Michael Kors Exceeds Earnings Expectations for the 10th Consecutive Quarter

Michael Kors (NYSE: KORS  ) , the designer and retailer of "affordable" luxury products, has just reported record-setting fourth-quarter results and exceeded analysts' expectations in the process. This marks the tenth consecutive quarter in which the company has surpassed expectations, which makes it a perfect ten-for-ten since it went public in December of 2011. The stock has reacted by making a slight move higher, so let's break down the earnings results and the company's outlook on fiscal 2015 and then check in on one of its largest competitors, Tiffany (NYSE: TIF  ) , to determine if we should be buying into the rally right now.

Source: Michael Kors' Facebook

The record-setting results
Michael Kors released its fourth-quarter report before the market opened on May 28 and the results far exceeded analysts' expectations on both the top and bottom lines; here's a breakdown:

Metric Reported Expected
Earnings Per Share $0.78 $0.68
Revenue $917.45 million $816.67 million

Source: Estimize

Earnings per share increased 56% and revenue increased 53.6% year-over-year, as global comparable-store sales increased an incredible 26.2%; here's a breakdown of Michael Kors' revenue and comparable-store sales growth by region compared to the fourth quarter of fiscal 2013:

Region Revenue Revenue Growth Comp.-Store Growth
North America $739.37 million 43% 20.6%
Europe $164.65 million 125.3% 62.7%
Other Regions $13.43 million 88.5% N/A
Total $917.45 million 53.6% 26.2%

Source: Michael Kors

John Idol, Michael Kors' Chairman and Chief Executive Officer, noted that the company's performance in North America was driven primarily by its accessories and watch offerings, while the performance in Europe was driven primarily by growing brand awareness and raw demand across the region. Also, Mr. Idol noted that its licensing segment, which grew revenue by 79% to $35.41 million, was led higher by continued strength in its watch, fragrance, and eye-wear categories.

Source: Michael Kors' Instagram

Gross profit increased 54.2% to $549.43 million and operating profit increased 58.3% to $245.91 million; in relation, the gross margin showed strength, expanding 20 basis points to 59.9%, and the operating margin was even stronger, expanding 80 basis points to 26.8%. 

In terms of expansion, Michael Kors opened 22 new stores during the quarter, bringing its total store count to 555 worldwide compared to 400 at the end of the fourth quarter a year ago; it is also worth noting that of the current 555 locations, 405 are company-owned and 150 are licensed.

Overall, it was a phenomenal quarter for Michael Kors and things only got better when the company went on to provide its guidance for the fiscal year ahead...

Will 2015 be another record-setting year?
Following the strong fourth-quarter results, Michael Kors provided its guidance for the first quarter and full year of fiscal 2015, calling for substantial growth and record-setting performances; let's start with its first-quarter outlook:

Metric Q1 2015 Outlook Q1 2014 Actual
Earnings Per Share $0.78-$0.80 $0.61
Revenue $840 million-$850 million $640.86 million

Source: Michael Kors

This outlook calls for earnings-per-share growth of 27.9%-31.1% and revenue growth of 31.1%-32.6% year-over-year, and also satisfied analysts' expectations of $0.79 in earnings per share and revenue of $826.05 million. Michael Kors added that it expects comparable-store sales to increase approximately 20%, which would result in the 33rd consecutive quarter of positive growth. Now let's move on to what the company expects for the full year of fiscal 2015:

Metric Fiscal 2015 Outlook Fiscal 2014 Actual
Earnings Per Share $3.85-$3.91 $3.22
Revenue $4.0 billion-$4.10 billion $3.31 billion

Source: Michael Kors

Michael Kors' full-year outlook calls for earnings-per-share growth of 19.6%-21.4% and revenue growth of 20.8%-23.9% compared to fiscal 2014, and this was inline with analysts' expectations of $3.85 in earnings per share and revenue of $4.06 billion. Also, the company noted that it expects comparable-store sales growth in the high-teens percentage range for the year, which seems quite attainable following the 26.2% growth it accomplished in fiscal 2014.

In summary, not only did Michael Kors report incredible growth in the fourth quarter, but its outlook calls for more of the same in fiscal 2015; with this in mind, I believe the the stock should have moved much higher following the release, which makes this a picturesque buying opportunity. 

Source: Michael Kors

An industry with growth on its side
Michael Kors was not the only company in the industry to experience strong growth in the most recent quarter; Tiffany, the world-renowned designer and retailer of fine jewelry and accessories, reported a blowout quarter of its own on May 21, which caused its shares to soar; here's a breakdown of the quarter:

Metric Reported Expected
Earnings Per Share $0.97 $0.78
Revenue $1.01 billion $955.12 million

Source: Benzinga

Earnings per share increased 49% and revenue increased 13% from the same period a year ago, as global comparable-store sales increased 9%. Tiffany achieved sales growth in all of its regions, including 20% growth in Japan, 17% growth in the Asian-Pacific, 9% growth in Europe, and 8% growth in the Americas.

Source: Tiffany's Facebook

Gross profit increased 17.1% to $589.53 million and the gross margin expanded 200 basis points to an impressive 58.2%; the company attributed this margin expansion to price increases across all of its product categories and regions, paired with lower costs of materials.

Also, Tiffany repurchased about 82,000 shares of its common stock for approximately $7 million, which kicked off the $300 million share repurchase authorization that it had announced in March; this is a three-year plan that is set to be completed in March of 2017, so the company is off to a great start.

These great results led Tiffany to reaffirm its revenue growth expectations and raise its earnings per share guidance for the full year; the company now expects earnings per share in the range of $4.15-$4.25, an increase of 11.3%-13.9%, and revenue growth in the high single-digit percentage range compared to fiscal 2013.

All in all, it was a fantastic quarter for Tiffany and its stock reacted accordingly by spiking 9.15% higher in the trading session that followed. The shares have continued rallying in the days since and I believe they could head much higher, so Foolish investors who are not sold on the potential of Michael Kors should dig deeper into Tiffany.

The Foolish bottom line
Michael Kors has just announced very strong fourth-quarter results, exceeding expectations for the tenth time in ten reports since going public, and added to the bullish sentiment by then providing an outlook on fiscal 2015 that predicts a record-setting performance. As a result, the company's stock ran 1.33% higher in the next trading session, but I believe there is much more room to the upside from here. Foolish investors should strongly consider initiating long-term positions right now and adding to them on any weakness to let price appreciation provide substantial returns over the next several years.

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