One Reason Michael Kors (KORS) Stock Closed Lower Today
NEW YORK (TheStreet) -- Michael Kors (KORS) stock closed down by 4.15% to $41.31 on Wednesday, after Macy's (M) weaker-than-expected third quarter sales highlighted slowing growth in brands and center core that will likely weigh on retailers such as Michael Kors.
Before the market open today, Macy's reported third quarter sales short of analysts' estimates, and lowered its forecast for full-year earnings.
The disappointing financial results indicate that center core businesses are growing slower than they were in past years, financial services firm Cowen said, Barron's reports.
Additionally, a number of Macy's big brands faced weaknesses during the quarter, Cowen notes, according to Barron's.
Other companies Cowen said might be affected by Macy's disappointing results include Kohl's (KSS), Urban Outfitters(URBN) and Tiffany (TIF), according to Barron's.
Separately, TheStreet Ratings team rates MICHAEL KORS HOLDINGS LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate MICHAEL KORS HOLDINGS LTD (KORS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 15.9%. Since the same quarter one year prior, revenues slightly increased by 6.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- KORS's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, KORS has a quick ratio of 2.00, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for MICHAEL KORS HOLDINGS LTD is rather high; currently it is at 58.80%. Regardless of KORS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, KORS's net profit margin of 17.09% compares favorably to the industry average.
- KORS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 39.94%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed compared to the Textiles, Apparel & Luxury Goods industry average, but is greater than that of the S&P 500. The net income has decreased by 6.7% when compared to the same quarter one year ago, dropping from $206.99 million to $193.14 million.
- You can view the full analysis from the report here: KORS
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.