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Bloomberg
Michael Kors Holdings Ltd.’s strategy to entice shoppers and get them to pay more for its luxury apparel and handbags is showing some signs of success.
Profit and sales in the quarter that ended in July exceeded analysts’ estimates, driving the shares up as much as 14 percent in early trading.
The fashion house has been
refreshing designs and sprucing
up stores to lure customers to
pay full price for products, while reducing department store markdowns, which have eroded its brand cachet.
Last month, Michael Kors agreed to buy shoemaker Jimmy Choo Plc for $1.2 billion to add luster to the brand, and CEO John Idol said he’s planning for more acquisitions to boost growth.
The strategy is akin to that of rival Coach Inc., which bought shoe brand Stuart Weitzman in 2015 and handbag maker Kate Spade & Co. in May.
While Michael Kors is shuttering as many as 125 retail locations in the next two years as part of its turnaround plan, it ended last quarter with 67 more stores than it had a year earlier — a total of 838.
“Investors have been afraid that Michael Kors was on a downward spiral, but this result appears to show them emerging from that black hole,†said Simeon Siegel, an analyst at Instinet LLC.
“With better-than-expected numbers, Michael Kors can work to regain the permission to charge full price†to customers, he said.
While same-store sales fell 5.9 percent, that was far less than the average 8.9 percent estimate of analysts, according to Consensus Metrix. Idol said the company saw better-than-expected results in both North America and Europe.