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Suravi Thacker
Suravi Thacker
Articles (157) 

Michael Kors Is a Solid Buy

June 12, 2014 | About:

Fashion retail has got a new direction with the debut of Michael Kors (NYSE:KORS), one of the leading fashion retailers in North America. It has indeed given a blow to all other industry players as it continues to snatch away market share. The company’s amazing and fancy collections have become customer favorites. This has led to more than 40% growth in revenue each quarter.

This happened once again when Kors reported its fourth quarter numbers recently, which beat the Street’s estimates by leaps and bounds. The results rocked the Street, forcing its share price to move north.

The Blockbuster Quarter

Revenue for the quarter jumped a whopping 53.6% over last year, clocking in at $917.5 million. This growth was helped by same store sales growth of 26%, which is remarkable since most of the retailers found it difficult to even register a positive same-store sales growth. Retailers suffered mainly because of extremely cold weather which led to store closures as well as lower store traffic. However, Kors was unmoved as evidenced from its great numbers.

Also, the retailer opened 22 new stores which helped in growing revenue higher. The fashion retailer witnessed growth across all categories and regions during the period, especially in North America. Its revenue from the Wholesale and Retail segment surged 55% and 50%, respectively.

In fact, revenue from the North American region surged 43% over last year, helped by same store sales growth of 20.6%. On the other hand, peer Coach (NYSE:COH) is finding it extremely difficult to drive demand in the North American region and reported a decline of more than 20% in its last reported quarter. However, International market is where Coach is doing well with a 14 % increase in sales. Also, Coach plans to launch its new Stuart Vevers’ collection in September which should lure customers.

Delving Deeper

Additionally, Kors’ performance in the international market was also commendable. Sales in Europe climbed 125.3% over last year. This is an exceptionally great growth and was driven by a 62.7% increase in same-store sales. Europe witnessed a growing demand for watches and handbags. Therefore, Europe now makes 18% of total revenue, much higher than 10% last year.

Earnings also increased to $0.78 per share from $0.50 per share in the prior year’s quarter. The company has been able to register growing bottom line because of its premium prices charged and efficient cost management. In fact, its margins also expanded during the quarter.

The Road Ahead

In addition to a blockbuster quarter, Michael Kors posted a great outlook for the year which pleased its investors. The company estimates to cross the $4 billion mark with earnings per share of $3.85 to $3.91 per share.

Moreover, it expects to expand its international presence further into markets such as China and India. In fact, China has been one of the key drivers of Coach’s growth story. Therefore, entering the region would give a blow to Coach’s market share.

Final Thoughts

Michael Kors has been an exceptional performer since its inception in December 2011. Its products such as accessories, watches and handbags have resonated well with customers. This was the case not only in America, but also in other markets such as Europe. Therefore, the retailer’s move to enhance its footprint globally should pay off soon. Moreover, it has been able to outperform other industry players. Hence, owning this company is the perfect thing to do.

Rating: 1.3/5 (3 votes)



Jsoumilas premium member - 3 years ago

KORS, based on any valuation metric seems to be trading at a lofty level. Anything that may go wrong could impact the price of this company. Being a conservative investor, I don't see the margin of safety on this company.

Amirojuve - 3 years ago    Report SPAM

It seems to me that you just in love with this stock, the stock is expensive, it may work out well but it may not and once the EPS will start to go lower then the share price is gonna fall even to 10$ depends if the usa economy will be in a recession, too risky, COH is way more attractive!

coach is still way more popular than kors:


google trends can help you with analyzing the trends in those industries

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