Growth spurt at Michael Kors puts pressure on profit margin

This is attributable to a huge number of new stores opening and the brand increasing in popularity. However, profit margins have declines due to increased costs. The demand for the stores’ luxury watches and fashion accessories is increasing, both in its own stores and in American and European department stores.

Its first quarter turnover reached $917m (almost €675m) indicating an increase of 54%. The turnover in America increased by 43% to $739.97m, while the turnover in Europe increased by 125.3% to $164.65m. Turnover, on a like-for-like basis, grew by 26% (20.6% in the US, 62.7% in Europe). This is a 21% outperformance of the expectations by analysts, the tenth consecutive quarter where Michael Kors has improved on those expectations.

The negative side to this positive news is that the gross profit margin has declined slightly, both quarterly and annually, and the operational costs have increased slightly.