Michael Kors reports weak holiday sales

Michael Kors reported a bigger-than-expected drop in comparable sales for the holiday quarter and said it would cut back promotions in North America starting this month to boost average retail prices.

However, the apparel and accessories maker forecast current-quarter profit and sales well below estimates, as it reduces sales to wholesale customers and continued weakness in North America and Europe, partly due to lower traffic in shopping malls.

The company’s shares fell as much as 14.3 percent to $35.37 in early trading on Tuesday.

Michael Kors said average selling prices in the third quarter were hurt by a highly promotional environment as well as the continued popularity of cheaper cross-body bags and small leather goods in the third quarter.

Quarterly revenue in the Americas region fell 7.4 percent, while Europe sales were down 7 percent.

Kors, like rival Coach, is trying to regain its brand value by reducing supplies to department stores, which have been heavily discounting its products to drive traffic.

The brand has also been hurt by overdistribution of its products during a period of growth, which alienated some customers.

Michael Kors forecast fourth-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, according to Thomson Reuters.

Sales at stores open for more than a year fell 6.9 percent in the third quarter ended Dec. 31. 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, in the quarter, from $294.6 million, or $1.59 per share, a year earlier.

Total revenue fell 3.2 percent to $1.35 billion.

Michael Kors SS 2017 ad campaign