The luxury goods market has been gaining momentum as the economy revives, and the lifestyle of an individual is constantly changing. This market caters to both males and females but is primarily governed by the female customers. The growth in this industry is mainly due to the rise in the disposable income and growth of nonessential spending. Brand preferences of a customer leverages a positive impact on the growth of this segment benefiting major players like Michael Kors (KORS, Financial). Michael Kors is one of the leading players that has been constantly expanding its customer base, and is further anticipated to flourish due to increasing demand from emerging markets and strong performances of the international luxury brands. The company has global footprints with over 649 retail stores across the globe.
Quarter overview
The company recently reported its second-quarter earnings which were firing on all cylinders. The revenue increased by 42.7% year over year, to record $1.05 billion as compared to $740.3 million in the same term last year. Increased number of company-operated stores with growing international demand influenced the growth in the top line. The company-operated stores increased by around 32% year over year to record 473 retail stores as compared to 352 company-operated retail stores in the same period last year.
Not just the top line, but the bottom line of the company also recorded growth of around 42% year over year, to record $207 million as against $146 million in the same quarter last year.
Tailwinds
The global jewelry and watches market is anticipated to be a $437 billion industry by 2017 with a CAGR of 10.2% from 2012 to 2017. The CAGR was 6.2% in between the tenure of 2008 to 2012, this goes on to signify that this market is on an upward trends. The company is focused to acquire a higher share of this growing market, this is exemplified as it expanded its horizon by opening 35 new watches and jewelries shops in various locations distributed globally.
The Internet has redefined ways of doing business. Jewelry and watch markets have to be gaining momentum through the ecommerce route of business. Kors has witnessed an exponential growth in sales from this channel ever since it launched its online ecommerce store for U.S. customers. Looking at the success of the ecommerce business, it now plans to launch ecommerce for Canada in 2015 with Europe and Japan to follow later in 2016.
Outlook
Looking at the market size and the company's ever-expanding retail stores, the management is quite optimistic for revenue growth. For the third quarter of the fiscal 2015, revenue is expected to be in the range of $1.27 billion to $1.30 billion, in line with the analyst estimate of $1.30 million. The revenue for the fiscal 2105 is expected to be in the range of $4.3 billion to $4.4 billion. EPS is anticipated to be in the range of $1.31 to $1.34 for the third quarter and for the complete fiscal 2015, EPS is anticipated to be in the range of $4.13 to $4.18.
Consensus of analyst expects the company to grow 16% next year. Furthermore, it is anticipated to grow 22.6% every year for next five years as compared to the industry growth of 15.05% every year for next five years.
Conclusion
As an investor, I will always prefer to bag this company in my portfolio as it has been maintaining the growth momentum much in line with the market analysts. The company maintains a favorable forward P/E ratio of 15.38 and with this value good returns in future can be expected. Currently the stocks of this comp[any is traded around $73 which is close to the lower range of the 52 weeks high-low price($68 - $101) and this can be the right time to buy this stock. The company is now more focused on the watch and jewelries segment and rising demands from the Asian countries like China and India can always benefit Kors. I suggest a buy for this company if you are looking for a long term sustained return with growth.
