Michael Kors Holdings Ltd reported a much smaller-than-expected decline in sales at established stores during the holiday quarter, helped by demand for high-end accessories and footwear. Shares of the handbag and accessories maker jumped 16 percent to $46.80 in premarket trading on Tuesday.
Kors, once the hottest name in the so-called “affordable luxury” sector, has in many ways been a victim of its own success.
A focus on affordable luxury helped the company post double-digit sales growth until 2014, but its bid to expand further by over distributing its products and rapidly expanding stores made them ubiquitous, losing some customers who preferred more niche brands.
To win back customers, the company has been innovating aggressively and expanding its online presence, which drove sales in the holiday quarter.
Sales at established stores fell 0.9 percent in the third quarter ended Dec. 26 – the smallest decline in a year. Analysts on average had expected a 4.5 percent drop, according to research firm Consensus Metrix.
“Investors have been concerned that the company has been in a death spiral … These results are yet another instance of upside surprise and (are) better than feared,” Nomura Securities analyst Simeon Siegel said.
Kors said its full-year 2016 revenue forecast would now be at the top end of its prior forecast of $4.6 billion-$4.65 billion. Total revenue rose 6.3 percent to $1.40 billion in the third quarter.
Net income attributable to the company fell to $294.6 million from $303.7 million a year earlier. However, on a per share basis earnings rose to $1.59 from $1.48 due to fewer outstanding shares.
Analysts on average had expected earnings of $1.46 per share and revenue of $1.36 billion, according to Thomson Reuters I/B/E/S.
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