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Michael Kors beats estimates as Americas sales rebound, shares jump
November 6, 2017 / 12:57 PM / a month ago

Michael Kors beats estimates as Americas sales rebound, shares jump

REUTERS - Handbag maker Michael Kors Holdings Ltd beat second-quarter profit and revenue estimates as its turnaround efforts helped reverse a decline in Americas sales for the first time in a year, sending its shares up 12 percent in early trading.

A Michael Kors Holdings Limited retail store is shown in La Jolla, California, U.S., May 17, 2017. REUTERS/Mike Blake/Files

The company also lifted its full-year revenue forecast on Monday to reflect additional sales from its $1.2 billion acquisition of upscale shoemaker Jimmy Choo.

The company, however, now expects Jimmy Choo to contribute up to $225 million to sales for the rest of the year, down from its earlier estimate of about $275 million.

Once the hottest name in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online. Over-distribution and a reliance on promotions to boost sales also eroded its brand value and appeal.

To reverse a more-than two-year slump in same-store sales, Kors is pursuing a multi-brand strategy for growth. In July, the maker of the popular Mercer and Hamilton handbags announced the deal to buy Jimmy Choo.

The company has also pulled back heavily-discounted inventory from department stores and off-price channels, refreshed its line of bags and shut underperforming stores.

The efforts helped the company post a smaller-than-expected 1.8 percent drop in same-store sales in the second quarter, compared with a 4.6 percent decline expected by analysts polled by research firm Consensus Metrix.

Products are displayed in the window of the Jimmy Choo store in New York City, U.S., April 24, 2017. REUTERS/Brendan McDermid/Files

Sales also got a fillip as the company boosted new products and high-end accessories by 40 percent for the fall season and sold more bags at full-price, helping it overturn a one-year slide in total revenue for the first time.

“This is the first time in over a year that sales in the Americas, for example, have grown - proof the company is clawing back some of the ground it has lost,” Neil Saunders, managing director of research firm GlobalData Retail said.

Total revenue rose 5.4 percent to $1.15 billion in the quarter, beating the $1.05 billion expected by analysts, according to Thomson Reuters I/B/E/S.

Kors lifted its fiscal 2018 revenue forecast to $4.59 billion from $4.28 billion.

For the key holiday quarter, the company expects Jimmy Choo sales to sum up to $105 million to $110 million.

Excluding one-time items, Kors earned $1.33 per share, beating the analysts’ average estimate of 83 cents per share, mainly due to a much lower tax rate.

The company’s shares were up 11.5 percent at $53.09 in early trading.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila

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