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Tiffany, Michael Kors, or Kate Spade: Which Company Had the Most Luxurious Quarter?

By Joseph Solitro - Mar 30, 2014 at 9:45AM

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The three giants of the luxury industry have just reported their earnings, so let's find out which had the best quarter.

Tiffany & Co. ( TIF ), Michael Kors ( CPRI 4.71% ), and Kate Spade & Co. ( KATE ) are three of the most popular luxury retailers in the world today and all three have recently reported their quarterly results. Let's break down their earnings reports to determine which company had the best quarter and could provide the highest returns for investors going forward.

Breaking down the earnings reports

Source: Tiffany's Facebook

Tiffany released its fourth-quarter report to complete fiscal 2013 on March 21; here's a breakdown and a year-over-year comparison of the results:

Metric Reported Year Ago
Earnings Per Share $1.47 $1.40
Revenue $1.30 billion $1.24 billion

Source: Tiffany & Co.

Tiffany's earnings per share increased 5% and revenue increased 5.1%, but these came in just below analysts' expectations of $1.52 in earnings per share and revenue of $1.31 billion. Comparable-store sales grew 7% in the Americas, 4% in the Asian-Pacific, 8% in Japan, and 2% in Europe, which resulted in overall growth of 6%. Gross profit rose 7.5% to $785.61 million and the gross margin expanded an impressive 140 basis points to 60.5%. Also, Tiffany opened six new locations during the quarter to bring its total store count to 289 globally.

Source: Michael Kors' Facebook

On Feb. 4, Michael Kors released its third-quarter report for fiscal 2014; here's an overview and a year-over-year comparison of the results:

Metric Reported Year Ago
Earnings Per Share $1.11 $0.64
Revenue $1.01 billion $636.78 million

Source: Michael Kors

Michael Kors' earnings per share increased 73.4% and revenue increased 59% year-over-year, which surged past analysts' expectations of $0.86 in earnings per share and revenue of $859.94 million. Comparable-store sales increased 24% in North America and 73% in Europe, which resulted in overall growth of 27.8%. Gross profit rose 61.6% to $619.5 million and the gross margin showed strength by expanding 100 basis points to 61.2%. Also, the company added 56 new stores during the quarter to bring its total store count to 533 worldwide; The company owns 395 of these stores and licensed partners operate the other 138. 

Source: Kate Spade's Blog

Kate Spade released its fourth-quarter report to cap-off fiscal 2013 on Feb. 25; here's a breakdown and a year-over-year comparison of the results:

Metric Reported Year Ago
Earnings Per Share $0.15 $0.04
Revenue $426.94 million $349.09 million

Source: Kate Spade & Co.

Kate Spade's earnings per share from continuing operations increased 275% and revenue increased 22.3% year-over-year; however, these results largely missed analysts' estimates which called for $0.29 in earnings per share on revenue of $536.90 million. With Juicy Couture and Lucky Brand no longer in its portfolio, the company has been able to focus on the growingly popular Kate Spade brand, which achieved comparable direct-to-consumer sales growth of 30% and revenue growth of 48% during the quarter. Gross profit increased 23.7% to $242.63 million and the gross margin expanded 60 basis points to 56.8%. Also, 59 net new Kate Spade locations opened up during the quarter and this brought the total store count to 212.

What will the future hold?

Source: Tiffany & Co.

Tiffany went on to provide its outlook on fiscal 2014 in its fourth-quarter report and it expects the following results:

  • Earnings per share in the range of $4.05-$4.15
  • Revenue growth in the high-single-digits
  • The openings of 13 new stores and closings of four existing stores
  • Free cash flow generation of at least $400 million
If these expectations were to come true, they would result in earnings-per-share growth of 8.6%-11.3% from fiscal 2013. In addition, the $400 million in projected free cash flow would work well with the company's current cash position to support further expansion, which would allow Tiffany's products to reach more markets which demand them. All in all, this would equate to another record-setting year for Tiffany.

Source: MichaelKors.com

In its report, Michael Kors provided guidance for its upcoming fourth quarter; here's what the company expects to accomplish:

Metric Q4 2014 Expected Q4 2013 Actual
Earnings Per Share $0.63-$0.65 $0.50
Revenue $790 million-$800 million $597.2 million

Michael Kors' outlook would result in earnings per share increasing 26%-30% and revenue increasing 32.3%-34% year-over-year. In addition, the company sees comparable-store sales growing 15%-20% during the quarter, which compares with 36.7% growth in the year-ago period. Overall, this would result in another record-setting quarter for Michael Kors and it would become the finishing touch to a record-setting fiscal year.

Source: KateSpade.com

In its report, Kate Spade only noted that it expects 2014's EBITDA to be in the range of $115 million-$125 million, so we will take a look at the consensus analyst estimates for the first quarter for comparison's sake; here are the current expectations:

Metric Q1 2014 Expected Q1 2013 Actual
Earnings Per Share ($0.03) ($0.16)
Revenue $198.65 million $371.80 million

Source: Estimize

These expectations would result in Kate Spade's earnings per share increasing 81.3% and revenue decreasing 46.6% year-over-year; however, you must remember that the the company had three brands in its portfolio in the year-ago period and now it solely has Kate Spade, so revenues from these periods do not offer a true comparison. With this said, the company will likely accelerate its expansion efforts in fiscal 2014 in order to enter as many markets as possible; this, paired with comparable-store sales growth at existing locations, will propel its revenues much higher and help Kate Spade grow its brand awareness and market share.

Source: Michael Kors' Instagram

And the winner is...
After reviewing the quarterly results and outlooks on the quarters ahead, Michael Kors wins this three-way match-up. It showed incredible growth in the third quarter and its outlook on the fourth quarter calls for more of the same. Michael Kors has been showing increased strength across all of its operating regions and it will continue to expand to take full advantage of its growing popularity.

The company's stock has taken a hit over the last few weeks as it has fallen more than 9% from its 52-week high, and I believe this is a buying opportunity. Foolish investors should strongly consider initiating positions right now and holding onto them for several years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Capri Holdings Limited Stock Quote
Capri Holdings Limited
CPRI
$66.69 (4.71%) $3.00
Kate Spade & Company Stock Quote
Kate Spade & Company
KATE
Tiffany & Co. Stock Quote
Tiffany & Co.
TIF

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