* Michael Kors raises profit, sales forecast
* Estee Lauder sales in Europe, China rise
* Kors shares jump 15 percent, Lauder, Saks also up
By Phil Wahba
Aug 14 Affluent shoppers shrugged off anxiety
about the global economy that cast a pall over the luxury sector
in the spring, leading Estee Lauder, Michael Kors and Saks to
issue bullish sales forecasts.
Consumers showed a willingness to pay for high-end handbags
and designer gowns and anti-aging creams despite fears earlier
this year that rocky stock markets and worries about the euro
zone financial crisis and the global economy would dampen luxury
"We have not seen any change in traffic in the full price
channel," Michael Kors Holdings Ltd Chief Executive
John Idol said on a conference call on Tuesday.
Kors raised its full-year sales and profit forecast and said
it expects same-store sales, a key retail measure, to rise 30
Kors and Saks Inc also each offered fewer markdowns
At the same time, consumers continued to travel, snapping up
Estee Lauder Cos Inc's beauty goods at its airport
stores, and flocking to department stores to buy Michael Kors
eyeglasses and watches.
More broadly, the government reported U.S retail sales
increased in July for the first time in four months as demand
rose broadly for everything from cars to electronics. That
signaled consumers could drive faster growth in the third
Kors shares rose about 15 percent to $48.66, while Estee
Lauder jumped 10 percent rose to $60.50. Saks was up 5.8 percent
Kors' better-than-expected profit was due in part to the
expansion of its boutiques within department stores at a time
when chains like Saks, Neiman Marcus Group and Nordstrom Inc
enjoy better sales gains than mid-priced competitors
like Macy's Inc and Target Corp.
Kors has benefited from a consumer appetite for "affordable
luxury" and its founder's prominent role as a judge on the
popular television reality show "Project Runway."
"Michael Kors is considered a premium brand but it has mass
appeal and mass affordability. And that's part of the secret.
They have a luxury halo but also have affordable price points,"
said Milton Pedraza, chief executive of research and consulting
firm Luxury Institute.
Kors, whose competitors include Coach Inc, ascribed
the 66 percent jump in its wholesale business to the roll-out of
boutiques within a store, just as Coach focuses more on its own
stores. Coach's shipments to U.S. department stores decreased
moderately last quarter.
Lauder saw gains in every product category and geographic
region, including high-single-digit percentage growth in sales
to North American department stores.
Outside the United States, shoppers showed more appetite for
Lauder reported strong sales in China, the world's fastest
growing luxury market, despite the company's warnings in May
that the key market was cooling off, as well as in Europe.
Similarly, Kors, which gets 90 percent of its sales in North
America but is expanding overseas, said European revenues
Saks maintained its forecast for same-store sales to rise in
the mid-single-digit range in the second half despite an
"uncertain" economy. The upscale chain's gross margin fell less
than expected in the latest quarter on reduced discounting.
Outside of department stores, other companies are also going
upscale. Gap Inc's Banana Republic on Tuesday said
American designer Narciso Rodriguez would be an adviser this
month with Banana Republic.
Rodriguez's own collections include sweaters and pants
priced at over $700 each, and $2,195 boots sold by Barneys, as
well as $100 perfumes sold by Nordstrom.
Both Kors and Lauder reported strong sales to travelers on
the heels of high-end luggage maker Tumi Holdings Inc
raised its full-year forecast last week.
Kors' CEO Idol said sales to tourists had spiked in the last
two months, while Lauder said its sales were particularly strong
in travel retail and emerging markets.
Still, others warn that shoppers remained cautious. Ralph
Lauren Corp said it still sees a tough global economy,
while Coach said its outlet shoppers are still hungry for