Michael Kors Posts Steep Drop in Profit, But Beats the Street

Stronger same store sales for Europe and North America helped to fuel revenue and profit at Michael Kors that beat Wall Street expectations for its fiscal first quarter.

On Tuesday, Michael Kors announced that its attributable net income was down 15% to just over $125.5 million, equal to 80 cents a share, compared to last year during the same period of $147 million equal to 83 cents per share.

The figure from last year included one-off costs that were related to its acquisition of a licensee in Greater China. Excluding that particular charge, Kors posted earnings per share of 90 cents.

While profits were down, the results on Tuesday outpaced the expectations by the company as well as Wall Street. Analysts were expecting Kors to have earnings per share of 62 cents, which was the company’s midpoint for their own forecasted range.

Total revenue during the first quarter ended at just over $952.4 million, which topped estimates by analysts for $918.6 million for sales. However, they dropped compared to last year during the same period was 3.6%.

The fall in revenue did not come as a surprise, added analysts but a necessary evil as the company rids itself of retailers that did not any longer fit the fresh strategy of the brand.

Kors sales at same stores fell by 5.9%, during the three-month period, but were better than had been expected. Analysts were expecting a drop of more than 9%.

Kors shares were up over 14% during premarket trading following the news of the company’s financial results.

Investors seem to by rallying behind the company, as it has shown early signs that the turnaround efforts its implemented are paying off at a quicker rate than expected. Kors increased its outlook for sales for the complete year.

Earlier in the summer, Kors revealed its plans to purchase Jimmy Cho the shoemaker based in London for $1.2 billion.

Kors also said at the time that Jimmy Choo would not be the last acquisition the company makes.

The company has said many times that Kors was focused on forming what it called a luxury group. It said on Tuesday that having a portfolio that is more diverse would bode well as the retailer looked to heighten its exposure across international markets.

At the same time, Kors has seen sales at same stores drop recently, with less shoppers visiting brick and mortar locations. The handbag business at the company slowed as well thanks to competitors rolling out huge discounts that have enticed shoppers to look for bargains.