Michael Kors Holdings Ltd.
) hit a new 52-week high of $57.35 on September 21, as shares have
been gaining momentum due to the increased outlooks for the second
quarter and fiscal 2013. Shares of this Zacks #1 Rank (Strong Buy)
apparel and accessories retailer have more than doubled in price
since the beginning of the year, riding on the success of its
multi-channel strategy, unique design and strong infrastructure.
On September 20, Michael Kors updated its second quarter and fiscal
2013 guidance, raising the projections for earnings and sales while
throwing light on its quarter-to-date comparable store results.
The company now expects earnings for the upcoming quarter between
38 cents and 40 cents per share, compared to the earlier forecast
of 33 cents to 35 cents. The sales guidance range was raised to
between $510 million and $520 million, versus the earlier
projection of $490 million - $500 million.
For fiscal 2013, the company expects earnings between $1.39 and
$1.41 per share, compared to the previous guidance of $1.32 -
$1.34. Sales for the year are expected at $1.85 billion - $1.95
billion, against the earlier projection of $1.8 million - $1.9
million. The company's guidance is based on comparable store sales
of about 30%, increasing from the earlier guidance of a mid-
to-high 20% range.
Quarter-to-date, comparable store sales in the retail segment
increased 45.1%, driven by strength across all regions. By region,
comparable store sales were up 45.1% in North America, 49.7% in
Europe and 16.0% in Japan.
FQ1 Earnings Grow
On August 14, Michael Kors released impressive fiscal 2013
first-quarter results, including an earnings beat, solid sales
growth and an encouraging future outlook. Earnings per share of 34
cents outperformed the Zacks Consensus Estimate by 70.0% and grew
161.5% year over year.
Total revenue jumped 71% year over year to $414.9 million,
surpassing the Zacks Consensus Estimate of $368 million. Sturdy
sales growth in each of the company's business segments - retail,
wholesale and licensing segments - and across all geographies drove
Sales at the company's retail segment grew 76% on the back of a
37.3% rise in comparable store sales and the opening of 76 new
stores during the quarter. Net sales at the wholesale and licensing
segments grew 66% and 61%, respectively.
Gross profit was up 83% to $251.0 million, while gross margin
expanded 420 basis points to 60.5%. Operating income in the quarter
totaled $111.9 million, up 149% year over year, with operating
margin up 850 basis points to 27.0%.
Earnings Momentum to the Upside
Michael Kors' estimates for both fiscal 2013 and fiscal 2014 have
shown significant upside in the last 7 days, as estimates were fine
tuned with the company's raised forecast. The Zacks Consensus
Estimate for fiscal 2013 grew nearly 5.2% to $1.42 per share,
whereas the Zacks Consensus Estimate for fiscal 2014 showed a 2.4%
upside to $1.74. The raised estimates for fiscal 2013 and 2014
reflect year-over-year growth of nearly 75.6% and 22.1%,
Valuation Premium Justified
Michael Kors currently trades at a forward P/E of 38.8x, reflecting
a significant premium to the peer group average of 14.7x.
Similarly, on a price-to-book basis, shares are trading at a
premium of 19.6x compared with 4.0x for the peer group.
However, given the company's compelling fundamentals, the premium
is justified and well supported by its long-term estimated EPS
growth rate of 32.1%. Moreover, the company's trailing 12-month ROE
of 33.0%, against 19.7% for the peer group, suggests that the
company actively and efficiently reinvests its earnings compared to
its peer group.
The charts of Michael Kors' show steady growth with a couple of
peaks and notches since the start of calendar year 2012. Shares of
this apparel store retailer have gained a robust 100.7%
year-to-date and currently trade near its 52-week high.
Additionally, shares of this newly listed stock are currently
trading above its 50-day moving average of $50.89.
Moreover, Michael Kors has consistently outperformed the S&P
500 year-to-date. The 100.7% year-to-date return for the stock
compares with the S&P 500's return of only 14.1%. Volume is
fairly strong, averaging roughly 3,189K daily.
Founded in 1981 and headquartered in Tsim Sha Tsui, Hong Kong,
Michael Kors is a well-known designer of luxury accessories and
ready to wear products. The company sells branded women's apparel
and accessories, and men's apparel. The company markets its
products primarily under the MICHAEL KORS, MICHAEL MICHAEL KORS,
and KORS MICHAEL KORS labels. Products under these labels include
accessories, footwear, watches, jewelry, men's and women's ready to
wear, and a full line of fragrance products. As of June 30, 2012,
the company operated a total of 321 stores worldwide, comprising
253 company-operated retail stores and 68 retail stores operated by
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades are
about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called
MICHAEL KORS (KORS): Free Stock Analysis Report
To read this article on Zacks.com click here.