Michael Kors provides cautious outlook as it posts Q1 numbers

Falling footfall in shopping malls and a drop in tourism to some major global cities has led Michael Kors to offer a cautious forecast for its full-year performance despite beating analysts estimates in Q1.

Sales at the global group were up 0.2% in the three months to 2 July at $987.9m, on a constant currency basis sales were flat for the period. Net income was down at $147.1m ($0.83 per diluted share), compared to $174.4m in the same period of the prior financial year.

Michael Kors chairman and CEO John D Idol said he was pleased to delivered a quarter ahead of forecasts (analysts had expected sales of around $953.3m) but drew attention to the fall in footfall at shopping malls and a decline in global tourist traffic as a reason to be cautious (echoing the sentiments of most of the luxury sector).

"Looking ahead, we remain focused on executing against our long-term growth strategies across both product categories and regions. For the Fall season, we are excited about the launch of several new digital flagships in Europe, the debut of our Michael Kors ACCESS line of smartwatches and trackers and our new Wonderlust fragrance, as well as the continued development of our men's business. Overall, we are on track to deliver on our revenue and earnings per share goals for the year," Idol said.

For the second quarter of fiscal 2017, the group set expectations for total revenue to be between $1.07bn and $1.085bn, which includes a planned reduction in wholesale shipments, and for comparable sales to "decrease in the mid-single digit range". For the full-year revenue would be flat, it said, again with a mid single-digit decrease in comparable sales.

Michael Kors' rival in the premium accessories space Coach posted its Q4 sales earlier this week, which saw a rise for the first time in three years at its North American stores. Comparable sales in its core market rose 2% and total sales there rose 9%, while globally, sales rose 15% to $1.15bn, however these did fall short of analysts' expectations.

Coach is attempting to mitigate the challenges in the sector by reducing its exposure to department stores due to their frequent discounting, increasing its prices (but still remaining accessible) and through innovation from its British creative director Stuart Vevers, appointed from Loewe in 2013.

Michael Kors recently opened a new European flagship on London's Regent Street while Coach and sister brand Stuart Weitzman will shortly opening a flagship on the opposite side of the same street.