Michael Kors Delivers on All Fronts but Nobody Cared

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Luxury fashion designer Michael Kors Holdings Ltd. delivered an impressive performance once again as it stepped out onto the Wall Street runway with its latest quarterly results. On Wednesday, May 28, 2014, the high-end lifestyle brand famous for its trendy designs for apparel, footwear, and accessories announced its results for the fourth quarter and full year of fiscal 2013.

Not only did revenue increase by leaps and bounds, the company's profits rose as well. What's even more interesting is the investor reaction as despite the company's solid gains, the stock traded up only 1% in early afternoon following the release. Let's take a closer look at just how well Michael Kors performed in the fourth quarter and the full year to see why the results received little applause.

Quarter and full-year results
Michael Kors' momentum in the fourth quarter continued to surpass all expectations, as the company refused to be halted by the cold weather, economic conditions, and heavy discounting that department-store retailers did to generate sales. Fourth-quarter revenue increased a whopping 53.6% to $917.5 million from $597.2 million a year earlier. Comparable-store sales also increased by 26.2% thanks to its ongoing global expansion throughout the United States and Europe.


Demand for the luxury brand's products has continued to rise hand over fist as more consumers are introduced to the designer's exceptional taste in fashion, especially in Europe, where revenue grew 125% in the fourth quarter. Profit also increased by a large sum, climbing to $161 million, or $0.78 per diluted share, from $101.1 million, or $0.50 per diluted share, in the same period a year prior.

Let's not forget about the company's full-year results for fiscal 2013, where it also delivered a solid performance. Revenue for the full year increased by 51.8%, totaling $3.3 billion compared to the previous year when revenue totaled $2.2 billion. While the revenue growth was quite remarkable for a company of its size, its profit gain was even more significant. Michael Kors's net profit grew by 63.5% from fiscal 2012. The company's diluted earnings per share totaled $3.22 for the year, or $661.5 million, compared to the year before when earnings per share for the year totaled $1.97, or $397.6 million.

Michael Kors opened 101 new retail stores in fiscal 2013 and it operated a total of 405 retail stores worldwide as of March 29, 2014. Along with the company's financial results for the fourth quarter this is definitely something to brag about, especially in the face of New York fashion designer and competitor Coach .

Bigger yet less profitable
Coach is losing ground to Michael Kors despite its long history, size, and reputable brand for high-end leather goods design.  While Coach is making an effort to turn things around and get consumers back, it is no match for Michael Kors, which is well on its way to dominating the fashion industry. Just look at the expectations for Coach for the fourth quarter and full year of fiscal 2013 compared to those for Michael Kors.

Fourth quarter of fiscal 2013:

Company

Q4 FY 2012 Earnings Per Share

Q4 FY 2013 Earnings Per Share

Earnings Per Share Growth

Q4 FY 2012 Revenue

Q4 FY 2013 Revenue

Revenue Growth

Coach

$0.89

$0.54 (Est.)

(39.3)% (Est.)

$1.22 billion

$1.1 billion (Est.)

(9.8)% (Est.)

Michael Kors

$0.50

$0.78

56%

$597.2 million

$917.5 million

53.6%


Full-year results for fiscal 2013:

Company

FY 2012 Earnings Per Share

FY 2013 Earnings Per Share

Earnings Per Share Growth

FY 2012 Revenue

FY 2013 Revenue

Revenue Growth

Coach

$3.73

$3.05 (Est.)

(18.2)% (Est.)

$5.08 billion

$4.77 billion (Est.)

(6.0)% (Est.)

Michael Kors

$1.97

$3.22

63.5%

$2.2 billion

$3.3 billion

51.8%

While these figures are no guarantee of how Coach will perform, it is expected to suffer a loss to some extent. Coach could perform better than these estimates, but it could also perform slightly worse. All in all, Coach is losing sales and profits to Michael Kors, plain and simple.

Foolish takeaway
Foolish investors should not be tricked by the lack of a response to Michael Kors' latest results. Not only were the results great but Michael Kors announced in the earnings release that it expects growth in both the first quarter and current full year. In fact, it expects fiscal 2014 EPS in the range of $3.85-$3.91 with full-year revenue of $4 billion-$4.1 billion. Given the company's record, it's a safe bet that it will meet if not surpass these expectations.

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The article Michael Kors Delivers on All Fronts but Nobody Cared originally appeared on Fool.com.

Natalie O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Coach and Michael Kors Holdings. The Motley Fool owns shares of Coach and Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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