Momentum continues at Michael Kors

<p>There were high expectations for fashion retailer, Michael Kors, in the run-up to the company’s market update today (28th May). As usual, the company didn’t disappoint. For […]</p>

There were high expectations for fashion retailer, Michael Kors, in the run-up to the company’s market update today (28th May).

As usual, the company didn’t disappoint.

For its fourth quarter, the company took total revenue of around $918m, marking a healthy 54% increase over the same period last year.

Retail sales grew around 50% at $408m, helped by a 26% rise in like-for-like sales and 101 new store openings since the same period the prior year. Wholesale sales came in at $474m, representing a 56% increase.

The company boasted decent growth across regions, with revenue in its core North American business (represents around 80% of total revenue) rising 43% to some $739m – around a 21% increase on a like-for-like basis.

Net profit for the quarter came in at $161m, up from $101m reported in the same period the prior year.

All of that helped the company post total full-year revenue of $3.3bn, representing a 52% rise over the previous year. Net income for the year came in at $662m versus $398m the prior year.

Michael Kors has had a good run

Indeed, the Hong Kong-based (but US-listed) company has developed something of a reputation for beating market expectations.

In February, for instance, in addition to raising its full year guidance (which it’s just beaten), Michael Kors posted earnings per share (EPS) of $1.11 on total revenue of $1bn – versus EPS expectations of $0.86 on revenue of $860m. That was thanks to strong performance over the holiday period.

All of that’s in contrast to some rivals, such as US-based Coach, which has met with a bit of difficulty of late, predominantly due to challenging conditions in its North American business.

And Michael Kors isn’t about to rest on its laurels: it’s looking to capture further growth by expanding its international presence – though that’s expected to pressure the company’s margins in the interim.

Michael Kors’ valuation has equally been on the rise

The company’s shares have soared around a notable 50% over the last year, and it now sports a valuation of some 25x expected 2015 earnings, a premium over some peers such as Coach, which trades at some 15x, but, well below Kate Spade’s 55x.

Of course, the question is: how long can the good run continue?

Such impressive growth can’t be expected to last forever, and, with very high expectations it’d be very easy for the company to disappoint (today’s reaction – shares are currently down some 1% on concerns over a slowdown in profit growth – is a case in point).

That said, for now, the company looks poised to continue to deliver.

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