Tuesday, November 13, 2018

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A pedestrian passes by a Michael Kors retail store in New York.

Scott Mlyn | CNBC
A pedestrian passes by a Michael Kors retail store in New York.

Michael Kors shares plunged more than 11 percent after the handbag maker recorded weaker sales at its retail stores in Europe during the fiscal second quarter, making this the first time in almost two years that Kors missed analysts’ quarterly revenue expectations.

Total revenue rose 9.3 percent to $1.25 billion, slightly missing analysts’ average estimate for $1.26 billion.

The company has been trying to cut back excess inventory at its stores in Europe, where rival brands like LVMH and Kering have gained in popularity.

Some analysts also say Kors’ product offering isn’t as “sophisticated” as other luxury retailers, including Coach-owner Tapestry in the U.S. Its handbags can be found scattered across off-price retailers like TJ Maxx and Marshalls, getting lost in a “sea of stuff,” GlobalData Retail Managing Director Neil Saunders said.

CEO John Idol said in a statement that Kors’ recently announced plans to acquire Versace is “setting the stage for accelerated revenue and earnings growth,” as the company still tries to gain a footing in Europe. The company announced the $2.1 billion deal in September. After the deal closes, Kors will also be changing its name to Capri Holdings.

Kors has said it plans to grow Versace to $2 billion in revenue globally and increase the brand’s retail presence from roughly 200 to 300 stores. It also expects to expand accessories and footwear from 35 percent to 60 percent of revenue.

During the latest quarter, the Jimmy Choo brand — which Kors acquired last November — delivered stronger sales than anticipated thanks to strength in footwear, according to the company. Because of this, Kors raised its adjusted earnings per share outlook for the fiscal year by 5 cents to a range of $4.95 to $5.05. It still expects total revenue to be about $5.13 billion, with same-store sales being down in the low single digits.

As of Tuesday, Kors shares had fallen about 8 percent so far this year.


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