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Is luxury back? Michael Kors' profit triples, stock soars

June 12, 2012|By Tiffany Hsu
  • Since going public in December, stock in Michael Kors Holdings has gained nearly 60%. In the fourth quarter, profit at the designer's firm more than tripled.
Since going public in December, stock in Michael Kors Holdings has gained… (Carolyn Cole / Los Angeles…)

Michael Kors is making it work: Profit at the newly public luxury retailer more than tripled in the fourth quarter.

The American fashion designer puts out extravagant $2,295 python satchels (other bags come in ostrich and crocodile) and $1,295 calf-hair cowboy boots but also creates more affordable $59 thong sandals as well as stylish iPhone carriers and MacBook sleeves.

The high-low strategy seems to be working. Michael Kors Holdings, which had its initial public offering last year, netted $43.6 million in net income, or 22 cents a share in its fiscal fourth quarter. During the same period last year, Kors made $13.6 million in profit, or 10 cents a share.

Kors, made especially popular by his stint as a judge on the reality show "Project Runway,"  is beloved by celebrities including Jennifer Lopez and Michelle Obama. There are 301 Michael Kors stores worldwide, including boutiques in Beverly Hills, New York, Palm Beach and elsewhere.

Since the end of last year, 71 new stores have opened -- nearly a quarter of the chain's total.

Same-store sales at locations open more than a year were up 36.1% in the fourth quarter, with some weakness in Europe, which is struggling with a debt crisis. Overall revenue, including net sales and royalties, jumped 58.3% to $380 million from $240 million.

The company’s stock soared as much as 11.9% to $42.72 in morning trading Tuesday. The December IPO was priced at $20 a share. Since going public, Kors stock has gained nearly 60%.

Could this signal the return of luxury? Kors predicts profit of $1.08 to $1.12 a share next year and sales between $1.7 and $1.8 billion – beating analysts' expectations.

On Monday, Warren Buffett’s Berkshire Hathaway Inc. made a $9.6-billion bet on private jets, buying up to 425 planes from Bombardier Inc. and Textron Inc.’s Cessna.

Last month, however, luxury jewelry chain Tiffany & Co. slashed its forecast for the year as sales slumped and concerns about Greece and the Eurozone mounted.


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