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Michael Kors surprises with better-than-expected Q1 sales & profit

Michael Kors Holdings Ltd reported better-than-expected first-quarter sales and profit and reaffirmed its forecast for the full year, surprising analysts who had expected the company to lower estimates to reflect a slowdown in the handbag market.

Kors had forecast revenue of $4.7 billion to $4.8 billion for the year ending March 2016. Analysts’ average estimate was lowered to $4.66 billion from $5.05 billion after the company’s forecast in May, according to Thomson Reuters I/B/E/S.

“The handbag business continues to be robust though not at the same levels it grew (in the past),” Michael Kors Chief Executive John Idol said on a post earnings call.

Michael Kors and rivals Coach Inc and Kate Spade & Co reported better-than-expected same-store sales for the quarter, helped by some recovery in North America, their biggest market by revenue.

Kors, once among the hottest names in the “affordable luxury” sector, has been focusing on accessories such as jewelry and watches as demand for handbags slows.

The company has been offering heavy discounts on handbags to win back shoppers who turn to brands such as Tory Burch.

The company said on Thursday that it expects to be pressured in the near-term by a strong dollar, fewer shoppers at its stores and reduced flow of tourists in some markets.

Revenue rose 7.3 percent to $986 million, led by a 6.2 percent rise in North American retail sales. Net income fell to $174.4 million, or 87 cents per share, from $187.7 million, or 91 cents per shares.

Michael Kors Fall Winter 2015-16 ad campaign

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