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Handbag giants Michael Kors Holdings Ltd. (KORS – Get Report) and Tapestry Inc. (TPR – Get Report) this week shot out strong from the earnings gate, with both revealing progress in their turnarounds and capitalizing on buoyant consumer confidence over the holidays. Do their positive results signal a turnaround in retail overall?
Yes, some analysts say. “Consumers have had the ability to spend due to rising wages, and they have the will to spend because they’re optimistic about their own personal finances and the future of the economy,” said Neil Saunders, managing director of retail consultant GlobalData. “That benefits all, but it benefits more discretionary spending like luxury retail.”
Michael Kors beat Wall Street forecasts on fiscal third-quarter earnings released Wednesday, reporting $219.4 million of net income vs. $271.3 million in the same period last year. That’s $1.77 per share excluding one-time items — up nearly 8% from the same period last year and trouncing the $1.29 in EPS that analysts had expected. KORS also posted $1.44 billion of revenues, exceeded the $1.38 billion analysts had anticipated.
And on Tuesday, Tapestry, which owns brands like Coach and Kate Spade, reported $1.07 in earnings per share for its fiscal second quarter (excluding one-time items). That beat Wall Street forecasts of 89 cents in EPS Net sales totaled $1.79 billion, a 35% uptick from the same period last year and topping analysts’ expectations of $1.77 billion.
David Weiss, a partner at retailer consultancy firm McMillanDoolittle LLP, said Kors and Tapestry “are both riding tailwinds right…