No company has taken the luxury goods market by storm like Michael Kors (CPRI -3.04%) has over the last three years. Its products have become the most desired for the consumer and the demand is only growing. The company went public just 21 short months ago and could be the next must-own stock. 

Trend setter 

Michael Kors is home to arguably the most fashionable line of women's and men's apparel and accessories. It is most known for its watches and purses, but has a growing presence in numerous other categories. The company went public in December 2011 at $20 per share and has since rallied over 280%. I first spotlighted the stock on February 8 and again on March 19 and the growth story has not changed. 

Starting the year off right 

On August 6, the company released its first quarter fiscal 2014 report and it was an impressive 3 months. Take a look at these results:

  • Earnings per share of $0.61 vs. expectations of $0.49
  • Revenue of $640.90 million vs. expectations of $570.77 million
  • Increased second quarter outlook
Not only did the company blow away earnings, but it increased its outlook for the next quarter; this is the holy grail of quarterly reports and the market reacted accordingly by sending the stock soaring. Earnings per share increased 79.4% and revenue increased 54.5% year over year, while gross profit as a percentage of sales increased to 62% from 60.5%. Michael Kors impressed investors in all key metrics and its outlook shows there is plenty more where that came from. 

Explosive growth 

Over the next few years, Michael Kors is expected to grow at a rapid pace. Even with heightened expectations, you must factor in that the company has exceeded all quarterly expectations it has ever faced, so these estimates can easily be left in the dust. Here's what analysts currently expect:

  • 2014: 40.1% growth
  • 2015: 22.8% growth
  • 2016: 22.4% growth
The numbers speak for themselves in this situation, but let me reiterate that Michael Kors has exceeded all expectations since going public. The company often raises its own outlook, so I wouldn't be surprised to see analysts continue raising theirs as well; especially with the strength the company has shown internationally.

Global playground

Michael Kors has been defying the odds by growing in all areas of the world, even in the most troubled economies like those of the European nations. Here's the map that Destination Kors currently shows on its global store locator:

(Photo Source: http://www.destinationkors.com/stores/)

There is a high concentration of stores in North America, and an expanding presence in Europe and Asia. In its latest earnings report, Michael Kors showed immense growth in all of these regions:

Region Sales growth
North America 46.2%
Europe 144%
Asia & Other 80.8%

Growing brand awareness will continue to drive global sales and store expansion will allow the brand to reach its full potential. The company opened 75 new stores in the last year, bringing its grand total to 442, and I think it will easily exceed 500 in the next year. Competitors must hate seeing a "Coming Soon: Michael Kors" sign posted up in their shopping centers.

What competition?

The fall of Coach (TPR 1.50%) can be directly tied to changes in consumer preferences; this is another way of saying there's another "brand" in demand. I prefer to call this "brand" by its proper name: "Michael Kors."

The key metric I want to spotlight when it comes to this competition is the North American comparable-store sales from each company's latest quarterly report:

Company Michael Kors Coach
Release Date August 6, 2013 July 30, 2013
N.A. Comp. Store Sales +25% (1.7%)

Coach has been exploring the option of going private and that may be its best bet in today's market. The company needs to innovate and possibly revamp its entire look if it is going to become a luxury darling once again. Coach losing its "cool factor" seemed like an overnight occurrence, but getting it back is going to take hard work and dedication to the consumer. While Coach struggles to compete against Michael Kors, other companies have taken the smarter route by partnering up with the brand.

Easy money...

It's one thing to build a brand, but to make millions of dollars off of someone else's is as easy as it gets. Estee Lauder (EL -1.09%) and Fossil (FOSL -3.42%) are directly tied into the Michael Kors brand and both will continue to benefit from the growth of the name. 

Estee Lauder is a worldwide manufacturer and marketer of makeup, hair care, skin care and fragrance products. In 2003, it acquired Michael Kors' Fragrance, the fragrance and beauty unit previously owned by American Designer Fragrances, for an undisclosed amount of money. This gave Estee Lauder the rights to manufacture skin care, makeup, hair care, and fragrance products under the Michael Kors name. Management saw the potential of the brand name and they could not have been more correct. Skin care, makeup, hair care, and fragrance sales exceeded  $10.1 billion in 2013, making up 99.6% of overall sales..  The company made a great move acquiring this unit, as the growing popularity should continue to drive sales higher. 

Fossil designs, markets, and distributes watches and fashion accessories worldwide. It manufactures products for several companies, with the most important of these being watches for Michael Kors. Watch sales made up 77.5% of its latest quarterly sales and the growing popularity of Michael Kors will only add to these numbers. Fossil has great products of its own, but its wide portfolio of world-class brands should drive growth for years.

The Foolish bottom line

The growth of Michael Kors continues to impress and I do not believe it will slow down within the next few years. The brand continues to dominate the luxury goods space and is quickly becoming a global powerhouse. It has pulled back about 6.5% from its 52-week high which provides a great entry point for investors.