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Michael Kors Rose with Increase in Revenue in Fiscal 3Q16

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Price movement of Michael Kors

Michael Kors Holdings (KORS) has a market cap of $9.2 billion. KORS rose by 23.9% to close at $50.11 per share as of February 2, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis was 32.6%, 25.1%, and 25.1%, respectively.

At times, the stock has broken the support of all moving day averages. Currently, KORS is trading 31.9% above its 20-day moving average, 25.1 % above its 50-day moving average, and 12.0% above its 200-day moving average.

The First Trust ISE ChIndia ETF (FNI) invests 5.1% of its holdings in Michael Kors. The ETF tracks an index of stocks from China and India screened by market cap and weighted in tiers. The YTD price movement of FNI was -10.9% as of February 1, 2016.

The AdvisorShares TrimTabs Float Shrink ETF (TTFS) invests 0.96% of its holdings in Michael Kors. The ETF aims to outperform the broad US equities. The actively managed, equal-weighted fund selects stocks based on trends in outstanding shares, firm leverage, and free cash flow.

The market cap of Michael Kors’ major competitors are as follows:

  • Ralph Lauren Corporation (RL) — $9.5 billion
  • Coach (COH) — $10.3 billion
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Performance of Michael Kors in fiscal 3Q16

Michael Kors (KOR) reported 3Q16 total revenues of $1,397.5 million, a rise of 6.3% compared to total revenues of $1,314.7 million in fiscal 3Q15. Revenue of retail, wholesale, and licensing rose by 11.1%, 0.30%, and 8.4%, respectively, in fiscal 3Q16 compared to revenue in fiscal 3Q15. The company’s cost of goods sold as a percentage of total revenue rose by 2.6%, and its operating income fell by 2.2% in fiscal 3Q16 compared to fiscal 3Q15.

Its net income and EPS (earnings per share) fell to $294.6 million and $1.59, respectively, in fiscal 3Q16, compared to $303.7 million and $1.48, respectively, in fiscal 3Q15.

Meanwhile, its cash and cash equivalents fell by 28.8%, and its inventories rose by 13.2% in fiscal 3Q16 compared to fiscal 4Q15. Its current ratio fell to 3.9, and its debt-to-equity ratio rose to 0.28 in fiscal 3Q16, compared to a current ratio and a debt-to-equity ratio of 6.1 and 0.20, respectively, in fiscal 4Q15.

The company has repurchased 4,682,121 of its shares for ~$200.0 million in open market transactions. As of December 26, 2015, the remaining availability under its share repurchase program was $558.1 million. It can suspend or discontinue the share repurchase program at any time.

The PE (price-to-earnings) and PBV (price-to-book value) ratios of Michael Kors were 11.8x and 5.0x, respectively, as of February 2, 2016.

Projection

Michael Kors (KOR) has made the following projections for fiscal 4Q16 and fiscal 2016. For fiscal 4Q16:

  • total revenue in the range of $1.13 billion to $1.15 billion, which includes ~$36 million of additional sales due to the 53rd week
  • comparable store sales to be flat on a reported basis and to increase in the low single digits on a constant currency basis
  • EPS in the range of $0.93–$0.97
  • tax rate of ~27.5%

The company expects foreign currency to impact net income by ~$3 million and EPS by ~$0.02.

For fiscal 2016:

  • total revenue of ~$4.65 billion
  • EPS in the range of $4.38 to $4.42
  • tax rate of 28.5%

The company expects foreign currency to impact net income by ~$38 million and EPS by ~$0.20.

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