With Massive Growth in Europe, Michael Kors Affirms Its Glowing Future

On the company's earnings call Monday morning, execs hit back against analysts' worries that growth is slowing.
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Eliza Brooke
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On the company's earnings call Monday morning, execs hit back against analysts' worries that growth is slowing.
Michael Kors's Fall 2014 runway show in New York. Photo: Imaxtree

Michael Kors's Fall 2014 runway show in New York. Photo: Imaxtree

After multiple retail analysts issued notes questioning the sustainability of Michael Kors's seemingly unstoppable growth last month, the brand came out swinging on its quarterly earnings call Monday morning. The company's execs peppered their comments on the three months ending June 28 with affirmations of its future potential. The opportunity to be a $1.5 billion business in Europe, for instance. The possibility of opening 500 men's stores in the long run.

Their message was clear: The world is still Kors's oyster.

For now, they're not wrong. Among Kors's global markets, Europe's sales growth broke ahead with a massive 128 percent increase in revenue growth and a 54 percent bump in comparable store sales for the quarter, which ended June 28. That compares to 30 percent revenue growth in North America and 43 percent worldwide; overall sales clocked in at $919.2 million for the quarter.

Kors execs said on the call that they expect the European business to top $1 billion in the next year, as it claims market share from leading luxury brands, a trend the company is seeing in Asia as well. 

On the call, Kors execs did own up to one stumble: The company's decision to start placing fall product in stores in May, a few weeks earlier than usual. The collection didn't end up selling as expected, potentially because customers wanted to keep shopping spring styles, and so the brand pulled the stagnant product from stores. 

Michael Kors also has room for improvement in its e-commerce business, which execs admitted is currently "not best in class." The company is bringing its North American site in-house this fall in an effort to improve its omnichannel game over the course of the year; although few luxury players do it well, Kors clearly understands that it's a key way to win in retail. Speed of delivery, aided by in-store or at-home delivery, is primary factor by which Kors is hoping to improve its business through consolidated online and offline strategy.

In the long term, the team said, e-commerce could contribute up to 20 percent of global revenue. It's all about that gleaming future.