Sales of Michael Kors' $300 Handbags Are Rebounding
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Michael Kors Holdings reported its strongest quarterly sales growth in a year as demand surged for its handbags and accessories in the Americas, and the company said it would buy back up to $1 billion in shares.
Shares of Michael Kors, which also said it had acquired its Greater China licensee, rose more than 8% to $46.23 in premarket trading on Wednesday.
Michael Kors has been refreshing its product lines faster, tightening its distribution to retain the exclusivity of its handbags and pushing into online retail to boost its sales growth.
The company, whose $300 handbags are a big draw for fashion-conscious women looking for affordable luxury products, had seen double-digit sales growth until mid-2015.
However, as more and more department stores and outlets started stocking its handbags, the brand lost some of its exclusivity, turning away shoppers and slowing the company's sales growth.
Although Michael Kors posted robust sales growth in the fourth quarter, the company forecast a decline for the current quarter, citing "planned" reduction in wholesale shipments.
If its first-quarter revenue comes within the forecast range of $940 million-$950 million, it would be Michael Kors' first sales drop since it went public at the end of 2011.
In the quarter ended April 2, sales in the Americas rose 4.6%. The region accounted for nearly three-quarters of Michael Kors' total revenue.
The company said it bought Michael Kors (HK) Ltd, its exclusive licensee in China and some regions in Asia, for $500 million in cash.
"We believe that our brand is gaining strong momentum in Greater China, making it the ideal time for us to integrate this territory into our business," Chief Executive John Idol said in a statement.
Sales at stores open for at least 13 months rose 0.3%. Analysts on average had expected a 0.1% rise, according to research firm Consensus Metrix.
The net income attributable to Michael Kors fell 3% to $177 million, or 98 cents per share, hurt by a stronger dollar.
Revenue rose 10.9% to $1.2 billion.
Analysts on average had expected a profit of 96 cents per share and revenue of $1.15 billion, according to Thomson Reuters I/B/E/S.
Reporting by Abhijith Ganapavaram and Yashaswini Swamynathan in Bengaluru