaningfully to its top line. The company has opened many watch and jewellery stores in order to enhance its offerings.
The fragrance business is also doing well. The company has launched women’s fragrance. Kors is seeing positive response by customers toward these new products. Michael Kors is thinking that these will lift this segment up with continued traction in the market. In addition, Kors is also pleased with the growth of its e-commerce channel. With the new website, Kors expects to provide best-in-class services to customers.
Conclusion
Kors looks cheap with a trailing P/E of 19.88 and a forward P/E of 15.61, which shows earnings growth potential. Its earnings are showing signs of improvement at a CAGR of 22.53% for the next five years, which is also more that the industry average of 16.32%. In addition, the company is already working on enhancing its e-commerce channel, while its new additions in fragrance, watch and women’s category are gaining steam. So, considering every aspect, Kors looks like a stock to consider for long-term investment.
