Michael Kors Holdings (NYSE:KORS)

CAPS Rating: 3 out of 5

Recs

13
Player Avatar TMF1000 (99.68) Submitted: 2/26/2013 1:15:09 PM : Outperform Start Price: $57.57 KORS Score: -1.02

KORS was placed on Caps at $57.57. Their growth has been exceptional. They are trading at the low end of their trading range due to their yearly new stock offering which inflates shares outstanding. Even though shares are growing very quickly they are expanding their store base quickly and the money brought in from shares will allow them to do it without taking on debt. Net income is growing fast enough, not to affect shareholders so far.

The present PE ratio is 33.87 and although that is on the high side of 30, they have grown revenues by over 70% for the last three quarters. I think this one will do quite well in my Caps portfolio. They have no debt and over $405 million in cash.

KORS
June 12, 2012 4Q:2012 earnings highlights:
** 4Q revenue was $379.99 million up 58.3% from $240 million
** Fiscal 2012 revenue was $1.3 billion up 61.8% from $803.34 million
** Fiscal 2012 revenue per share $6.60 per share
** 4Q earnings were $0.22 up from $0.10
** Fiscal 2012 earnings were $0.78 up from $0.40
** Diluted share count 196.855 million up from 179.2 million
** Cash flow for the year was 27.1 million down from $52.96 million
** Cash flow for the year was $27.1 million or $0.14 per share
** Trading range between June 12, 2012 and August 14, 2012 was $36.81 to $45.20: PE ratio range was 47.19 to 57.95: PS ratio range was 5.58 to 6.85: Cash flow yield not meaningful

August 14, 2012 1Q:2013 earnings’ highlights:
** Revenue was $414.865 million up 70.6% from $243.126 million
** TTM revenue was $1.47 billion or $7.38 per share
** Earnings were $0.34 up from $0.13
** TTM earnings were $0.99
** Diluted share count 199.39 million
** Cash flow for the quarter was $41.2 million up from $36.8 million
** TTM cash flow was $31.5 million or $0.16
** Trading range between August 14, 2012 and November 13, 2012 was $47.15 to $58.62: PE ratio range was 47.63 to 59.22: PS ratio range was 6.39 to 7.94 cash flow yield not meaningful

November 13, 2012 2Q:2013 earnings’ highlights:
** Revenue was $532.935 million up 74.4% from $305.532 million
** TTM revenue was $1.7 billion or $8.48 per share
** Earnings were $0.49 up from $0.22
** TTM earnings were $1.26
** Diluted share count 200.192 million
** Cash flow for six months was $70.839 million up from negative ($12.127 million)
** TTM cash flow was $110.1 million or $0.55 per share
** Trading range between November 13, 2012 and February 12, 2013 was $46.66 to $60.00 PE ratio range was 37.03 to 47.62: PS ratio range was 5.5 to 7.08: Cash flow yield range was .09% to 1.2%

February 12, 2013 3Q:2013 earnings’ highlights:
** Revenue was $636.8 million up 70.45% from $373.606 million
** TTM revenue was $1.96 billion or $9.68
** Earnings were $0.64 up from $0.20
** TTM earnings were $1.70 per share
** Diluted share count 202.82 million
** Cash flow for nine months was $174.332 million up from $60.55 million
** TTM cash flow was $140.88 million or $0.70
** Cash $405.78 million: debt 0
** Trading range between February 12, 2013 and the present February 26, 2013 was $57.85 to $65.10: PE ratio range was 34.03 to 38.29: PS ratio range was 5.98 to 6.73: Cash Flow yield range was 1.1% to 1.2%

thompsonFN estimates: February 26, 2013
4Q: 2013 $0.38
Fiscal 2013 $1.85
1Q:2014 $0.48
Fiscal 2014 $2.41

Report this Post 2 Replies
Member Avatar TMF1000 (99.68) Submitted: 8/24/2013 8:11:00 AM
Recs: 2

Kors continues to announce great reports. Net income has risen to $2.24 per share. The PE ratio on my original caps purchase is now 25.7 which shows a significant margin of safety (which protects the principal) is being build around the price as net income goes up. I suspect the holidays will be excellent for them. The 32 PE ratio isn't bad considering their rapid rate of growth.

