* Third-quarter earnings $0.64/share vs est $0.41/share
* Revenue jumps 70 pct to $636.8 mln
* Raises full-year EPS forecast to $1.80-$1.82 from
* Raises full-year rev view to $2.1 bln from $1.86 bln-$1.96
* Shares jump 13 pct
By Siddharth Cavale
Feb 12 Fashion company Michael Kors Holdings Ltd
raised its full-year forecast after strong sales of its
luxury items such as handbags and watches over the holiday
period helped to win market share from rival Coach Inc,
sending its shares to a record high.
Shares of the company, named after its New York-born
founder, rose as much as 13 percent to $64.80 on the New York
Stock Exchange on Tuesday. The stock has more than tripled since
Michael Kors went public in December 2011.
"Michael Kors is bringing more excitement to the category
where people are buying new handbags, instead of other items
like clothing," Citi analyst Oliver Chen told Reuters.
Designer Michael Kors launched his brand 30 years ago as a
luxury sportswear house. The company now makes pyramid-studded
Saffiano leather handbags, watches and apparel worn by first
lady Michelle Obama and celebrities including Jennifer Lopez.
Michael Kors raised $944 million in its initial public
offering just over a year ago, one of the biggest ever listings
by a U.S. fashion company. The company now has a market
capitalization of $12.6 billion.
Kors, well-known for his work as a judge on the long-running
television fashion show "Project Runway", held a 3.7 percent
stake in the company as of Dec. 31. At today's share price, this
stake would be worth around $466 million.
The company, which reported third-quarter results that
comfortably beat Wall Street estimates, said the addition of new
stores and the conversion of department store premises into
branded "shop-in-shops" had drawn in more customers.
A shop-in-shop is a mini-store within a larger department
store that houses similar products. In total, there were 388
Michael Kors stores worldwide at the end of the third quarter,
the company said.
"It's the big opportunity for Michael Kors, growing stores,
as that means a lot of runway for them to grow for at least two
or three more years," said Chen.
Comparable-store sales rose 41 percent in North America in
the October-December holiday quarter, while larger rival Coach
said last month same-store sales fell 2 percent in North
America, only its third decrease in 11 years.
"They (Michael Kors) are gaining market share from Coach,
but it's not only Coach - it's also the little guys that are
getting squeezed in a highly competitive market," Morningstar
analyst Paul Swinand said.
Chen, the Citi analyst, said that Michael Kors' popularity
as a brand allowed the company to be more flexible in pricing
than its rivals. He said its focus on smaller handbags and
accessories also presented a particular challenge to Coach.
Michael Kors Chief Executive John Idol said there was strong
demand for luxury items in the third quarter from Europe and
North America. He said he expected the global luxury market to
keep growing at the same pace, without specifying a timeframe.
The Luxury Goods Worldwide Market Study of 2012 estimated
that the global luxury goods market would grow to between $314
billion and $327 billion in 2015 from $251 billion in 2011.
The lure of a new brand in the market has also driven growth
for Michael Kors in the relatively weak European market.
Comparable-store sales in Europe rose 58 percent in the third
quarter, the company said.
"Their fashion angle is quite attractive and I feel
Europeans respond to the fashion credibility that Michael Kors
has," Chen said.
Chief Executive Idol said he expected Europe to be a $500
million market in which the company would open 100 stores.
Kors raised its full-year earnings-per-share estimate to a
range of $1.80 to $1.82 from its previous range of $1.48 to
$1.50. It also raised its full-year revenue forecast to about
$2.1 billion from a range of $1.86 billion to $1.96 billion.
Analysts had estimated full-year earnings of $1.57 per share
on revenue of $2.01 billion, according to Thomson Reuters
The largest shareholder in Michael Kors, with a stake of
about 16 percent, is Hong Kong-based Sportswear Holdings Ltd,
led by Silas Chou and Lawrence Stroll, who have had a hand in
developing fashion brands including Tommy Hilfiger and Pepe
Michael Kors said it expected a low- to mid-20s percentage
increase in same-store sales in the current quarter.
Net income rose fourfold to $130.0 million, or 64 cents per
share, from $32.0 million, or 20 cents per share, a year
earlier. Analysts had expected 41 cents per share.
Revenue jumped 70 percent to $636.8 million in the quarter
ended December, compared with $540.3 million forecast by
"I think its sales trends will continue," said Swinand of
Morningstar. "It is going to have momentum as newer people are
more excited about it."