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Michael Kors’s Top Line and EPS Rose in 4Q16

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Price movement of Michael Kors

Michael Kors Holdings (KORS) has a market cap of $8.2 billion. It rose by 6.6% to close at $45.55 per share on June 1, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 9.6%, -14.0%, and 13.7%, respectively, on the same day.

This means that KORS is trading 2.1% above its 20-day moving average, 9.3% below its 50-day moving average, and 0.15% below its 200-day moving average.

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Related ETFs and peers

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.25% of its holdings in Michael Kors. This ETF tracks a market-cap-weighted index of midcap growth companies selected by the Center for Research in Security Prices (or CRSP). The YTD price movement of VOT was 3.2% on June 1, 2016.

The iShares MSCI USA Quality Factor ETF (QUAL) invests 0.19% of its holdings in Michael Kors. The ETF tracks an index of US large- and mid-cap stocks, selected and weighted by high ROE, stable earnings growth and low debt-to-equity ratio, relative to the peers in each sector.

The market caps of Michael Kors’ competitors are as follows:

  • Ralph Lauren Corporation (RL) — $7.9 billion
  • Coach (COH) — $10.9 billion

Performance of Michael Kors in 4Q16 and 2016

Michael Kors (KORS) reported fiscal 4Q16 total revenue of ~$1.2 billion, a rise of 10.9% compared to total revenue of ~$1.0 billion in fiscal 4Q15. Revenue from retail and wholesale segments rose by 22.0% and 3.5%, respectively, and revenue from licensing fell by 13.6% in fiscal 4Q16 compared to fiscal 4Q15.

In fiscal 4Q16, its net income fell to $177.0 million and its EPS (earnings per share) rose to $0.98 compared to net income and EPS of $182.6 million and $0.90, respectively, in fiscal 4Q15.

During fiscal 4Q16, the company repurchased 3,690,685 of its common shares worth ~$200.0 million in open market transactions.

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Fiscal 2016 results

In fiscal 2016, KORS reported total revenue of ~$4.7 billion, a rise of 7.8% YoY (year-over-year). Its net income fell to $839.1 million, and its EPS rose to $4.44 in fiscal 2016 compared to net income and EPS of $881.0 million and $4.28, respectively, in fiscal 2015.

Michael Kors’s (KORS) cash and cash equivalents fell by 28.3%, and its inventories rose by 5.2% in fiscal 2016. Its current ratio fell to 3.8x, and its debt-to-equity ratio rose to 0.28x in fiscal 2016. This is compared to a current ratio and a debt-to-equity ratio of 6.1x and 0.20x, respectively, in fiscal 2015.

Acquisition

The company completed the acquisition of Michael Kors (HK) Limited on May 31, 2016, for $500 million in cash. Michael Kors (HK) Limited is the exclusive licensee of the company in China and other jurisdictions in Asia.

Projections

Michael Kors Holdings (KORS) has made the following projections for fiscal 1Q17 and fiscal 2017:

Fiscal 1Q17:

  • total revenue in the range of $940 million–$950 million, which includes a reduction in wholesale shipments and comparable sales to fall in the mid-single-digit range
  • non-GAAP operating expense as a percentage of total revenue to rise in the range of 6.9%–7.4%.
  • non-GAAP EPS in the range of $0.70–$0.74
  • GAAP EPS in the range of $0.62–$0.66
  • tax rate of ~21%

Fiscal 2017:

  • expected total revenue could be flat and comparable sales to fall in the low single-digit range.
  • non-GAAP operating margin of ~21.5%
  • non-GAAP EPS in the range of $4.56–$4.64
  • GAAP EPS in the range of $4.47–$4.55
  • tax rate of ~21%

For more analysis of this sector, you can visit Market Realist’s Consumer Discretionary page.

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