Summary:
Michael Kors continues to impress with its performance. The company's second-quarter fiscal 2015 earnings of $1.00 per share and revenue of $1,056.6 million topped the Zacks Consensus Estimate and rose 40.8% and 42.7%, year over year, respectively. Driven by stellar results, the company raised its earnings projection for the fiscal 2015. The company continues with its international expansion unabated while focusing on product diversification to expand market share. The company is venturing into avenues like jewelry, fragrances, eyewear and Men's apparel apart from handbags. However, management's cautious commentary regarding margins on account of intense promotional backdrop and lowering of comparable-store sales guidance took some sheen away from the stock. This compels us to downgrade our recommendation to Neutral.
Overview:
Headquartered in Tsim Sha Tsui, Hong Kong, Michael Kors Holdings Ltd. (KORS) is a global luxury lifestyle company, founded by renowned designer Michael Kors. The company produces a diverse assortment of products including handbags, watches, accessories, jewelry and fragrance products and footwear under Michael Kors, MICHAEL Michael Kors labels.
Michael Kors operates in over 85 countries, with significant presence in some of the world's most popular cities like New York City, London, Paris, Dubai, Milan Munich, Tokyo and Hong Kong. The company operates its own stores and showcases its merchandise with finest luxury retailers as well as leading department retailers including Bloomingdales, Bergdorf Goodman, Saks Fifth Avenue, Neiman Marcus, Holt Renfrew, Harrods, Harvey Nichols and Printemps.
Michael Kors launched its e-Commerce site for North America in September this year and plans to launch e-commerce sites for Canada in 2015 followed by Europe and Japan in 2016. Michael Kors' online business was earlier managed by third party, Neiman Marcus through a partnership deal inked in 2007.
The company conducts its operations through three segments: Wholesale, Retail and Licensing.
Retail Segment (contributed 48.1% to net sales in fiscal 2014) comprises the company's retail stores. Store count as of Sep 27, 2014 is 473 outlets (excluding licensed locations).
Wholesale segment (contributed 47.6% to net sales in fiscal 2014) sells the products to leading department stores/ specialty stores across the globe through "shop in shop" to give customers who prefer to shop from these stores a more personal treatment. As of Sep 27, 2014, total number of wholesale doors was 3,960 comprising 2,548 doors across North America and 1,412 doors internationally.