Discounts Weigh on Kors Disappointing Profit Outlook


Michael Kors Holdings Ltd (NYSE:KORS) forecast a lower-than-expected profit for the current quarter as heavy discounting and increased promotions weigh on the luxury accessories retailer's margins.

Shares of the company, founded by fashion designer Michael Kors, fell 9 percent in premarket trading.

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Analysts have expressed concerns about Michael Kors' recent spike in discounting and promotions, in contrast to rivals Coach Inc <COH.N> and Kate Spade & Co <KATE.N>.

Holiday splurging on handbags has helped Coach and Kate Spade cut back on promotions, confident that Americans are more willing to splash out on luxury.

Michael Kors said on Thursday it expected current-quarter profit of 89 to 92 cents per share, below the average analyst estimate of 94 cents, according to Thomson Reuters I/B/E/S.

The company's profit beat estimates in the holiday quarter despite a 31 percent jump in costs to $514.6 million.

The company's net income rose to $303.7 million, or $1.48 per share, in the quarter ended Dec. 27 from $229.6 million, or $1.11 per share, a year earlier.

Analysts on average had expected $1.33 per share.

Revenue rose 30 percent to $1.31 billion, almost in line with the average estimate.

On a constant currency basis, revenue in North America rose 23.1 percent, with a 6.8 percent increase in comparable store sales.

Michael Kors shares were down 9 percent at $65.00 in premarket trading on Thursday. The stock had fallen about 10 percent in the six months to Wednesday's close.

(Reporting by Devika Krishna Kumar in Bengaluru; Editing by Don Sebastian)