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Will Michael Kors' Growth Initiatives Help Lift the Stock?
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Michael Kors Holdings Limited has undertaken strategic initiatives such as expansion of product offerings, increase in global footprint and enhancement of the e-Commerce platform to bring itself back on the growth trajectory. This seems vital given the stock’s performance in the last six months.
Michael Kors’ shares have plunged over 21.6% in the past six months compared with the Zacks categorized Textile – Apparel Manufacturing industry‘s decline of 17.6%. In fact, its shares fell 10.8% since it reported third-quarter fiscal 2017 results. This can primarily be attributed to year-over-year decline in the company’s top line and bleak outlook.
However, a glimpse of this Zacks Rank #3 (Hold) company’s price movement over the past one month shows that its shares have gained 2.3% against the industry’s fall of 0.5%.
Let’s Delve Deeper
Michael Kors has been persistently focusing on store expansion, along with building shop-in-shops in order to drive top-line growth. Management is putting more emphasis on opening retail outlets and enhancing men’s business either through standalone stores or by adding men's offering in the existing lifestyle outlets. Moving ahead, it remains optimistic about Michael Kors’ ACCESS wearable technology line of watches and fitness trackers.
Moreover, we believe that Michael Kors is well poised to gain from Asia. Notably, in third-quarter fiscal 2017, total retail net sales in Asia soared about 300% on account of revenue from the acquisition of the Greater China as well as Korea operations. Going forward, management stated that it will continue with its expansion drive in Asia and also believes that it has a $1 billion opportunity over the long term.
Notably, Michael Kors’ earnings have outpaced the Zacks Consensus Estimate for the seventh straight quarter when it reported third-quarter results. However, its revenue came in line with the Zacks Consensus Estimate and also declined year over year. Management stated that results were hurt by comparable sales performance of North American and European markets. According to the company, headwinds in the aforementioned markets will continue throughout the spring season. This can be attributed to sluggish mall traffic, currency fluctuation and uncertainty surrounding certain political changes in European countries.
Consequently, management did not provide an encouraging outlook. Michael Kors now envisions fiscal 2017 earnings in the band of $4.15–$4.19 per share, down from $4.44 reported in the prior year. Management also projects earnings in the range of 68–72 cents for the final quarter, down from 98 cents posted in the year-ago period. Earlier, it had projected fiscal 2017 earnings in the range of $4.37–$4.43 per share.
Michael Kors now forecasts fiscal 2017 total revenue to be approximately $4.48 billion, down from about $4.55 billion, estimated earlier.
Bottom Line
We believe Michael Kors is trying all means to uplift its performance and become investors’ favorite. However, these endeavors might take time.
Coach, with a long-term earnings growth rate of 10.6% has increased 10.7% in the past three months.
Adidas, with a long-term earnings growth rate of 26.1% has surged a whopping 60% in the past one year.
Steven Madden has a long-term earnings growth rate of 12%. Also, the stock has posted an average earnings beat of 1.4% in the trailing four quarters.
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Will Michael Kors' Growth Initiatives Help Lift the Stock?
Michael Kors Holdings Limited has undertaken strategic initiatives such as expansion of product offerings, increase in global footprint and enhancement of the e-Commerce platform to bring itself back on the growth trajectory. This seems vital given the stock’s performance in the last six months.
Michael Kors’ shares have plunged over 21.6% in the past six months compared with the Zacks categorized Textile – Apparel Manufacturing industry‘s decline of 17.6%. In fact, its shares fell 10.8% since it reported third-quarter fiscal 2017 results. This can primarily be attributed to year-over-year decline in the company’s top line and bleak outlook.
However, a glimpse of this Zacks Rank #3 (Hold) company’s price movement over the past one month shows that its shares have gained 2.3% against the industry’s fall of 0.5%.
Let’s Delve Deeper
Michael Kors has been persistently focusing on store expansion, along with building shop-in-shops in order to drive top-line growth. Management is putting more emphasis on opening retail outlets and enhancing men’s business either through standalone stores or by adding men's offering in the existing lifestyle outlets. Moving ahead, it remains optimistic about Michael Kors’ ACCESS wearable technology line of watches and fitness trackers.
Moreover, we believe that Michael Kors is well poised to gain from Asia. Notably, in third-quarter fiscal 2017, total retail net sales in Asia soared about 300% on account of revenue from the acquisition of the Greater China as well as Korea operations. Going forward, management stated that it will continue with its expansion drive in Asia and also believes that it has a $1 billion opportunity over the long term.
Notably, Michael Kors’ earnings have outpaced the Zacks Consensus Estimate for the seventh straight quarter when it reported third-quarter results. However, its revenue came in line with the Zacks Consensus Estimate and also declined year over year. Management stated that results were hurt by comparable sales performance of North American and European markets. According to the company, headwinds in the aforementioned markets will continue throughout the spring season. This can be attributed to sluggish mall traffic, currency fluctuation and uncertainty surrounding certain political changes in European countries.
Consequently, management did not provide an encouraging outlook. Michael Kors now envisions fiscal 2017 earnings in the band of $4.15–$4.19 per share, down from $4.44 reported in the prior year. Management also projects earnings in the range of 68–72 cents for the final quarter, down from 98 cents posted in the year-ago period. Earlier, it had projected fiscal 2017 earnings in the range of $4.37–$4.43 per share.
Michael Kors now forecasts fiscal 2017 total revenue to be approximately $4.48 billion, down from about $4.55 billion, estimated earlier.
Bottom Line
We believe Michael Kors is trying all means to uplift its performance and become investors’ favorite. However, these endeavors might take time.
Meanwhile, you can focus on better-ranked stocks like Coach, Inc. , Adidas AG (ADDYY - Free Report) and Steven Madden, Ltd. (SHOO - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coach, with a long-term earnings growth rate of 10.6% has increased 10.7% in the past three months.
Adidas, with a long-term earnings growth rate of 26.1% has surged a whopping 60% in the past one year.
Steven Madden has a long-term earnings growth rate of 12%. Also, the stock has posted an average earnings beat of 1.4% in the trailing four quarters.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>