Last week, I wrote that I would be surprised to see Michael Kors (NYSE: KORS ) put up anything shy of a 25% year-over-year increase in international comparable-store sales. Today, Kors announced a 25% increase in North America, and a global increase of 27.3%. Thanks, Mike!
Why the long face?
Along with the increase in comparable sales, Kors also had a 54.5% increase in revenue and a 79.4% increase in earnings per share. On top of the good quarter, the company announced an increase in its outlook for the fiscal year. Kors now expects to earn revenue between $2.8 billion and $2.9 billion for the year. Last year, Kors pulled in $2.2 billion in revnue.
With all that good news, you might expect the market to have an intensely positive reaction, but it didn't. The stock was up almost 5% when the market opened, but it quickly pulled back. By midday, it had pushed back up to a 3.7% gain. In the grand scheme of things, 3.7% seems a little lackluster for all that good news.
Investors' reactions were tempered by their own existing expectations. While Kors bumped up its forecast, it failed to push that internal estimate above the market's expectations. Analysts had already forecast revenue of $2.84 billion for Kors' fiscal year. While the rest of the news helped the stock, the increase in the company's yearly expectations didn't provide any new information to the market.
A land grab in process
One thing that Kors successfully managed this quarter -- and that it has managed in every quarter -- was to steal market share from competitors. Kors' comparable sales increase far exceeded the results from Coach (NYSE: COH ) , giving Kors a bigger share of the luxury-goods market. Coach reported a 1.7% drop in its year-over-year comparable sales. Today's good news from Kors highlighted the failures at Coach.
While international sales may be the future of both companies, the results out of North America are telling. Coach is losing the ground it worked so hard to gain in the first place, while Kors and others are picking up the slack. The results out of Kors today reinforce the strength that the brand has. Right now, it's the hot thing.
The worry for any investor has to be what's around the next corner. Luxury designer Tory Burch is reportedly considering an IPO, and the influx of cash could give it the resources it needs to really challenge Kors. Even if it doesn't, Coach's plan to refocus on North America puts up a new wall for Kors. I doubt the company will have any trouble dealing with Coach this year, but any slowdown in comparable sales growth would be bad news for investors.
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