Michael Kors Holdings Ltd. rose the most in more than a year after overseas growth helped first-quarter earnings top analysts’ estimates, easing concerns that the company is mired in a slump.
The earnings amounted to 87 cents a share in the period, which ended June 27, the company said in a statement on Thursday. Analysts had estimated 76 cents on average, according to data compiled by Bloomberg.
While still the minority of Kors’s operations, the international business far outperformed its core North American market. Revenue in Europe grew 17 percent last quarter, even including the unfavorable impact of a strong U.S. dollar, and jumped 33 percent in Japan. The results are helping counter a narrative that Kors has become overexposed, alienating customers, said Simeon Siegel, an analyst at Nomura Securities.
“You’re still seeing people buying Kors product,” Siegel said. “The notion that Kors product is untouchable because they oversaturated themselves is overdone.”
The shares surged 11 percent to $43.77 at the close of trading in New York, the biggest intraday gain since February 2014. Kors had slid 47 percent this year through Wednesday’s close, dragged down by concerns that its growth is slowing.
Kors also reaffirmed its full-year earnings forecast of $4.40 to $4.50 a share. Still, it only expects profit of as much as 90 cents a share in the second quarter, missing analysts’ estimates for 98 cents a share. The company forecast second-quarter revenue of $1.06 billion to $1.08 billion, less than the $1.11 billion analysts have projected.
Same-store sales fell 5 percent last quarter, excluding currency fluctuations. That was a slightly better performance than the 5.4 percent decline analysts predicted. Michael Kors expects comparable sales to decline by a low-single-digit percentage on that basis in the second quarter.
To help spur demand, the brand has been slashing prices on many of its products. Kors is contending with sluggish mall traffic and a strong dollar, which has reduced tourist spending. The company also is adding new products in the second half and improving its digital operations.
Sales in the handbag business remain “robust,” though they aren’t growing at the same rates as previous years, executives said on the earnings conference call. Backpacks are getting more popular, and millennial customers in particular prefer smaller bags and cross-body purses, which typically have lower retail values. Watch sales also dragged down the company’s North American same-store sales, the company said.