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Is Michael Kors A Fashionable Investment?

April 05, 2014 | About:
rusticnomad

rusticnomad

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Michael Kors (KORS) performed exceptionally well in the third quarter, beating the consensus estimate. The stock has been soaring since its IPO launch in 2011, with an increase of more than 300% and it seems that it still maintains its growth trajectory. In spite of tough competition from peers such as Coach, Kors is doing good and the company is positive about its future. Let us have a detailed analysis of this firm.

Quarterly performance

Revenue for third quarter rose 59% to $1.01 billion, exceeding the analyst estimate of $859.9 million, and its comp sales also increased 27.5%. Its international performance was led by Europe and Japan, with revenues up 144% 54% respectively. The strategic moves adopted by Kors played a big role in the company’s outstanding performance in the previous quarter.

The conversion of its department store doors to shop-in-shops caused the net sales to increase 68%. This further led to increased demand for luxury accessories and footwear products by enhancing the visibility of its products on the shelves.

Expansion plans

It has plans to open 57 new retail stores in North America, while in the wholesale segment; the company will continue converting department doors into shop-in-shop store for accessories, footwear, women's wear, and menswear.

Adding to its international growth Kors plans to open new retail stores in Europe. Its European customers are pleased with its products, which caused a 140% growth in its revenue in the third quarter. Continuing with the growth momentum it plans to open 36 new stores in Europe in 2014, while the company anticipates the numbers to increase to 200.

Kors had also introduced fragrance and beauty products, which proved to be a success in Europe. This can act as a catalyst for increasing its brand awareness in the Euro Zone. Apart from Europe the company also has plans to expand into Asia and Middle East.

With this in mind Kors opened its first flagship store in China on a 5,800 square feet area. Looking forward the company anticipates China to be one of the biggest growth drivers and expect to increase the store count up to 200. China’s luxury market was estimated to be around $ 19 billion in 2013 and Kors would do its best to tap this huge potential.

However, even in China, Kors has to face tough competition from Coach. Coach’s handbags have great demand from Chinese customers, which led its same store sales to increase 10% in the three months ending December. Its designer bags have been a hit in China for long, and it is looking to use its presence in the nation by pricing them correctly. In a bid to attract more customers

Kors is also planning to enhance its travel business by opening more retail shops and standing shops at airports, particularly in Asia. In addition, the company is also launching a new website to enhance customer interface and interaction. Besides luxury apparels, Kors’ jewelry business is also doing good. It also plans to expand the jewelry segment in its retail and wholesale stores

Conclusion

Kors had an outstanding performance so far and looking forward the management is optimistic about its future prospects mainly in Europe and China. Kors has several good points about its business and investors should definitely consider buying it.


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