Michael Kors Holdings Limited (KORS – Free Report) maintained its positive earnings surprise streak for the 14th straight quarter when it reported second-quarter fiscal 2019 results. On the contrary, revenues fell short of the Zacks Consensus Estimate, after six successive quarters of beat. Analysts pointed out that the company’s sluggish performance in Europe might have hurt the top line to an extent. Nevertheless, total revenue improved year over year, however, this failed to restrain the decline in the bottom line that was marred by higher operating expenses.
As a result, shares of this Zacks Rank #3 (Hold) company are down more than 11% during pre-market trading hours. In the past three months, the stock has plunged about 18%, while the industry declined 3.2%.
This designer, marketer, distributor and retailer of branded apparel and accessories delivered adjusted quarterly earnings of $1.27 per share that surpassed the Zacks Consensus Estimate of $1.09 but fell from $1.33 reported in the year-ago quarter. Nonetheless, management raised its fiscal 2019 earnings view citing better-than-expected performance for both the Michael Kors and Jimmy Choo brands.
Total revenues of $1,253.8 million grew 9.3% year over year but came below the Zacks Consensus Estimate of $1,259.3 million. Top line includes revenue contribution of $1,137.1 million from Michael Kors, down 0.8% year over year and $116.7 million from Jimmy Choo. On a constant currency basis, total revenues were up 9.9%.
Adjusted gross profit jumped 10.8% to $765.4 million. Meanwhile, adjusted gross margin increased 80 basis points (bps) to 61%. Adjusted operating income declined 8.6% to $216.9 million while operating margin contracted 340 bps to 17.3%.
Segment Performance
MK Retail revenue came in at $643.9 million, down 0.2% year over year. Comparable sales (comps) slid 2.1%. The company witnessed positive performance in the Americas and Asia, offset by decline in Europe. On a constant currency basis, retail revenue inched up 0.5%, while comps fell 1.3%.
