REUTERS

(REUTERS)

What's Hurting Sales at Michael Kors?

Industries Reuters

Michael Kors Holdings reported a bigger-than-expected drop in quarterly comparable sales as fewer shoppers visit malls and a strong dollar discourages tourists from spending on its handbags and accessories.

Continue Reading Below

Shares of the company, which also forecast current-quarter sales below analysts' expectations, fell more than 4 percent in premarket trading on Wednesday.

U.S. retailers have been hurt as shoppers turn to the internet, reducing their visits to malls.

Department stores such as Nordstrom and Macy's have been forced to discount heavily to attract customers, causing luxury goods makers to slash their supply in an attempt to protect their brand value.

Kors' revenue in the Americas slid 5 percent in the first quarter. The region accounted for more than two-thirds of total revenue.

Sales at stores open more than a year slumped 7.4 percent, a drop bigger than the 4.7 percent analysts on average had expected, according to research firm Consensus Metrix.

Continue Reading Below

Kors' same-store sales have fallen for five of the past six quarters.

The company forecast revenue of $1.07 billion-$1.09 billion and a profit of 84-88 cents per share for the second quarter. Analysts on average had expected revenue of $1.11 billion, according to Thomson Reuters I/B/E/S.

Kors said it expected a mid single-digit percent decline in comparable sales in the current quarter.

Net income dropped 15.7 percent to $146.3 million, or 83 cents per share, in the quarter ended July 2.

Excluding items, Kors earned 88 per share, topping the average analyst estimate of 74 cents.

Total revenue rose slightly to $987.9 million, beating the average estimate of $953 million, as higher sales in Europe and Asia more than offset the impact of weakness in the Americas.

Kors shares were trading at $48 before the bell. Up to Tuesday's close, the stock had risen by about a quarter this year.

(Reporting by Jessica Kuruthukulangara and Subrat Patnaik in Bengaluru; Editing by Kirti Pandey)