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Michael Kors Holdings Ltd (NYSE: KORS) Stock Up 18% With This Winning Retail Formula

Michael Kors Holdings Ltd (NYSE: KORS) stock has gained nearly 18% today to $90.44 after delivering a strong earnings report this morning (Tuesday).

Michael Kors announced a 59% increase in revenue for its fiscal 2014 Q3 report ending Dec. 28, 2013, compared to Q3 2013, marking the 31st consecutive quarter of growth for the global luxury brand.

Kors' quarterly earnings per share (EPS) climbed 73.4% to $1.11 per share, shattering the consensus estimates of $0.86. Wholesale net sales increased 68.2% to $461.4 million.

Kors' success took a bite out of competitors – retail net sales increased 51.3% to $503.4 million, versus a 27.8% increase in comparable store sales.

KORS stock responded by soaring 20% in premarket trading. Today's Kors stock gain follows a 50% gain in 2013.

Three factors set Kors – and KORS stock – apart from its retail counterparts:

Why KORS Stock Is Soaring

No. 1: Kors has kept a bricks-and-mortar appeal with customers.

A growing number of retail companies have had to shut down hundreds or thousands of their physical locations, as consumers switch to online shopping.

But Michael Kors sees the need to open more stores.

When Kors went public back in December 2011, the designer was clear in his vision to more than double the North American store fleet to 400 and to quadruple department store boutiques to more than 1,000.

The company has been true to that goal. As of Dec. 28, 2013, KORS operated 395 retail stores, including concessions, compared to 297 retail stores, including concessions, at the end of 2012. And that's not including an additional 138 retail stores operated through licensing partners.

That makes 533 Michael Kors stores across the globe at the end of Q3 2014.

No. 2: Kors posts strong holiday season while others slumped.

The retailer shunned the promotional/discount ploy used by many of its competitors during the holidays – and third-quarter profit soared 77%. Chief Executive Officer and Chairman John D. Idol attributed this rise mostly to holiday shopping.

"Michael Kors enjoyed an outstanding holiday season, as global brand awareness continued to drive strong demand for our luxury product," Idol said at earnings release.

Compare Kors' soaring holiday numbers to competitor Coach (NYSE: COH), which released Q2 2014 earnings in January…

Coach revealed a 9% drop in North American sales and a 6% drop in revenue over the same quarter last year. CEO Victor Luis attributed the decline to weak bag and accessory sales over the holiday season.

And retail competitor Best Buy (NYSE: BBY) also suffered a holiday season revenue loss of 2.6% from the same period last year. It said its promotions cut heavily into holiday season sales.

"KORS is gaining market share at a dramatic pace across numerous categories," Cowen and Co analyst Faye Landes wrote in a note. "Clearly not all companies had a lousy holiday season."

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No. 3: Kors has something no one else does: Founder Michael Kors' vision and branding.

But Idol gives much credit to "the creative vision of Michael Kors," his team, and the "distinctive jet-set in-store experience" customers get when they shop at Kors stores.

Michael Kors offers something unique that other luxury goods brands don't – it's cast a wide net in terms of both price points and breadth of offerings.

The brand has created varied price points by taking a bifurcated approach to fashion, offering couture and affordable collections. You can see Kors designs draped on the likes of Cate Blanchett or on Meryl Streep at awards shows just last month. But you can also go to your local mall and find Kors items at accessible prices.

The effect is exceptional. In its earnings release today, the company attributed a massive 144% European revenue gain to a "growing brand awareness" and demand across Europe – two factors driven by red carpet advertising coupled with accessibility to the average consumer.

Kors also offers every clothing item wanted by its target consumer. The company attributed the Q3 North American revenue increase of 51% to $863 million to its accessories and watch offerings, both rapidly expanding sectors within Kors.

"There's still money being spent in these markets and consumers are responding to the right product, presented in the right way and delivered in the fashion environment," Idol said on a post-earnings call.

Analysts agree. "Once upon a time, Coach was the go-to brand in accessible luxury, a superlative KORS now holds," Randal Konik, analyst at brokerage Jefferies & Co, wrote in a note.

Investors have noticed Kors' success. After earnings released before opening bell, KORS stock surged 21.56% in pre-market to $93.20 per share.

Leave us a Facebook comment or tweet us @Moneymorning and tell us what you think about the #KORS brand.

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Join the conversation. Click here to jump to comments…

  1. catherinekylie | April 3, 2014

    They must do something to counter its competitor KORS. May be Introduce new products. Even though they don’t have substantial money in cash available, but they should invest in capital expenditures to make sure it stands premium with its rivals.

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