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Michael Kors share price falls despite big sales
Shares in luxury fashion brand Michael Kors dropped more than seven per cent in early trading, having risen 12 per cent before the opening bell.
The company had reported strong revenue growth in the second quarter however investors' enthusiasm was tempered with the company predicting profit margins to shrink for the year as they expand into Europe.
The New York fashion company, renowned for its luxury handbags that sell for up to $3,000, had an operating margin of more than 30 per cent and revenue of $919.2m in the first quarter ended June 28.
However, due to plans to both increase the number of shops it has in department stores and open new stores in Europe, the company expects to see a long-term operating margins drop to around 29 per cent as a result.
Chief executive John Idol said:
We never believed that a 30 per cent operating margin was a sustainable margin for the company.We need more investment, we are building this company for the long-term. We are not here for a quarter by quarter situation. We are here to build something that is very sustainable, and to do that you have to invest.In the long term, we continue to believe … this market can generate revenue of approximately $1.5 billion for Michael Kors.