Back in vogue

8 August 2017 By Kate Duguid

Shares in the U.S. fashion houses leapt as tighter distribution and inventory curbs yielded earnings beats. Yet a harsh retail climate is depressing sales and both shops are late in their turnaround efforts. It will take more work to get their valuations off the discount rack.

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Michael Kors on Aug. 8 reported net income attributable to shareholders of $126 million in the three months ended July 1, down 14 percent from the same period a year earlier. Earnings amounted to 80 cents a share, compared with analysts’ expectations of 62 cents. Sales fell 3.6 percent to $952 million, but exceeded expectations of $919 million.

The company lifted its sales forecast for the 12 months ending March 2018 to $4.28 billion, up from $4.25 billion previously. It said designer shoemaker Jimmy Choo, which in July it agreed to acquire, would add $275 million to revenue in the second half of its financial year. The company’s shares were up nearly 20 percent at $7.33 in morning trading.

Ralph Lauren reported net income of $60 million in its fiscal first quarter ended July 1, compared with a loss of $22 million in the same period a year earlier. Excluding restructuring and other charges, adjusted earnings amounted to $1.11 a share, exceeding analysts’ expectations of 94 cents. Adjusted sales were $1.35 billion, down 13.2 percent from a year earlier but ahead of analysts’ expectations of $1.34 billion. The company’s shares were up nearly 10 percent in morning trading at $7.71.

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