Michael Kors' profit
forecast disappoints as promotions weigh
Send a link to a friend
[February 07, 2017]
(Reuters) - Michael Kors Holdings Ltd <KORS.N> reported a
bigger-than-expected drop in comparable sales for the holiday quarter
and forecast current-quarter profit well below estimates as the company
continues to offer discounts on its handbags.
The company's shares were down 7.3 percent in premarket trading on
Revenue in the Americas region fell 7.4 percent, while Europe sales were
down 7 percent.
The company said weakness in the two regions, which together account for
nearly all of Michael Kors' sales, would continue through spring, partly
due to lower traffic in shopping malls and a cutback in promotions in
Kors, like rival Coach Inc <COH.N>, is trying to regain its brand value
by reducing supplies to department stores, which have been heavily
discounting its products to drive traffic.
"While the reduction in wholesale shipments was supposed to aid
consolidated gross margin, 3Q results were disappointing," Mizuho
analyst Betty Chen said, noting that operating expenses rose during the
Chen had expected gross margin of 60.5 percent, while Kors reported 59.6
The company said it plans to reduce wholesale shipments in the current
quarter and expects comparable sales to decrease in the low-teens on a
[to top of second column]
Michael Kors logo
is seen in a shop in downtown Lisbon, Portugal, November 16, 2016.
Michael Kors forecast current-quarter profit of 68 cents-72 cents per share on
revenue of $1.04 billion-$1.06 billion. Analysts were expecting earnings of 93
cents per share and revenue of $1.11 billion.
Sales at stores open for more than a year fell 6.9 percent in the third quarter
ended Dec. 31, falling for the seventh time in eight quarters. Analysts had
expected a 4.9 percent decline, according to research firm Consensus Metrix.
Net income attributable to the company fell to $271.3 million, or $1.64 per
share, from $294.6 million, or $1.59 per share, a year earlier.
Total revenue fell 3.2 percent to $1.35 billion.
Analysts on average had expected earnings of $1.63 per share on revenue of $1.36
billion, according to Thomson Reuters I/B/E/S.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty
and Shounak Dasgupta)
[© 2017 Thomson Reuters. All rights
Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.