The firm said it lowered its rating on the luxury handbag, clothing, shoes, and accessories retailer as the company is facing an increase in competition, resulting in more discounted merchandise.
"We are increasingly concerned about the level of promotions in the premium department store channel," Credit Suisse said.
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"The percent of [stock keeping Units] on sale in premium department stores spiked from 5% in October to 31% in December. We found Michael Kors handbags to have the highest average percentage of SKUs on sale...we are also concerned to find that 65% of handbags on the company owned website were discounted in December, making it the most promotional company ecommerce site out of the six brands we studied," Credit Suisse added.
The firm said it is worried Michael Kors' discounting will "spill over" into the mid-tier channel in 2015.
Separately, TheStreet Ratings team rates MICHAEL KORS HOLDINGS LTD as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate MICHAEL KORS HOLDINGS LTD (KORS) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 17.1%. Since the same quarter one year prior, revenues rose by 42.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- KORS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.17, which clearly demonstrates the ability to cover short-term cash needs.
- MICHAEL KORS HOLDINGS LTD has improved earnings per share by 40.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MICHAEL KORS HOLDINGS LTD increased its bottom line by earning $3.21 versus $1.97 in the prior year. This year, the market expects an improvement in earnings ($4.18 versus $3.21).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 42.0% when compared to the same quarter one year prior, rising from $145.81 million to $206.99 million.
- The gross profit margin for MICHAEL KORS HOLDINGS LTD is rather high; currently it is at 61.05%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 19.59% is above that of the industry average.
- You can view the full analysis from the report here: KORS Ratings Report