Why is Michael Kors a Strong Buy? - Analyst Blog


On Jul 1, 2014, Zacks Investment Research upgraded Michael Kors Holdings Limited ( KORS ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Michael Kors is fast emerging as a giant in the luxury retail space. The company is best known for its handbags and small leather goods collection, which is rapidly gaining market share in North America and outpacing its peers. In addition, the company is presently focused on enhancing its apparel, footwear and other miscellaneous categories to widen its portfolio.

Therefore, to capitalize on its ever-increasing popularity, especially  overseas, Michael Kors has taken up store expansion in a big way. To further increase its brand visibility, the company has been collaborating with leading department/specialty retail stores in order to convert department store doors to shop-in-shops. These initiatives will continue to boost its revenues and margins, going forward.

This was well reflected in the company's stellar fourth-quarter fiscal 2014 results, following which estimates have been northbound. Moreover, this luxury retailer has delivered positive earnings surprises in the trailing four quarters with an average beat of 18.2%. The long-term expected earnings growth rate for this stock is 25.4%.   

The company's quarterly earnings per share of 78 cents came way ahead of the Zacks Consensus Estimate of 68 cents while rising 56.0% year over year. Revenues of $917.5 million handily surpassed the Zacks Consensus Estimate of $823.0 million and grew nearly 53.6% year over year. Strong performance across all segments and geographies facilitated this growth.

Moreover, comparable store sales (comps) increased 26.2%, marking the 32nd straight quarter of comps growth.

Given the robust performance, management provided an encouraging outlook for fiscal 2015. Revenues are expected in the range of $4.0-$4.1 billion, while comps are projected to increase in the high teens. Earnings are anticipated to be within $3.85-$3.91 per share.

The Zacks Consensus Estimate for fiscal 2015 and 2016 increased 3.1% to $3.94 and 3.0% to $4.70 per share respectively over the last 60 days.

Other Stocks to Consider

Other retailers worth considering include Hanesbrands Inc. ( HBI ), Vince Holding Corp ( VNCE ) and G-III Apparel Group, Ltd. ( GIII ). Hanesbrands and Vince Holding sport a Zacks Rank #1 whereas  G-III Apparel is a Zacks Rank #2 (Buy) stock.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

HANESBRANDS INC (HBI): Free Stock Analysis Report

G-III APPAREL (GIII): Free Stock Analysis Report

MICHAEL KORS (KORS): Free Stock Analysis Report

VINCE HOLDNG CP (VNCE): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: HBI , GIII , KORS , VNCE



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