(Reuters) - Fashion house Michael Kors Holdings Ltd’s KORS.N efforts to revamp stores as well as its high-end shoe brand Jimmy Choo paid off as the company topped Wall Street’s quarterly profit estimates on Wednesday and raised its full-year earnings forecast.
The company spruced up its shoe business last year with the addition of Jimmy Choo, banking on a brand whose stilettos have been worn by the rich and famous, ranging from Princess Diana to “Sex and the City” star Sarah Jessica Parker.
The company has been pulling products from department stores and other channels as well as cutting back on retail space to limit the amount of discounting these channels apply on their products. The company has also spent heavily in the past year to update the image of the brand, which has been associated more with rich, older women.
Their increased efforts on social media marketing campaigns featuring celebrities like models Kendall Jenner and Hailey Baldwin also helped the brand gain momentum.
Jimmy Choo sales came in at $172.7 million, comfortably beating analysts’ average estimate of $143.65 million, also benefiting from a shift in timing of certain wholesale shipments from the second quarter to the first. The brand contributed 14 percent to first-quarter sales.
“We have begun to see the benefits of our long-term growth strategy driven by our two luxury brands: Michael Kors and Jimmy Choo,” Chief Executive John Idol said on a call with analysts and investors, underscoring the company’s Runway 2020 plan, which focuses on product innovation, brand engagement and customer experience.
Shares of the New York-based company rose 7.39 percent to $70.45 in early morning trading on the New York Stock Exchange on Wednesday.
The company raised its full-year earnings forecast range by 25 cents to $4.90 to $5.00 per share, above analysts’ estimates of $4.77.
Kors now expects its investments in Jimmy Choo to have a flat to 5-cent impact on its 2019 earnings, down from a prior forecast of a 5- to 10-cent hit.
Kors has also been pulling heavily discounted products off department store shelves, forcing customers to shop at its own retail outlets where they pay full price for its handbags and watches.
The move helped the company earn a profit of $1.32 per share, excluding certain items, in the quarter, easily beating the average estimate of 95 cents per share.
Not performing as well, Idol said, is Kors’ watches category. The company hopes a new smartwatch offering heart rate monitoring and the ability to make payments via Google Pay will eventually be able to offset the declines in their fashion watch business.
Net income attributable to Kors rose to $186.4 million, or $1.22 per share, in the quarter ended June 30, from $125.5 million, or 80 cents per share, a year earlier.
Excluding certain items, the company earned $1.32 per share, beating the average estimate of 95 cents per share.
Total revenue rose 26.3 percent to $1.20 billion, beating the average analyst estimate of $1.14 billion, according to Thomson Reuters I/B/E/S.
As the call came to an end, Idol encouraged participants to go and see their stores come fall season. “We will have really, really changed,” he said.
Reporting by Uday Sampath in Bengaluru and Melissa Fares in New York; Editing by Saumyadeb Chakrabarty and Jonathan Oatis