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A Look at Michael Kors Holdings’s Performance in 1Q17

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Price movement

Michael Kors Holdings (KORS) has a market cap of $8.7 billion. It fell by 2.8% to close at $48.71 per share on August 10, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.63%, -6.2%, and 21.6%, respectively, on the same day.

KORS is trading 5.0% below its 20-day moving average, 2.6% below its 50-day moving average, and 2.5% above its 200-day moving average.

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Related ETFs and peers

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.58% of its holdings in Michael Kors. The ETF tracks a market-cap-weighted index of midcap growth companies selected by the Center for Research in Security Prices (CRSP). The YTD price movement of VOT was 6.9% on August 10.

The iShares MSCI USA Quality Factor ETF (QUAL) invests 0.18% 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, relative to peers in each sector.

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

  • Ralph Lauren (RL) — $8.5 billion
  • Coach (COH) — $11.1 billion

Performance of Michael Kors in fiscal 1Q17

Michael Kors reported fiscal 1Q17 total revenue of $987.9 million, a rise of 0.19% compared to total revenue of $986.0 million in fiscal 1Q16. Revenue from retail segment rose by 7.6%, and revenue from its Wholesale and Licensing segments fell by 7.0% and 20.9%, respectively, in fiscal 1Q17 compared to fiscal 1Q16.

The company’s gross profit margin and income from operations fell by 2.2% and 24.8%, respectively, in fiscal 1Q17 compared to fiscal 1Q16.

Its net income and EPS (earnings per share) fell to $147.1 million and $0.83, respectively, in fiscal 1Q17 compared to $174.4 million and $0.87, respectively, in fiscal 1Q16.

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Michael Kors’s cash and cash equivalents fell by 52.0%, and its inventories rose by 11.0% in fiscal 1Q17 compared to fiscal 4Q16. Its current ratio fell to 1.8x, and its debt-to-equity ratio rose to 0.53x in fiscal 1Q17 compared to a current ratio and a debt-to-equity ratio of 3.8x and 0.28x, respectively, in fiscal 4Q16.

During fiscal 1Q17, it repurchased 8,025,749 of its common shares worth of ~$400.0 million in open market transactions.

Projections

Michael Kors Holdings has made the following projections for fiscal 2Q17 and fiscal 2017:

Fiscal 2Q17

  • total revenue in the range of $1,070,000–$1,085,000, which includes a reduction in wholesale shipments and comparable sales to fall in the mid-single digit range
  • operating expense as a percentage of total revenue to rise in the range of 7.9%–8.2%
  • EPS in the range of $0.84–$0.88
  • tax rate of ~21%

Fiscal 2017

  • The company expects total revenue to be flat and comparable sales to fall in the mid-single digit range.
  • It expects non-GAAP operating margin of ~21.5%, which excludes the one-time acquisition related costs.
  • It expects non-GAAP EPS in the range of $4.56–$4.64.
  • It expects GAAP EPS in the range of $4.51–$4.59.
  • It expects a tax rate of ~21%.

Now, we’ll take a look at International Paper (IP).

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