Michael Kors Holdings Ltd (NYSE:KORS) has released its Q3 results today. They show EPS on an adjusted basis of $1.77. This is ahead of expectations and represents an increase of 7.9% compared to the same period of the prior year.
Part of the reason for the better-than-expected results was strong performance from both the Michael Kors and Jimmy Choo brands. The latter has now been successfully integrated into the business. This could enable further growth in the long run in my view.
The combined business continues to make progress on its Runway 2020 strategy. It is seeking to elevate its brand position through a more innovative fashion luxury offering.
During Q3, accessories sales were better than anticipated. New products which had a unique focus seemed to resonate well with customers. There was also growth in women’s footwear as well as in ready-to-wear businesses, as consumers embraced holiday offerings.
In terms of comparable store sales, they were ahead of anticipated figures. Reduced promotional activity plus new product innovation helped to drive higher average unit retails in North America digital flagships and lifestyle stores.
I feel that Michael Kors has put in place a sound strategy through which to deliver strong growth in the long run. Its focus on new products and on the elevation of its brand position could help to improve sales performance in future. It may also lead to increased pricing power, which could produce higher margins and greater profitability.
Although competition within the luxury goods sector remains high, the addition of Jimmy Choo to the business could provide a boost to the company’s long term sales performance. It may also provide a degree of diversification which helps to reduce the overall risks facing the business.
Therefore, with what seems to be a favourable risk to reward ratio, I’m upbeat about the stock’s long term investment potential.