KORS Stock Surges on Strong Results and Optimistic Guidance

Michael Kors’ fiscal 2019 guidance

As discussed in this series, Michael Kors (KORS) did better than the consensus expectations on both the top and bottom lines during the first quarter of 2019. Buoyed by the first quarter results, the management also raised full fiscal 2019 guidance. It raised the upper and the lower end of the earnings guidance by 25 cents and now expects $4.90 to $5.00 in full-year earnings per share.

Total sales are now projected at $5.125 billion versus $5.1 billion guided earlier. $580 million to $590 million could come from the Jimmy Choo acquisition. Michael Kors’ comps are likely to stay flat as guided earlier.

KORS Stock Surges on Strong Results and Optimistic Guidance

The stock price impact of results

Investors reacted positively to Michael Kors’ strong results and positive guidance. Its stock soared 6.7% on August 8 and another 3.3% on the next trading day. The company is now sitting at YTD (year-to-date) gains of 15%.

Competitor Tapestry (TPR) has also gained 8% so far this year, while apparel players PVH Corp (PVH) and VF Corporation (VFC) have surged 14% and 29%, respectively. The S&P 500 Apparel and Accessories Index has gained 18.8% YTD, outperforming the broader S&P 500 Index at 6.7%.

Analyst action

Michael Kors’ strong results were followed by a host of target price increases from Wall Street analysts. Brokers that raised their price targets included:

  • Cowen and Company raised its target price from $74 to $78.
  • Telsey Advisory raised its target price from $67 to $75.
  • Nomura raised its target price from $80 to $85.
  • RBS raised its target price from $68 to $74.
  • Canaccord Genuity raised its target price from $84 to $90.

There weren’t any rating changes for the company. ETF investors seeking to add exposure to KORS can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.4% of its portfolio in the company.