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Michael Kors Sales Soar on Strength of Shoes and Accessories Offering in Q3

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Michael Kors answered the call of its athleisure-loving customers last year and introduced smaller bags to go with their new low-maintenance looks—and the move paid off. The luxury lifestyle brand on Tuesday revealed that total revenue for the third quarter of fiscal 2016 was $1.40 billion, up 6.3% from $1.31 billion a year ago, and $1.59 per diluted share.

The quarterly results topped the predictions of analysts polled by Thomson Reuters, who had estimated earnings of $1.46 per diluted share on revenue of $1.36 billion.

Wall Street responded well to the news: Michael Kors Holdings Ltd. shares (KORS) had jumped 18 percent by mid-morning.

Retail net sales for the three months ended Dec. 26 increased 11.1% to $766.2 million, a growth the company attributed both to e-commerce sales from its digital flagships and the 114 new stores that opened since the third-quarter of fiscal 2015.

While comparable store sales decreased 0.9%, wholesale net sales increased 0.3% to $575.5 million from $573.8 million and licensing revenue rose 8.4% to $55.8 million from $51.5 million.

“We are pleased with our third-quarter results, as we delivered revenue, comparable store sales and earnings growth ahead of our expectations,” John Idol, chairman and chief executive, stated, citing the “strong consumer response” to accessories and footwear, as well as continued momentum in the company’s digital flagship business and in overseas markets.

Japan registered the biggest growth of the quarter, reporting a 59.1% leap in revenue to $25.5 million, compared with $16.03 million in the year-ago period. Sales in Europe, meanwhile, increased 14.3% to $276 million. The Americas, though still the company’s largest market in dollar terms, only posted a 0.4% rise in revenue to $1.06 billion.

Gross profit for the three-month period increased 4 percent to $832 million, or 59.5% as a percentage of total revenue. The company said that foreign currency translation and transaction “negatively impacted” gross profit margin by around 95 basis points.

Looking ahead to Q4, Michael Kors said it expects revenue to be in the range of $1.13 billion to $1.15 billion, or diluted earnings per share (EPS) of between $0.93 and $0.97. The company is anticipating foreign currency to impact net income by roughly $3 million and EPS by $0.02.

Idol added, “We remain focused on further developing our digital flagship strategy as we offer our customers a seamless omnichannel experience, the build-out of our men’s business and leveraging our strong brand awareness to expand our business globally. We believe that the continued execution of these strategic initiatives positions us well to deliver long-term growth.”

As of Dec. 26, there were 857 Michael Kors stores worldwide, including licensed locations.

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