Michael Kors’ stock performance
Michael Kors’ (KORS) stock price fell 8.5% after the company reported its fiscal 4Q17 results on May 31, 2017. Although the company delivered a top-line and bottom-line beat, its weak guidance for fiscal 1Q18 triggered the stock’s decline.
On June 1, 2017, the company had a year-to-date (or YTD) loss of 23%. In comparison, handbag competitor Coach (COH) delivered a YTD gain of 32%. Smaller rival Kate Spade (KATE) is also in the red with a YTD loss of ~2%.
Most of the apparel sector is also in the red. The biggest apparel sector losers are Under Armour (UAA), Lululemon Athletica (LULU), and Ralph Lauren (RL), which are down 32%, 25%, and 23%, respectively.
The S&P 500 Apparel and Accessories Index is down ~2.3% YTD, underperforming the S&P 500 Index (SPX), which has gained 6.7% year-to-date.
Michael Kors (KORS) has a strong cash flow position. The company ended fiscal 4Q17 with cash and cash equivalents of $228 million and net debt of -$95 million, indicating that its balance sheet cash is greater than the total debt outstanding.
The company uses its strong balance sheet position to enhance investor returns. Although KORS doesn’t offer dividends, it frequently repurchases its shares. During fiscal 4Q17, the company bought back 6.6 million shares for ~$250 million. The company’s board of directors announced a new $1 billion share repurchase program on May 25, 2017.
Due to its high buyback ratio, Michael Kors (KORS) is included in the SPDR S&P 500 Buyback ETF (SPYB). SPYB is a 100-company index that focuses on stocks that have the highest buyback ratio over the last 12 months. SPYB invests ~1% of its portfolio in KORS.