Luxury retailer Michael Kors Holdings (NYSE: KORS) is currently experiencing explosive sales and earnings growth due to increasing global brand awareness and soaring popularity among affluent, fashion-conscious consumers in the U.S., Europe, and Asia.

Based in Hong Kong, Michael Kors Holdings is a global designer, marketer, distributor, and retailer of luxury-branded women's apparel footwear, and accessories, as well as men's apparel. Michael Kors operates in three segments: retail, wholesale, and licensing.

The company has a presence in 85 countries.

Exceptional growth
In fiscal year 2013, Michael Kors' annual earnings growth rate represented a blistering 79.41% increase over the previous year's EPS.

Michael Kors' quarterly earnings growth has been equally impressive. In its most recent earnings announcement on Nov. 5, the company reported a second quarter profit of $0.71 per share, a 45% increase in net income from its second quarter a year ago.

Total revenue for the company jumped 39% to $740 million soundly beating analysts' forecast of $725 million.

Interestingly, when it comes to analysts' quarterly revenue estimates, Michael Kors has beaten analysts' estimates by a relatively wide margin over the past four consecutive quarters.

Finally, Michael Kors explosive revenue and earnings growth has been reflected in its stock performance. The stock is up 60% year-to-date. This month Michael Kors shares have closed at record highs on multiple occasions.

Earnings growth is challenging for competitors
Admittedly, investors looking for companies with high earnings growth rates are well advised to be cautious of investing in the luxury retail sector. The sector as a whole is very competitive and sensitive to fluctuations in the economy.

The current competitive and uncertain economic environment has made it difficult for many companies within this sector to generate significant earnings growth over the past year.

For example, perennial luxury retailer Ralph Lauren (NYSE: RL) designs, markets, and distributes men's and women's and children's clothing. Ralph Lauren also produces footwear, eyewear, watches, hats, belts, and leather goods such as handbags and luggage.

In 2013, Ralph Lauren made $750 million or $8.00 per share—a modest 12% increase in earnings from its previous fiscal year.

As an indicator of the difficulty of the growing company's earnings, Ralph Lauren's earnings-per-share growth rate for 2013 is projected by analysts to decline to an even more modest 8% increase in fiscal year 2014.

Perhaps the most well known luxury retailer is Tiffany's (NYSE: TIF). Tiffany's principal merchandise offering is jewelry. The company's jewelry was even featured in the 2013 movie The Great Gatsby.

Tiffany's net earnings actually declined 5% from $3.40 per share for fiscal year 2011 to a disappointing $3.25 per share for fiscal year 2012.

Company chairman and chief executive officer Michael Kowalski attributes the disappointing results to lower than expected sales growth and pressures on gross margin.

To be fair, Tiffany's is apparently making a comeback from its dismal 2012 fiscal year based on its most recent quarterly earnings reports. However, even with an improved earnings outlook, analysts are still only projecting a modest 10% growth rate for Tiffany's for fiscal year 2013.

What explains Michael Kors explosive growth?
Michael Kors apparently has not experienced this same difficulty in growing its company's earnings as others in the luxury retail sector. Michael Kors 79% EPS growth rate for 2013 far surpassed that of its competitors, Ralph Lauren and Tiffany's.

This large differential in earnings growth rates between Michael Kors and its competitors raises an important question:  what distinguishes Michael Kors from its competitors?

The answer is Michael Kors "accessible luxury" business strategy.

Michael Kors has been able to grow the company by making luxury items more accessible without compromising its image as a high-end brand.

By making luxury items more accessible, Michael Kors has captured a niche in the luxury market that makes its products both cool and in demand among fashion-conscious consumers.

Most Michael Kors brands cost in the $200-$400 range. According to at least one research analyst, "there hasn't been anyone who has cornered the market in that price range, which still has a high degree of fashion credibility."

The road ahead
Looking toward the future, Michael Kors' stellar earnings growth is expected to continue.

Analysts estimate annual earnings per share of the current fiscal year 2014 at $2.76 per share---a stellar 40% increase over the $1.97 per share reported for fiscal year 2013!

Michael Kors continued domination of a niche within the luxury retail market should enable the company to sustain its current exceptional earnings growth well into the future.

Regarding the future stock performance of the company, I believe the share price has the potential to climb exponentially for this reason: due to the company's earnings growth, Michael Kors' shares are now attracting large amounts of money from institutional investors.

As recently as October, 2012 institutions owned approximately 44% of the company's shares. By September, 2013, institutions had nearly doubled their stake in Michael Kors to 86%, propelling the company's share price to record levels in the process.

As the company continues to grow, I expect Michael Kors' shares will continue to attract the amounts of institutional money necessary to move the company's share price upward well into the future.

Given the potential earnings and stock performance of Michael Kors, one would certainly be Foolish to take a closer look at this up and coming luxury retailer.

 

Doug Lofton has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.