Michael Kors Beats Big, Again

In what seems like a common occurrence nowadays for Michael Kors Holdings, the company announced spectacular earnings results, which indicates it is one of the top investments in the retail space.

Feb 8, 2014 at 7:00AM

In the company's latest earnings release, Michael Kors Holdings (NYSE:KORS) showed why it's one of the best companies operating in all of retail at the moment. On almost every comparative basis worth mentioning, Michael Kors excelled.

The company's success is directly tied to the immense power of the MK brand. Similar to high-growth athletic retailer Under Armour (NYSE:UA), Michael Kors remains one of the few retailers powerful enough to buck major consumer trends.

Blowout earnings, as usual
Most of Michael Kors' reported numbers are simply staggering. The company grew revenue to $1.01 billion in the third quarter, up 59% from $636.8 million in 2013's comparable quarter. Even more impressive is the company's growth in diluted earnings per share for the quarter, which increased 73.4% to $1.11 from 2013's $0.64. 

As expected, these results from Michael Kors blew past analysts' estimates. The consensus revenue estimate called for $859.5 million and the consensus EPS estimate called for $0.86. Michael Kors' reported revenue of $1.01 billion and EPS of $1.11 represented a significant beat on both the top and bottom lines. 

Not surprisingly, shares of Michael Kors soared approximately 20% in pre-market trading past the $90 level, which would represent an all-time-high share price at the open.

What's driving the growth?
Similar to athletic apparel, footwear, and accessories maker Under Armour, incredible brand strength is driving most of the growth for Michael Kors. An effective management team is simply steering the ship well and allowing the brand to flourish among consumers around the world.

In a very recent article, I mentioned that these two companies are my top picks in the retail space. My reasoning was simple and it's as true now as it ever was: both brands are extremely popular at the moment. My perceptive friend Anna recently made me aware of the popularity of the Michael Kors brand among young women, and ever since I've been seeing the signature MK logo everywhere I look. From my own experience, I have also been familiar with Under Armour's immense popularity in athletic atmospheres for some time. I have recently begun to spot its emerging popularity among casual folks as well.

As a result of such brand popularity and pervasiveness, both Michael Kors and Under Armour have loyal consumer bases and the ability to demand a premium for product/services. Accordingly, the two companies can remain more resilient in times of weak consumer spending.

Proof of this for Michael Kors is not just in the terrific growth numbers the company recently reported, but also in the increasingly robust margins the brand is experiencing. The company's gross profit margin as a percentage of total revenue increased to 61.2% in the quarter, which compares favorably to 2013's same quarter gross profit margin of 60.2%.  This indicates that the Michael Kors brand is selling very well at premium price points and without the need to discount significantly.

Chairman and Chief Executive Officer John D. Idol explained, "Michael Kors enjoyed an outstanding holiday season, as global brand awareness continued to drive strong demand for our luxury product. Comparable stores sales increased 28% which exceeded our expectation and represents our 31st consecutive quarter of growth." 

Beyond brand strength, however, is management's drive to continue expanding the reach of the Michael Kors brand. The continual expansion of company-owned stores and retail locations operated by licensed partners should continue to drive even further growth for the foreseeable future. As of Dec. 28, 2013, the company operated 395 retail stores; this was up approximately 33% from 297 in the same time last year. 

Proof in the numbers


Michael Kors

Under Armour

Revenue Growth 2014



EPS Growth 2014



*Michael Kors fiscal 2015 shown above, which begins in March 2014

Both Michael Kors and Under Armour are projected to grow above 20% with regard to revenue and earnings per share over the following year. The former appears to have the edge in sales growth and the latter in earnings growth. However, both companies are set to grow at robust levels going forward.

Best of the best
When trying to find the best companies in the often-challenging retail space, it is usually best to not over-think things. The highest quality companies are often the ones that resonate well with consumers.

Perhaps no two brands resonate as well with their respective consumer bases than those of Michael Kors and Under Armour. Wall Street is beginning to recognize this fact, as both companies have surged higher after blow-out earnings in their most recently-reported quarters.

Considering both companies recently raised guidance for 2014, Michael Kors and Under Armour remain viable long-term growth stories and the two best investments in the retail space at the moment.

Michael Kors and Under Armour are two great growth stocks, but are they among the best?
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Philip Saglimbeni owns shares of Under Armour. The Motley Fool recommends Michael Kors Holdings and Under Armour. The Motley Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information