For Immediate Release
Chicago, IL – October 20, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Michael Kors Holdings Limited (NYSE:(KORS - Free Report) – Free Report), Gildan Activewear Inc. (NYSE:(GIL - Free Report) – Free Report), PVH Corp. (NYSE:(PVH - Free Report) – Free Report) and Lululemon Athletica Inc. (Nasdaq:(LULU - Free Report) – Free Report).
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Here are highlights from Thursday’s Analyst Blog:
Can Michael Kors' Strategic Plan Combat Comps Woes?
Michael Kors Holdings Limited‘s (NYSE:(KORS - Free Report) – Free Report) 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. (NYSE:(GIL - Free Report) – Free Report), PVH Corp. (NYSE:(PVH - Free Report) – Free Report) and Lululemon Athletica Inc. (Nasdaq:(LULU - Free Report) – 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%.
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