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wholesale michael kors
Shares of Michael Kors jumped 11 percent on Thursday, after the handbag maker reported what one analyst referred to as “better-than-feared” results.
Despite concerns surrounding a slowdown in the overall handbag market—paired with worries that Kors’ product is becoming overdistributed—the affordable luxury label on Thursday reported sales and profits that beat analysts’ expectations for the first quarter.
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Cowen & Co. analyst Oliver Chen said the brand’s margins came in better than expected, even as the company increased discounts during the quarter. Management admitted it got “a little more promotional” during the period, as same-store sales slowed more quickly than anticipated.
“We believe Kors shares have found a bottom,” Jefferies analyst Randal Konik wrote in a research note.
“Fundamentals are showing signs of stabilization and we see room for further improvement as product initiatives kick in, combined with easier compares. Broadly speaking, this is likely the cheapest you will get this global growth player,” he said.
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Though investors reacted positively to the news, sending the company’s stock above $44 a share, analysts noted that much of the revenue growth came from opening more than 100 stores over the course of the year.
Sales at the company’s stores that have been open at least a year, on the other hand, fell 9.5 percent for the period. That follows a near 6 percent drop in the fourth quarter, signaling a marked slowdown from the days when Kors reported robust double-digit growth in this metric.
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To be sure, the brand faced several external headwinds in the first quarter. Among them: A slowdown in the overall handbag market, lighter traffic at department stores, and unfavorable exchange rates. The company said currency challenges diluted its results by 6 cents a share.
As for internal issues, analysts have cautioned that between its vast department store presence and expanding retail growth, the company’s product runs the risk of becoming too ubiquitous—a problem that befell key competitor Coach.
Kors’ results round out generally optimistic reports from three of the most popular U.S. handbag makers. Earlier in the week, the struggling Coach brand said it will return to top-line growth in 2016; and on Wednesday, Kate Spade beat analysts’ comparable sales forecasts, posting gains of 10 percent.