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Empresas y finanzas

Michael Kors says margins to shrink as it expands in Europe


    (Reuters) - Michael Kors Holdings Ltd , known for its trendy handbags and watches, said it expects margins to shrink for the year as it invests more to open stores in Europe and increases the number of shops it has in department stores.

    Michael Kors' shares fell more than 7 percent in early trading. They rose as much as 12 percent before the opening bell on Monday after the company reported another quarter of strong revenue growth.

    Michael Kors, controlled by fashion designer and former "Project Runway" TV show judge Michael Kors, is one of the fastest-growing companies in the luxury and so-called "affordable luxury" segments.

    Revenue jumped 43 percent to $919.2 million in the first quarter ended June 28, driven by strong sales of handbags, watches and footwear in North America and Europe.

    Michael Kors has posted sales growth of 40 percent or more in almost every quarter since going public in December 2011. But it is now having to spend heavily to maintain that momentum.

    The company, started as an American luxury sportswear house in 1981, has overtaken closest rival Coach Inc in market share as its core customers - women between the age of 20 and 35 - snap up its trendy accessories.

    The company's handbags sell for $200 to $3,000, with most selling for $500-$700, while its oversized watches are priced between $150 and $550.

    Apart from its own standalone stores, the company sells in department stores such as Macy's and Bloomingdale's.

    Michael Kors said in May it expected the cost of opening new stores in Europe to depress gross margins in the next few quarters.

    The company said on Monday it expects gross margins to decline by about 50 basis points and operating margins by about 200 basis points in the current quarter.

    Michael Kors had an operating margin of more than 30 percent in the first quarter. Gross margin expanded 20 basis points to 62.2 percent.

    "... We never believed that a 30 percent operating margin was a sustainable margin for the company ...," Chief Executive John Idol said on a conference call.

    Michael Kors said it expects full-year earnings of $4.00-$4.05 per share on revenue of $4.25 billion to $4.35 billion.

    It had previously forecast earnings of $3.85 to $3.91 per share on revenue of $4 billion to $4.1 billion.

    Michael Kors' revenue from North America, its biggest market, rose 30 percent to $718.9 million in the first quarter.

    Same-store sales increased 24.2 percent, with a growth of 18.7 percent in North America. Sales in Europe more than doubled to $185.5 million and now make up 20 percent of total sales.

    "In the long term, we continue to believe ... this market can generate revenue of approximately $1.5 billion for Michael Kors," Idol said.

    Net income rose to $187.7 million, or 91 cents per share, from $124.9 million, or 61 cents per share, a year earlier. [ID:nBw6MXyfJa]

    Analysts on average had expected earnings of 81 cents per share on revenue of $851.7 million, according to Thomson Reuters I/B/E/S.

    Michael Kors' shares were down 6.7 percent at $76.31 in early trading on the New York Stock Exchange. Up to Friday's close, the stock had risen 19 percent in the past year.

    (Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Saumyadeb Chakrabarty)