Michael Kors (NYSE:CPRI) reported second quarter earnings on November 5 that exceeded expectations. The conference call that ensued gave even deeper insight into the growing global powerhouse. The positive comments made were confirmed in Fossil's (NASDAQ:FOSL) conference call later that day and were foreshadowed in Coach's (NYSE:TPR) call a few weeks back. Let's take a look at the most notable comments from each company to see what the future may hold.
The brand taking over
Michael Kors is home to one of the most fashionable lines of women's and men's apparel and accessories. The most consumer attention has been placed on its watches and handbags, but it has been gaining ground in clothing, footwear, sunglasses, and other categories. There are not many brands that cater to the tastes of both women and men, but Michael Kors has found the recipe for success.
(Image Source: Michael Kors Instagram)
Sizzling second quarter
As mentioned before, second quarter earnings were released on November 5 and the reported statistics beat analyst estimates. Here's an overview of the results and a year-over-year comparison:
|Earnings Per Share||$0.71||$0.68|
|Revenue||$740.30 million||$725.91 million|
- Earnings per share increased 44.9%
- Revenue increased 38.9%
- Comparable-store sales rose 22.9%.
- Gross profit increased 42.4% to $449.9 million
- Gross margin expanded 150 basis points to 60.8%
Call me maybe?
The conference call was management's time to shine and tell its shareholders about the great quarter the company had just experienced. Here are five of the most notable quotes, in no specific order, from Michael Kors' executives:
"In the second quarter, retail net sales grew 47% over the prior period and global comparative store sales increased 23%, representing the 30th quarter of consecutive comp store growth." -CEO John Idol
"As we stated in our last call, we launched our new fragrance and beauty collection, which exemplifies the sporty, sexy glam aesthetic of the Michael Kors brand. The collection was distributed to our North America retail stores and in the fragrance and beauty departments within numerous Macy's stores. Since the collection's launch, we achieved a top 5 ranking in the U.S. fragrance category, which is extremely encouraging, and indicates strong customer acceptance of our new fragrance collection." -CEO John Idol
"Overall, we continued to see great demand from the Michael Kors brand, a strong acceptance of the fashion luxury products created by Michael Kors and our design teams, and excitement for our unique jet-set in-store experience that we offer to our customers. We believe the Michael Kors brand has significant growth potential over the long term." -CEO John Idol
"We have solid momentum as we head into the holiday selling season in the back half of the year. We believe that 2014 will be another record year for the company as we continue to expand the Michael Kors luxury lifestyle brand globally." -CEO John Idol
"We believe that Michael Kors has become a powerful brand within the global luxury market, poised for exceptional long-term growth." -CFO Joseph Parsons
Fossil Group designs, markets, and distributes watches and fashion accessories worldwide. It manufactures products for several companies, with the most important of these being watches, jewelry, and accessories for Michael Kors. In its conference call, it did not speak of Michael Kors directly. However, when questions were taken, the floodgate of praises was opened. Here's a summary of the three best responses:
(Speaking about Fossil's jewelry business) "In addition, the Kors jewelry business continues to be strong. Especially in Europe, it's showing very strong sell-throughs. And as we continue to build watch and jewelry shops with Kors around the world, I think that's going to be a big opportunity for us." -CEO Kosta Kartsotis
(Speaking on growth in Europe) "Well, as I've said earlier, part of it's just, we had a relatively slow growth last year, so we're getting bigger growth in jewelry, plus we have a couple of watch brands over there gaining big share. Kors is obviously one of them, resonating really strong with the customers over there." -CEO Kosta Kartsotis
(Speaking on growth of the opportunity within the men's watch category) "In some brands, men's is 50% of their watch business, so there's a big opportunity there. So we are working on that and just the entire distortion of Kors Men's, in conjunction with all their other categories and to communicate that very strongly globally, we think, is a very large long-term opportunity, especially as we continue to get penetration with Kors in Asia. The Asia consumers even more skewed toward male shoppers." -CEO Kosta Kartsotis
While Michael Kors' management speaks of nothing but positives for the company today and going forward, Coach cannot be as joyous. Coach was once the darling of the luxury goods space with its purses in demand year-round. However, with increased industry competition, like that from Michael Kors, Coach has fallen on difficult times. Here are three quotes that sum up Coach's first quarter earnings, released on October 22:
"While we are encouraged by the initial iterations of our transition to a lifestyle brand, we have recognized that the full reflection of this positioning is part of a multi-year journey. In addition, the retail environment remains challenging with soft mall traffic and volatility in consumer sentiment." -CFO Jane Nielsen
"Our total revenues in North America declined 1% for the quarter with our directly operated businesses also down 1%. As noted, total Q1 same-store sales declined 6.8%..." -CEO Lew Frankfort
"Also we are forecasting our North America comp run rate to be down high single-digits for the balance of FY '14." -CFO Jane Nielsen
The Foolish bottom line
Michael Kors is one of the best growth stories in recent stock market history. The company is home to one of the best lines of luxury goods and consumers have taken notice. Its earnings report and conference call confirmed its continued rise to stardom and the stock has reacted accordingly by jumping to fresh 52-week highs. Michael Kors should be bought on any weakness provided by the market.