Fashion Retailer Michael Kors Rocks Q3 Earnings

Strong sales of leather handbags, watches and jewelry propelled Michael Kors (KORS) ahead of earnings estimates, with huge same-store sales growth in its first public earnings report Tuesday.
The luxury apparel and accessory retailer said its wholesale, retail and licensing divisions all saw growth, and it remains bullish going forward, on the spending strength of its more affluent clientele.

Michael Kors shares rocketed to fresh highs, rising 27.5% to 42.85. They debuted at 20 in December.
The fashion house reported earnings of 20 cents per share in its fiscal third quarter — 28 cents excluding one-time items. Analysts expected 9 cents. Revenue surged 68% to $373.6 million. Sales at stores open more than a year climbed 38% in North America and 34% in Europe.

Michael Kors sees fourth-quarter EPS of 10 to 12 cents on revenue of $350 million to $355 million. Analysts expect 11 cents per share on $347.4 million in sales.
The firm guided same-store sales growth of 25% to 30%. Margins would be slightly tighter due to markdowns, partially offset by a sales shift to higher-margin retail stores, the company said.

"The luxury segment continues to grow globally, and our positioning as an American lifestyle luxury brand will enable us to continue our global expansion," CEO John Idol said in a conference call with analysts.
Michael Kors is named after its founder — a fashion designer and "Project Runway" reality show judge. It sells $300 purses, $500 suede jumpsuits, and other must-haves for young aspirational buyers.

It ended the quarter with 231 retail stores, up from 156 a year ago. Retail sales climbed 83% to $199.4 million.
Michael Kors is headquartered in Hong Kong, but its products are sold in 2,300 department stores and other retailers in the U.S. and Europe. Wholesale division sales climbed 55% to $154.6 million.

Royalty revenue grew 44% to $19.6 million.
The quarter benefited from a slight shift to higher-margin retail and European sales.

Europe's economic woes have not hurt, the company said. And rising commodity costs had a minimal impact
The brand is still building awareness and cache, said Robert W. Baird analyst Erika Maschmeyer. And new products keep existing customers coming back. "They're finding incremental ways to get women to open their pocketbooks," she said.

Also Tuesday, watch and accessory retailer Fossil (FOSL) beat earnings forecasts and rocketed 15% to 119.82, a six-month high.
Fossil supplies Michael Kors with its branded watches that retail for $150 to $500. Fossil also supplies necklaces, bracelets and other jewelry that Michael Kors sells for $45 to $400.

Kors said jewelry sales are on track to reach the targeted 5% of sales at its free-standing stores.
"We don't know how high is high because we ran out of product, quite frankly," Idol said in the conference call.
Luxury handbag and accessories maker and retailer Coach (COH) rose fractionally to a fresh high. The upscale company reported better-than-expected quarterly results last month.