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Michael Kors (KORS) Loses Favor with Investors: Here's Why

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Investor sentiment is no more inclined toward Michael Kors Holdings Limited that has lost its sheen in the bourses. Shares of this designer, marketer, distributor and retailer of branded women’s apparel and accessories have declined roughly 12.8% in the past six months, underperforming the Zacks categorized Consumer Discretionary sector, which has gained 7.9% in the same time frame. Moreover, analysts are skeptical about this Zacks Rank #4 (Sell) stock, as evident from a declining Zacks Consensus Estimate.

So, what is hurting the stock? Analysts pointed to the macroeconomic factors such as cautious consumer spending, sluggish mall traffic and fall in tourism along with aggressive promotional environment, foreign currency fluctuations and other geopolitical issues as the primary headwinds plaguing the company.

Further, analysts are worried about margins in the near term due to heavy investments in new store openings, expansion of the existing outlets and international operations, digital flagships as well as global infrastructure. These initiatives will help reap benefits in the long run.

The stock also came under pressure following Michael Kors’ second-quarter fiscal 2017 results, wherein both the top and bottom lines declined 3.7% and 6% year over year, respectively. As a result, management lowered its fiscal 2017 projection. The company envisions fiscal 2017 total revenue to be about $4.55 billion and earnings in the band of $4.37–$4.43 per share. Earlier, management had projected revenue to be about $4.71 billion and earnings in the range of $4.56–$4.64. All these triggered a downtrend in the Zacks Consensus Estimate.

In the past 60 days, the Zacks Consensus Estimate of $4.40 for fiscal 2017 and $4.48 for fiscal 2018 has declined 17 cents and 31 cents, respectively. Moreover, the Zacks Consensus Estimate for the third quarter has dropped 15 cents to $1.62 in the same time frame.

 

 

So for time being you can shift your focus from Michael Kors to other better-ranked stocks.

Stocks to Consider

Better-ranked stocks in the retail sector include Best Buy Co., Inc. (BBY - Free Report) , The Children's Place, Inc. (PLCE - Free Report) and Burlington Stores, Inc. (BURL - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy delivered an average positive earnings surprise of 25.7% in the trailing four quarters and has a long-term earnings growth rate of 11.9%.

The Children's Place delivered an average positive earnings surprise of 36.3% in the trailing four quarters and has a long-term earnings growth rate of 10.3%.

Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.

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