Michael Kors Sinks, Tiffany Soars Following Earnings Reports

NEW YORK (TheStreet) -- Shares of luxury handbag, clothing, shoes and accessories retailer Michael Kors  (KORS) and jewelry and accessories retailer Tiffany & Co  (TIF) are moving in opposite directions this morning after reporting quarterly earnings. Michael Kors provided a weaker than expected outlook for the first quarter and fiscal year 2016, while Tiffany's earnings beat expectations and it backed its forecast for fiscal year 2015.

MICHAEL KORS: Michael Kors reported fourth quarter earnings per share of 90c, missing analysts' consensus estimates by 1c, on revenue of $1.08B, in line with estimates. The company said retail net sales increased 14.9% and comparable store sales decreased 5.8%. Kors' board authorized the repurchase of up to an additional $500M of its shares and extended the program through May 2017, which increases the initial repurchase authorization to $1.5B. Looking to its first quarter, Michael Kors forecast EPS of 74c-78c on revenue of $930M-$950M, significantly below analysts' consensus estimates of $1.03 and $1.09B, respectively. The company sees a low double digit SSS decease on a reported basis and a mid-single digit decrease on a constant currency basis. For FY16, the retailer forecast EPS of $4.40-$4.50 and revenue of $4.7B-$4.8B, also well below analysts' expectations of $4.70 and $5.05B, respectively. The company sees flat comparable store sales on a reported basis and a low single digit comparable store sales increase on a constant currency basis. On its conference call discussing the results, Michael Kors noted weak traffic trends in North America in the quarter, which reflected a reduction in tourist traffic, a decline in the North American watch business, as well as a 90 basis point negative impact from shipping delays associated with West Coast port issues. The retailer said it sees foreign exchange rates as a headwind this year, but believes these headwinds will "diminish" throughout the year. The company sees revenue growth accelerating in the second half of the year and believes it can deliver double digit top-line and bottom-line growth in fiscal year 2017.

TIFFANY: On the other end of the earnings spectrum, Tiffany & Co. reported Q1 EPS of 81c and revenue of $962.4M, beating analysts' consensus estimates of 70c and $918.68M, respectively. The company said worldwide SSS were 1% below last year on a constant exchange rate basis. Tiffany backed its view of "minimal" growth in FY15 EPS from the $4.20 excluding charges it earned in fiscal year 2014, compared with analysts' estimates of $4.17. The company anticipates net earnings in the second quarter declining at a more moderate rate than in Q1, and sees double digit percentage net earnings growth in the second half of the year. The retailer's outlook reflects no material changes from previously reported guidance for sales growth, store openings, effective tax rate and free cash flow. Frederic Cumenal, the company's Chief Executive Officer, commented that the FY15 forecast reflects "caution" regarding expectations for the year due to the strong U.S. dollar and other economic uncertainties. Cumenal believes the company can return to double digit EPS growth over the long-term.

ANALYST REACTION: JPMorgan downgraded Michael Kors to Neutral from Overweight and cut its price target to $60 from $70, saying that the "bad news" in Q4 was "materially worse" than expected. Cantor raised its price target on Tiffany to $97 from $86 and said the company's outlook is "conservative," adding that it is "warming up to Tiffany" but maintains a Hold rating on the stock, given its valuation.

OTHERS TO WATCH: Michael Kors' peers include Coach  (COH) and Kate Spade  (KATE), which are both lower this morning, while Tiffany & Co. peers Signet Jewelers  (SIG) and Blue Nile  (NILE) are higher in morning trading.

PRICE ACTION: Michael Kors fell nearly 21% to $47.90 in morning trading, while Tiffany shares rose more than 11% to $95.44.

Reporting by Laurie Pasternack Chan.

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