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Michael Kors' Store Expansion Intact; Dismal Outlook a Woe

In an effort to drive its top line, Michael Kors Holdings LimitedKORS is focusing on store expansion. In the second quarter, the company opened 39 new stores, including 23 in U.S, 12 in Europe and 4 in Japan. At the end of the second quarter, Michael Kors operated 804 stores across the globe, inclusive of licensed locations. Given the scope for high profitability from company-owned stores, management is laying more emphasis on opening retail stores.

Michael Kors, which shares space with Hanesbrands Inc. HBI , Ralph Lauren Corporation RL and G-III Apparel Group, Ltd. GIII , continues to see opportunities for 500 Men's stores globally. Also, bringing in new collection in 2016 should help to alleviate weakness in the watch business. To make the most of the holiday season, the company has designed a compelling assortment that includes current hot fashion trends like backpacks, small leather goods, cross bodies, active footwear and watches. In spring 2016, the company will unveil its largest handbag collection. All these initiatives bode well for the company's top-line growth.

On the flip side, as digital commerce picks up pace and currency headwinds intensify, comps will take a hit. Consequently, the company has lowered its fiscal 2016 outlook. Management now expects fiscal 2016 revenues to be around $4.60 billion to $4.65 billion compared to $4.7 billion to $4.8 billion expected earlier. Further, comps (on constant currency) are projected to decrease in the low-single digits, whereas on reported basis comps are expected to decline in the mid-single digits.

Earnings are now expected to be in the range of $4.38-$4.42 per share compared to the range of $4.40-$4.50 per share projected earlier. The company expects earnings to take hit of $0.19 from currency headwinds. In addition, waning traffic, reduced tourism in key markets and geopolitical turmoil are added concerns.

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RALPH LAUREN CP (RL): Free Stock Analysis Report

HANESBRANDS INC (HBI): Free Stock Analysis Report

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

MICHAEL KORS (KORS): Free Stock Analysis Report

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


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

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