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Key Insights from Michael Kors’s 3Q18 Results

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Feb. 13 2018, Published 1:19 p.m. ET

Snapshot of the series

Michael Kors Holdings Limited (KORS) reported its 3Q18 results on February 7, 2018. The results relate to the three-month period ending December 30, 2017.

Like the first two quarters of fiscal 2018, Michael Kors did better than Wall Street analysts’ revenue and earnings expectations. Michael Kors’s EPS (earnings per share) stood at $1.77—$0.48 more than analysts’ estimates. The revenue improved 6.5% YoY (year-over-year) to $1.44 billion and beat the consensus by $60 million. In this series, we’ll discuss Michael Kors’s 3Q18 performance.

Michael Kors’s stock price increased ~1% after the earnings were released on February 7. However, the stock price tumbled 9.1% the next trading day. Now, Michael Kors is sitting at year-to-date losses of 5%.

In July 2017, Michael Kors 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.

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Valuations update and stock recommendation

Currently, Michael Kors is trading at a one-year forward PE (price-to-earnings) ratio of 13.8x—compared to a three-year average of 11.2x. The company is trading at the upper end of its 52-week PE range of 8.8x–14x. Rival Tapestry (TPR) trades at a premium to Michael Kors. Tapestry is valued at 16.3x the next 12-month earnings.

Michael Kors trades at a discount to several other apparel and accessories stocks. PVH Corp (PVH), VF Corp (VFC), and Ralph Lauren (RL) trade at 14.8x, 21.0x, and 15.2x, respectively.

ETF investors seeking to add exposure to Michael Kors can consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF). CNDF invests 2.2% of its portfolio in Michael Kors.

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