Can Michael Kors Beat Earnings Expectations Once Again?



Snapshot of the series

The New York–based Michael Kors Holdings Limited (KORS) is slated to report its 2Q18 results on Wednesday, February 7.

Wall Street has projected a 22% YoY (year-over-year) decline in the company’s earnings to $1.28 per share on total sales of $1.34 billion (+1.6% YoY). Kors cruised ahead of Wall Street’s earnings and revenue estimates during the first two quarters of the year.

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Valuations update

KORS is currently trading at a one-year forward price-to-earnings ratio of 17.2x, which is the upper end of its 52-week PE (price-to-earnings) range. It’s also expensive compared to its three-year average PE of 11.1x. Competitor Tapestry (TPR) trades at a slight premium to KORS. The company is valued at 19 times its next-12-months’ earnings.

KORS is also cheaper than apparel and accessories stocks V.F. Corp (VFC) and Ralph Lauren (RL), which are currently trading at 24.3x, and 20.7x, respectively.

About Michael Kors

Established in 1981, Michael Kors is a luxury fashion brand that designs and sells handbags, ready-to-wear apparel, and fashion accessories. The company operates close to 840 retail stores, including concessions in more than 100 countries.

In July 2017, the company announced the acquisition of Jimmy Choo for $1.2 billion. Jimmy Choo is a premier luxury footwear and accessories brand with a strong presence in Europe, Asia, and North America.

ETF investors seeking to add exposure to KORS can consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF), which invests 2.4% of its portfolio in the company.

In this series

This series offers a preview of Michael Kors’s 3Q18 results. In parts 2 and 3 of this series, we’ll discuss the company’s recent financial performance and expectations from the coming quarter. In Part 4, we’ll talk about its stock market performance and valuations, and in Part 5, we’ll talk about the recent analyst action.


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