Investors cast aside shares of Michael Kors like an out-of-date handbag after the fashion retailer reported weak full-year guidance and its first quarterly sales decline since its public debut five years ago.
Kors’ stock sank 9 per cent earlier on Friday following an after-the-bell report on Thursday that showed total revenue from the past quarter of $1.09bn, a 3.7 per cent decrease from the same quarter a year ago. The shares recovered later in the day, closing down 4 per cent at $49.70.
Despite improving retail net sales, its total revenue took an 11 per cent hit in the Americas, its largest market, offset partly by a modest 1.9 per cent uptick in European sales and substantial improvement in Asia to $95.1m.
Comparable sales were down 5.4 per cent, Kors said, as it attempts to absorb the impact from declining mall traffic and tourism headwinds in major cities, as well as its move to reduce inventory in the US wholesale channel.
“Despite these near-term challenges, we remain confident in our ability to drive long-term growth and increase shareholder value,” said chief executive John Idol, pointing to recent successes like the launch of Access smartwatches and fitness trackers, new autumn handbag line and expanded men’s apparel offerings.
Nevertheless, the company projected a dip in revenue for full fiscal year 2017 — an estimated $4.55bn, compared with $4.7bn in 2016 — and comparable store sales to decrease in the mid-single digit range.
Citi analyst Paul Lejuez said that, while “partly self-inflicted (from reductions of wholesale distribution), it supports our view that the brand has become overdistributed, and the adjustment period is under way”.
As retailers’ earnings reports continue to trickle in, department store chain Nordstrom’s shares also slipped at the start of trading, a day after it reported a $197m impairment charge tied to TrunkClub, a personal styling service provider it acquired in 2014.
Despite swinging to a loss, the company said sales modestly beat expectations, clocking in at $3.5bn, a 6.4 per cent increase from a year ago. Nordstrom shares ended the day 4.8 per cent higher at $58.72.
Shares in another department store chain, Dillard’s — which operates 330 stores in 28 states — also fell early on Friday, the day after it reported that quarterly earnings had declined to 67 cents per share, compared with $1.19 during the same period a year earlier.
Declining sales weighed heavily on its profitability, chief executive William Dillard said in a statement, with comparable-store sales declining 4 per cent as it faces pressure from weaker traffic and increased competition from online retailers. Dillard’s ended the day 1.2 per cent higher at $71.28.
It has been a rocky year for department stores, as foot traffic faces pressure from online retailers. However, some — including Macy’s and Kohl’s — have started to stabilise as they adjust to the changing brick-and-mortar retail environment.
US bond markets were closed on Friday for the Veterans Day holiday. US stock exchanges, however, were open for business on the last day of a wild week that saw Republican Donald Trump pull an upset victory in the race for the presidency.
At the close on Friday, the benchmark S&P 500 was off 0.1 per cent at 2,164. After surging to a new record high on Thursday, the Dow Jones Industrial Average kept up its momentum, up 0.2 per cent to 18,847, while the tech-heavy Nasdaq rose 0.5 per cent to 5,237.
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