Photo Credit: Didier P.

Michael Kors Holdings Ltd. (KORS) Consumer Discretionary – Textiles, Apparel & Luxury Goods | Reports June 1, Before Market Opens

Weak consumer spending has hurt retail earnings this quarter. Upscale brands have fared badly as consumers opt for discount goods and services. This season we have already seen losses from luxury retailers including Nordstrom and Tiffany’s, setting the stage for weakness from Michael Kors, Vera Bradley, and Lululemon over the next week. Tomorrow, Michael Kors kicks things off for the remaining retailers with its fiscal fourth quarter earnings.

The Estimize consensus is calling for earnings of 97 cents per share on $1.15 billion in revenue, 1 cent higher than Wall Street on the bottom line and right in line on the top. Compared to a year earlier this represents a 9% increase in earnings with sales expected to grow by 11%. Given its recent string of strong growth, the stock is typically a positive mover during earnings season. Through shares, on average, increase 4% through earnings and continue to make gains in the month following its report.

In an effort to drive top line growth, Michael Kors has focused on opening new stores. Last quarter the company opened 34 new stores, comprising of 15 in the United States and the rest in international markets. While the new stores will increase operating costs and contract margins, they should help generate higher revenue in the near term. Global stores should continue to see adverse impacts from weak currency conditions. Regardless, Michael Kors continues to deliver positive growth in key financial metrics including revenue, net sales, profit and net income.

Unfortunately, the biggest news from the company was a decision from Nordstrom to no longer carry Michael Kors handbags. Nordstrom had been feeling squeezed by Macy’s to price match and discount similar Kors bags. The ongoing promotions Macy’s ran was a major determinant for Nordstroms to stop carrying the bags. This clearly isn’t a good thing for Michael Kors, which should expect to feel the aftermath in the remainder of the year.