Michael Kors (KORS) will report it’s FQ1 ’16 results tomorrow morning and from examining the recent stocks price action, expectations are low for Michael Kors. Michael Kors has continued to disappoint investors this year, year-to-date (YTD) the stock has collapsed over -47% compared to the broader S&P 500 which has risen 2.49%.
The Estimize community is predicting better EPS and revenue figures than Wall Street for Michael Kors. According to Estimize, Michael Kors will produce $0.78 in EPS and $952.79M in revenues, whereas Wall Street analysts are predicting $0.75 in EPS and $942.99M in revenues.
Many consumer discretionary stocks including Macy’s (M) and Hasbro (HAS) have been reaping the rewards recently as households in United States gain more discretionary income as a result of lower fuel prices and slowly rising wages. Michael Kors however, is certainly not benefiting. The once exclusive high-end fashion label famous for its prestigious handbags has lost its way over the past two years. The explosion of sales growth experienced by Michael Kors a number of years ago is beginning to have painful effects on company’s brand name and sales. Michael Kors is now faced with a challenging environment in which their brand name has been tarnished and its exclusivity lost. This has led to Michael Kors having to slash prices in an attempt to sell slow moving lines of stock.
Michael Kors’ share price collapse is a result of numerous additional factors, all of which should be a serious concern for investors leading into the company’s upcoming result. Michael Kors’ watch business continues to experience weakness, foreign exchange headwinds and a slowdown in North American traffic have all been detrimental to Michael Kors’ underlying business and are likely to continue to have negative effects on the companies finance in the coming quarters.
Investors will want to hear from management with respect to their store opening strategy. The company’s store count experienced an explosion of growth from 2013 where its products were available in circa 2,913 globally compared to today’s figure of over 4,133 locations. Although more stores typically results in increased revenues, it can harm the brand and cause long term problems as growth slows, which is what is currently being experienced. Investors will likely react negatively if management continue to open stores at a rapid rate.
With the stock almost halving over the past 8 months, the question now is whether or not Michael Kors can fall even further? With expectations so low, it is hard to picture ongoing losses for Michael Kors shareholders. However, if the report tomorrow morning disappoints once again and no clear strategy is outlaid, investors may in for another tough 3 months.
Do you think Michael Kors has further to fall? Make sure you get your estimate in here.
(Photo Credit: Essi Wellenius)