We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Michael Kors Strategic Growth Plan Combat Comps Woes?
Read MoreHide Full Article
Michael Kors Holdings Limited‘s positive earnings surprise, store optimization and global expansion bode well. Further, the company’s decision to acquire Jimmy Choo gives an indication that it is focused on international fashion brands. However, waning top-line along with dismal comps and wholesale segment performance continues to act as headwinds. The company has taken several strategic initiatives to bring both the top line and comps back on growth trajectory.
Turn Around Strategy
Michael Kors’ acquisition of Jimmy Choo will help diversify portfolio and tap international markets. The buyout is likely to be accretive in the low-single digits in fiscal 2020. In order to drive top-line growth, the company has been focusing on store expansion. In fiscal 2016, the company opened 142 new stores, which included 47 in the Americas and 95 worldwide. In fiscal 2017, it opened 159 net new stores openings, which includes 111 outlets related to the acquisition of the earlier licensed operation in Greater China. Given the scope for high profitability from company-owned stores, management is putting more emphasis on opening retail outlets.
Sales from Asia have shown tremendous improvement. The company had stated that it will continue with the expansion drive in Asia and also believes it has an opportunity worth $1 billion in the long term.
In an effort to increase the profitability in stores fleet, the company has announced its intention to close between 100 to 125 full priced retail stores over the next two years. Moreover, the company stated that it will incur one-time costs of nearly $100-$125 million related to store closures. Meanwhile, it anticipates annual saving of $60 million due to store closures as well as fall in depreciation and amortization related with these impairment charges.
Hurdles to Cross
Michael Kors’ wholesale segment continues to pose concern. In first-quarter fiscal 2017, wholesale segment sales declined 23% to $303.6 million primarily due to dismal performance of Americas, European and Asia region, while on a constant currency basis, it fell 22.7%. In the fourth, third, second and first quarter of fiscal 2017, wholesale segment sales declined 22.8%, 17.8%, 18.4% and 7%, respectively.
Stiff competition, falling comps, aggressive promotional environment and waning mall traffic are making things tough for Michael Kors. We noted that comparable sales had fallen 5.9% in the first quarter of fiscal 2018, following declines of 14.1%, 6.9%, 5.4% and 7.4% in the fourth, third, second and first quarters, respectively.
Michael Kors which shares space with Gildan Activewear Inc. (GIL - Free Report) , PVH Corp. (PVH - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) is struggling with top-line performance. After registering meager growth of 0.2% in first-quarter fiscal 2017, it had declined 3.7%, 3.2% and 11.2% in the second, third and fourth quarters of fiscal 2017. In first-quarter fiscal 2018, revenues declined 3.6%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Can Michael Kors Strategic Growth Plan Combat Comps Woes?
Michael Kors Holdings Limited‘s positive earnings surprise, store optimization and global expansion bode well. Further, the company’s decision to acquire Jimmy Choo gives an indication that it is focused on international fashion brands. However, waning top-line along with dismal comps and wholesale segment performance continues to act as headwinds. The company has taken several strategic initiatives to bring both the top line and comps back on growth trajectory.
Turn Around Strategy
Michael Kors’ acquisition of Jimmy Choo will help diversify portfolio and tap international markets. The buyout is likely to be accretive in the low-single digits in fiscal 2020. In order to drive top-line growth, the company has been focusing on store expansion. In fiscal 2016, the company opened 142 new stores, which included 47 in the Americas and 95 worldwide. In fiscal 2017, it opened 159 net new stores openings, which includes 111 outlets related to the acquisition of the earlier licensed operation in Greater China. Given the scope for high profitability from company-owned stores, management is putting more emphasis on opening retail outlets.
Sales from Asia have shown tremendous improvement. The company had stated that it will continue with the expansion drive in Asia and also believes it has an opportunity worth $1 billion in the long term.
In an effort to increase the profitability in stores fleet, the company has announced its intention to close between 100 to 125 full priced retail stores over the next two years. Moreover, the company stated that it will incur one-time costs of nearly $100-$125 million related to store closures. Meanwhile, it anticipates annual saving of $60 million due to store closures as well as fall in depreciation and amortization related with these impairment charges.
Hurdles to Cross
Michael Kors’ wholesale segment continues to pose concern. In first-quarter fiscal 2017, wholesale segment sales declined 23% to $303.6 million primarily due to dismal performance of Americas, European and Asia region, while on a constant currency basis, it fell 22.7%. In the fourth, third, second and first quarter of fiscal 2017, wholesale segment sales declined 22.8%, 17.8%, 18.4% and 7%, respectively.
Stiff competition, falling comps, aggressive promotional environment and waning mall traffic are making things tough for Michael Kors. We noted that comparable sales had fallen 5.9% in the first quarter of fiscal 2018, following declines of 14.1%, 6.9%, 5.4% and 7.4% in the fourth, third, second and first quarters, respectively.
Michael Kors which shares space with Gildan Activewear Inc. (GIL - Free Report) , PVH Corp. (PVH - Free Report) and Lululemon Athletica Inc. (LULU - Free Report) is struggling with top-line performance. After registering meager growth of 0.2% in first-quarter fiscal 2017, it had declined 3.7%, 3.2% and 11.2% in the second, third and fourth quarters of fiscal 2017. In first-quarter fiscal 2018, revenues declined 3.6%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>