This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Why Michael Kors' Shares Are in the Doghouse

Michael Kors reports its fiscal first-quarter results on August 5. Analysts, according to Thomson Reuters expect the company to post earnings of 81 cents a share for the quarter, up 34%, on $853 million of revenue, up 33% from last year. For the full year, analyst expect the company to earn $3.97 a share on revenue of $4.204 billion, an increase of 27% year over year.

Unlike its competitor Coach, Michael Kors still has "significant top-line momentum" at the moment, Sterne Agee's Boruchow wrote.

"The company has been a major beneficiary of COH's struggles, with significant (and accelerating) market share gains over the past 12 months. Though U.S. sales growth has moderated somewhat and is likely to continue moderating over time, the company's domestic comps remain among the best in retail today (we model a 17% U.S. comp for Q1), and we may see persistently solid top-line results from KORS over the coming quarter," the analyst wrote in the note.

The retailer's semi-annual sale appears to be broader than last year, Boruchow wrote, suggesting that the company cannot get rid of merchandise at full price, leaving it with excess inventory, which includes not only "slow sellers" and seasonal fashion bags but core products as well.

Michael Kors sells its merchandise through retail stores as well as through wholesale accounts like Macy's (M) and Nordstrom (JWN) and through licensing agreements. Boruchow noted that in the first quarter there were "far more markdowns" at its wholesale partners than last year.

Company management warned at the end of May that gross margin in the first quarter would be slightly lower than last year and that its operating expense rate would be slightly higher as its high growth. The company continues to invest in its brand by opening stores, particularly in Europe. Management gave first-quarter guidance between 78 cents and 80 cents a share.

"Although it is tough to critique a [quarter] with a 26% comp and 64% EPS growth, one thing to note is that [gross margin] was up only 20bps compared to increases of 100bps or more in prior [quarters]. This could be a sign that markdown levels are finally beginning to normalize," Wells Fargo Securities analyst Paul Lejuez wrote in May.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
KORS $50.16 -0.14%
AAPL $94.27 -0.76%
FB $101.00 1.47%
GOOG $684.12 0.89%
TSLA $143.67 -3.09%


Chart of I:DJI
DOW 15,914.74 -99.64 -0.62%
S&P 500 1,851.86 -0.35 -0.02%
NASDAQ 4,283.5920 +14.8290 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs