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Michael Kors reports bigger-than-expected drop in quarterly comparable sales

Luxury goods makers such as Michael Kors have tightened supply to department stores to avoid deep discounting on their products, which they fear will erode their brand value.

Sales in Michael Kors’ wholesale business, which supplies to department store operators including Macy’s Inc and Neiman Marcus, declined 7 percent in the first quarter.

Sales at stores open more than a year slumped 7.4 percent, a drop bigger than the 4.7 percent analysts on average had expected, according to research firm Consensus Metrix.

Michael Kors forecast revenue of $1.07 billion-$1.09 billion and a profit of 84-88 cents per share for the second quarter. Analysts on average had expected revenue of $1.11 billion, according to Thomson Reuters I/B/E/S.

Michael Kors, which has reported a drop in comparable sales for five of the past six quarters, said it expected a mid single-digit percent decline in the current quarter.

Michael Kors’ revenue rose slightly to $987.9 million in the quarter ended July 2, beating the average estimate of $953 million, as higher sales in Europe and Asia more than offset the impact of weakness in the Americas.

“Cross-bodies, small leather goods and athletic footwear were top performers in our European stores, offset by lower handbag and watch sales,” Chief Executive John Idol said on a conference call.

However, customer visits weakened in its UK stores due to economic uncertainty after Britain’s vote to exit the European Union. Slowdown in tourism in France after recent attacks also hurt sales in Europe, he said.

Michael Kors will open stores in Seoul and Singapore this fall, the company said, as it looks to expand in Asia, its fastest-growing market.

Net income dropped 15.7 percent to $146.3 million, or 83 cents per share. Excluding items, Kors earned 88 cents per share, topping the average estimate of 74 cents.

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