* Fourth-quarter earnings $0.78/shr vs est. $0.68
* Revenue $917.5 mln vs est. $816.5 mln
* Gross margin 59.9 pct vs 59.7 pct
* Sees first-qtr revenue $840-$850 mln vs est. $826.1 mln
* Shares fall as much as 4 pct
(Adds analyst comment, background; updates shares)
By Devika Krishna Kumar
May 28 Michael Kors Holdings Ltd, whose
trendy clutch bags and watches have taken Wall Street by storm,
said it expected the cost of opening new stores in Europe to
depress gross margins in the next few quarters.
A seemingly inexorable rise in the company's stock ground to
a halt after a company executive said he expected gross margins
to fall slightly in the current quarter from a year earlier.
But the company, founded by fashion designer Michael Kors,
forecast higher-than-expected revenue and extended its
unblemished record of growing sales by 40 percent or more every
quarter since going public in December 2011.
"Their growth has been like nothing we've ever seen," Wells
Fargo analyst Paul Lejuez told Reuters. "It's been one of the
most impressive retail stories that I have seen in my career."
Michael Kors, which had 80 stores in Europe at the end of
the fourth quarter, said margins would ease in the next few
quarters as it opens an expected 55 new stores in the region
through the year ending March 2015.
"After that, I believe that there will be an upside to the
European retail operating margins," Chief Executive John Idol
said on a post-earnings conference call.
Start-up expenses, such as leasing costs, would hurt its
retail operating margins in Europe, the company said, prompting
its shares to fall as much as 4 percent in morning trading.
The stock reversed course after rising 8 percent before the
bell on Wednesday, when the company reported quarterly results
that once again beat analysts' estimates.
Sales in Europe, which accounts for about 10 percent of its
total revenue, more than doubled to $164.7 million in the fourth
quarter ended March 29.
Sales in North America, its biggest market, rose 43 percent
to $739.4 million on higher demand for its watches and small
leather goods such as wallets and clutch bags.
The strong sales helped Michael Kors grab market share from
Coach Inc, which last month reported its fourth straight
quarterly decline in sales from North America.
Strong demand for clutches and wristlets costing around $100
right through to snakeskin handbags with a $3,000 price tag
helped Michael Kors post fourth-quarter revenue of $917.5
million, beating the average analyst estimate of $816.5 million.
Michael Kors' first-quarter revenue forecast of $840
million-$850 million was also higher than the average analyst
forecast of $826.1 million, according to Thomson Reuters
Net income rose 59 percent to $161 million, or 78 cents per
share, in the fourth quarter. Analysts on average were expecting
earning of 68 cents per share.
Michael Kors shares recovered to trade up 1.5 percent at
$97.13 by afternoon on the New York Stock Exchange. The stock
rose 54.5 percent in the year to Tuesday's close.
(Additional reporting by Maria Ajit Thomas in Bangalore;
Editing by Kirti Pandey, Savio D'Souza and Robin Paxton)