The One Thing You May Have Overlooked in Michael Kors' Blowout Earnings Report

Michael Kors' blowout quarter was impressive, but there was one statistic that stuck out that many overlooked. Let's take a look at it...

Feb 12, 2014 at 4:00PM

If you follow the stock market, chances are you heard about the blowout quarter Michael Kors (NYSE:KORS) reported on Feb. 4. Shares skyrocketed over 17.25% on the day of the release and the run higher has continued. However, as many investors focused directly on the results while comparing them to the year before, I was very impressed with an update that many others overlooked.

Affordable luxury at its finest
Michael Kors is a high-growth luxury goods company, with an expanding presence worldwide. Its products include women's and men's apparel and accessories, with the most popular of these beings handbags and watches. These products are available through Michael Kors' company-owned retail stores as well as licensed stores and select department stores such as Macy's

Screen Shot

A glance at the earnings
The third-quarter report was released on Feb. 4 and it soared past analysts expectations.. Here's a breakdown of the report:

Metric Reported Expected
Earnings per share $1.11 $0.86
Revenue $1.01 billion $859.94 million
  • Earnings per share increased 73.4%
  • Revenue rose 59%
  • Global comparable-store sales grew 27.8%
  • North American comparable-store sales rose 24%
  • Gross profit increased 61.6% to $619.5 million
  • Gross margin expanded 100 basis points to 61.2%

What you may have missed
In its report, Michael Kors gave updated guidance for the fourth quarter, but what many may have missed is that the company also updated its guidance for fiscal 2014; this update factored in the results from the first three quarters, which made for an outstanding new set of estimates. The update was missed by many because it just consisted of four sentences in the release, but it is something that investors must see. Here are both sets of updated guidance:

Fourth quarter:

Metric 4Q '14 Guidance 4Q '13 Growth
EPS $0.63-$0.65  $0.50 26%-30%
Revenue $790 million-$800 million $597.2 million  32.3%-34%

Fiscal 2014:

Metric Fiscal 2014 Guidance Fiscal 2013 Growth
EPS $3.07-$3.09 $1.97 55.8%-56.9%
Revenue $3.18 billion-$3.19 billion $2.2 billion 44.6%-45%

The company's previous full-year earnings outlook called for $2.77-$2.81 per share on revenue of $2.9 billion, so this increase was quite substantial. In addition, Michael Kors noted that it expects comparable-store sales to increase 15%-20% in the fourth quarter and 25% overall for the fiscal year. This would be an incredible accomplishment to add on top of an already very impressive year. After what we just saw in the third quarter, I am fully confident that Michael Kors will meet or exceed these expectations, which will allow its shares to continue rallying higher.

Not everyone sees green
As Michael Kors sees nothing but growth and success in its future, Coach (NYSE:COH), its largest competitor, seems destined for the opposite performance. Coach's last earnings report came on Jan. 22 with earnings per share declining 13.8% and revenue falling 5.3%. It is not expected to get any better the next time out for Coach either, as analysts expect the following in the third quarter:

Metric Expected % Change
Earnings Per Share $0.62 (26.2%)
Revenue $1.1 billion (8.3%)

As you can see, Coach's third quarter is expected to contain even sharper year-over-year declines than the second quarter did. Another negative quarter will not help Coach's stock, which has already fallen more than 14.5% year-to-date and underperformed the overall market. In my opinion, Coach's stock should not be touched, regardless of how "inexpensive" it becomes. Instead, investors should go with the new king of the luxury-goods space, Michael Kors.

The Foolish bottom line
Michael Kors has continued to astonish investors with each earnings release since it went public in December of 2011. Its third-quarter report was one for the record books and its guidance going forward is icing on the cake. I believe Michael Kors should be a part of every investor's portfolio, so keep a close eye on the company and consider buying shares right now or on any weakness the market provides.

1 stock you can't miss
You may be considering Michael Kors for your portfolio, but there’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Joseph Solitro owns shares of Michael Kors Holdings. The Motley Fool recommends Coach and Michael Kors Holdings. The Motley Fool owns shares of Coach. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers