uploads/2017/01/kors-pm.png

Piper Jaffray Downgrades Michael Kors Holdings to ‘Neutral’

By

Updated

Price movement

Michael Kors Holdings (KORS) has a market cap of $7.1 billion. It rose 0.23% to close at $43.08 per share on January 3, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.56%, -6.8%, and 0.23%, respectively, on the same day.

KORS is trading 6.0% below its 20-day moving average, 9.5% below its 50-day moving average, and 12.4% below its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The Vanguard Mid-Cap Growth ETF (VOT) invests 0.58% of its holdings in Michael Kors. The YTD price movement of VOT was 0.76% on January 3.

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

  • Ralph Lauren (RL) — $7.5 billion
  • Coach (COH) — $10.0 billion

KORS’s rating

On January 3, 2017, Piper Jaffray downgraded Michael Kors Holdings’s rating from “overweight” to “neutral.” It also lowered the stock’s price target from $60.00 to $48.00 per share.

TheStreet reported on January 3 that Piper Jaffray analysts wrote in a note, “While we believe in the global scale of the Michael Kors brand and note there were some successes over the holiday (All Access smartwatches), the handbag category has remained excessively promotional and we believe it underwhelmed, particularly at wholesale, from a conversion perspective.”

Article continues below advertisement

Performance of Michael Kors in fiscal 2Q17

Michael Kors (KORS) reported fiscal 2Q17 total revenues of $1.09 billion, a fall of 3.5% compared to total revenues of ~$1.1 billion in fiscal 2Q16. The company’s gross profit margin expanded 40 basis points, and its income from operations as a percentage of total revenues narrowed 550 basis points in fiscal 2Q17 compared to fiscal 2Q16.

Its net income and EPS (earnings per share) fell to $160.9 million and $0.95, respectively, in fiscal 2Q17 compared to $193.1 million and $1.01, respectively, in fiscal 2Q16.

Michael Kors’s cash and cash equivalents fell 73.4%, and its inventories rose 27.2% between fiscal 4Q16 and fiscal 2Q17.

Projections

Michael Kors (KORS) made the following projections for fiscal 3Q17:

  • total revenues in the range of ~$1.37 billion–$1.38 billion
  • operating margin of ~25.0%
  • EPS in the range of $1.61–$1.65

The company made the following projections for fiscal 2017:

  • expected total revenues of ~$4.6 billion
  • non-GAAP[1. generally accepted accounting principles] operating margin of ~20.7%, which excludes its one-time acquisition-related costs
  • non-GAAP EPS in the range of $4.37–$4.43

In the next part, let’s discuss Steven Madden (SHOO).

Advertisement

More From Market Realist