Michael Kors (NYSE:CPRI) and Vince (NYSE:VNCE) are two of the fastest-growing luxury brands in the world, and both have recently released earnings results for their respective quarters. Let's compare the results and the companies' outlooks going forward to determine which had the stronger quarter and whether it represents the better investment opportunity right now.
Looking over the luxurious results
On May 28, Michael Kors released its fourth-quarter report for fiscal 2014, and the results exceeded the consensus analyst estimates. Here's a breakdown and year-over-year comparison:
|Earnings Per Share||$0.78||$0.68|
|Revenue||$917.45 million||$816.67 million|
- Earnings per share increased 56%.
- Revenue increased 53.6%.
- Global comparable-store sales increased 26.2%.
- Gross profit increased 54.2% to $549.4 million.
- Gross margin expanded 20 basis points to 59.9%.
- Operating profit increased 58.3% to $245.9 million.
- Operating margin expanded 80 basis points to 26.8%.
- Expansion update: Michael Kors opened 22 new stores during the quarter, bringing its total store count to 555 worldwide; of the now 555 stores, 405 are company-owned and 150 are licensed.
Vince released its first-quarter report for fiscal 2014 on June 5, and the results exceeded the consensus analysts estimates as well. Here's a breakdown and year-over-year comparison:
|Earnings Per Share||$0.04||$0.00|
|Revenue||$53.45 million||$48.77 million|
- Earnings per share increased $0.04 from $0.00 a year ago.
- Revenue increased 32.4%.
- Comparable-store sales increased 11.1%.
- Gross profit increased 50.8% to $26.4 million.
- Gross margin expanded 600 basis points to 49.4%.
- Operating profit increased 174% to $5.2 million.
- Operating margin expanded 500 basis points to 9.7%.
- Updated store count: Vince opened two new full-price retail stores during the quarter, bringing its total store count to 30; of the now 30 locations, 24 are full-price retail stores and six are outlet stores.
What should investors expect going forward?
In its fourth-quarter report, Michael Kors also provided its initial outlook on fiscal 2015. The company called for the following results:
|Metric||Fiscal 2015 Outlook||Fiscal 2014 Actual|
|Earnings Per Share||$3.85-$3.91||$3.22|
|Revenue||$4.0 billion-$4.1 billion||$3.31 billion|
This outlook calls for earnings per share to increase 19.6%-21.4% and revenue to increase 20.8%-23.9% compared to fiscal 2014. Michael Kors also noted that it anticipates comparable-store sales growth in the high-teens percentage range for the year, compared to the 26.2% growth achieved in fiscal 2014. Lastly, the company noted that it expects earnings per share in the range of $0.78-$0.80 and revenue in the range of $840 million-$850 million in the first quarter of fiscal 2015; this would result in year-over-year growth of 27.9%-31.1% and 31.1%-32.6%, respectively.
Following its stronger-than-expected first quarter, Vince raised its earnings per share forecast and reaffirmed its other growth expectations for the full year. Here's the company's updated outlook:
|Metric||Fiscal 2014 Expected||Fiscal 2013 Actual|
|Earnings Per Share||$0.88-$0.92||$0.73|
|Revenue||$325 million-$340 million||$288.2 million|
This outlook calls for earnings per share to increase 20.5%-26% and revenue to increase 12.8%-18% compared to fiscal 2013. In addition, Vince anticipates comparable-store sales growth in the high single-digit to low double-digit percentage range, compared to the 20.6% growth reported in fiscal 2013. This is along with the opening of seven to eight new stores and gross margin expansion of 150-250 basis points in fiscal 2014.
And the winner is...
After reviewing the companies' earnings results and outlooks going forward, the winner of this matchup is Michael Kors. It showed much stronger growth in the majority of the key financial categories, and its outlook calls for significant growth going forward. This was also the 10th consecutive quarter that Michael Kors exceeded earnings expectations, giving it a longer track record of success in the public eye and once again proving that analysts cannot keep up with its global growth.
Today, Michael Kors' stock sits more than 10% below its 52-week high, and I believe it represents the best investment opportunity in the market. Foolish investors should take a deeper look and strongly consider initiating long-term positions right now and adding to them on any further weakness. This would let price appreciation provide substantial returns over the next several years.