(Reuters) - Fashion house Michael Kors Holdings Ltd's efforts to revamp its high-end shoe brand Jimmy Choo paid off as the company topped Wall Street's quarterly profit estimates on Wednesday and raised its full-year earnings forecast.
The company spruced up its shoe business last year with the addition of Jimmy Choo, banking on a brand whose stilettos have been worn by the rich and famous, ranging from Princess Diana to "Sex and the City" star Sarah Jessica Parker.
Once the hottest name in affordable luxury, Kors chased mass-market appeal by making its sought-after products more widely available and has spent heavily to reposition the Jimmy Choo brand, which has traditionally been seen as a brand preferred by rich older women, as more youth-focused. Their increased efforts on social media marketing campaigns also helped the brand gain momentum.
Jimmy Choo sales came in at $172.7 million, comfortably beating analysts' average estimate of $143.65 million, also benefiting from a shift in timing of certain wholesale shipments from the second quarter to the first. The brand contributed 14 percent to first-quarter sales.
"We have begun to see the benefits of our long-term growth strategy driven by our two luxury brands: Michael Kors and Jimmy Choo," Chief Executive John Idol said on a call with analysts and investors, underscoring the company's Runway 2020 plan, which focuses on product innovation, brand engagement and customer experience.
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Shares of the New York-based company rose 3.2 percent to $65.60 in pre-opening trading on Wednesday morning.
The company raised its full-year earnings forecast range by 25 cents to $4.90 to $5.00 per share, above analysts' estimates of $4.77.
Kors now expects its investments in Jimmy Choo to have a flat to 5-cent impact on its 2019 earnings, down from a prior forecast of a 5- to 10-cent hit.
Kors has also been pulling heavily discounted products off department store shelves, forcing customers to shop at its own retail outlets where they pay full price for its handbags and watches.
The move helped the company earn a profit of $1.32 per share, excluding certain items, in the quarter, easily beating the average estimate of 95 cents per share.
Not performing as well, Idol said, is Kors' watches category. The company hopes a new smartwatch offering heart rate monitoring and the ability to make payments via Google Pay will eventually be able to offset the declines in their fashion watch business.
Net income attributable to Kors rose to $186.4 million, or $1.22 per share, in the quarter ended June 30, from $125.5 million, or 80 cents per share, a year earlier.
Excluding certain items, the company earned $1.32 per share, beating the average estimate of 95 cents per share.
Total revenue rose 26.3 percent to $1.20 billion, beating the average analyst estimate of $1.14 billion, according to Thomson Reuters I/B/E/S.
(Reporting by Uday Sampath in Bengaluru and Melissa Fares in New York; Editing by Saumyadeb Chakrabarty and Jonathan Oatis)
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