May 29, 2013 4Q:2013 earnings’ highlights:
** 4Q revenue was $597.154 million up from $379.99 million
** Fiscal 2013 revenue was $2.182 billion up from $1.302 billion
** TTM revenue per share was $10.71 per share
** 4Q earnings were $0.50 up from $0.22
** Fiscal 2013 $1.97 up from $0.78
** Diluted share count was 203.785 million
** Cash flow for the year was $235 million or $1.15 per share up from $27.1 million
** Capital expenditures for the year were $121.321 million up from $88.187 million
** Stock based compensation $20.932 million down from $27.02 million
** Trading range between May 29, 2013 and August 8, 2013 was $56.16 to $71.73: PE ratio range was 28.51 to 36.41: PS ratio range was 5.24 to 6.7: Cash flow yield range was 1.6% to 2.04%

August 8, 2013 1Q:2014 earnings’ highlights:
** Revenue was $640.859 million up from $414.865 million
** TTM revenue was $2.41 billion or $11.78 per share
** Net income was $0.61 up from $0.34
** TTM earnings were $2.24
** Diluted share count 204.336 million
** Cash $639 million: debt $104.647 million
** Cash flow for the quarter $149.34 million up from $41.212 million
** TTM cash flow was $343.128 million or $1.68 per share
** Trading range between August 8, 2013 and the present August 24, 2013 was $68.83 to $72.98: PE ratio range was 30.73 to 32.58: Cash flow yield range was 2.3% to 2.44%

Member Avatar TMF1000 (99.68) Submitted: 8/25/2013 2:11:32 PM
Recs: 1

Michael Kors Holdings Limited (KORS) -
Price $72.57
Dow 15,010.51
SP500 1,663.50
Oil $105
Euro/USD $1.34
Gold $1,396.50
Silver $24.05
Copper $3.35
Cotton $0.80
Coffee $1.32
Lamb $1.08
Barley $222.12 metric ton
Wheat $302.85 metric ton
Corn $245.08 metric ton
Chicken wings $1.97 up from $1.71 last year

Price $72.57: PE ratio 32.40: Cash flow yield 2.3%

Business:

The company is a rapidly growing luxury lifestyle brand – and it is really growing rapidly. Revenue for the quarter increased 54.47%. The Company operates 328 retail stores, including concession compared to 253 stores last year. Comparable sales growth was up 27.3%. KORS’ retail stores average about 2,904 square feet per store. Total gross square footage is 316,511 up 34.2% from 235,788.

They also sell directly to department stores in North America and Europe. Wholesale revenue increased 59.3% for the first quarter of 2014. Their third business segment is their licensing business. Their products can be found in 2,214 department and specialty stores in North America and in 1,034 department and specialty stores internationally. Their licensing business only accounts for 3.8% of total sales.

The sell handbags, shoes, watches & jewelry, fragrances, belts and … It would be easier just to link the 40 page KORS catalog.

http://www.michaelkors.com/store/catalog/templates/F0.jhtml?itemId=cat54301&parentId=cat144&masterId=cat000000

According to Atlagamma Studies total global sales of luxury goods in 2012 were about $277.7 billion. This was up 10.4% from $251.5 million sold in 2011. The pre-great-recession peak for these sales was $222.7 billion.

There is no Mr. Coach, but there is a Mr. KORS which may highlight a psychological advantage of a personal designer versus corporate designers. That point could prove significant.

Who is Michael Kors?

He is a world renowned fashion designer who was born in 1959 in New York City. In 2013, he was included on Times magazine’s list of 100 most influential people in the world. He first launched his luxury collection in 1981.

June 12, 2012 4Q:2012 earnings highlights:
** 4Q revenue was $379.99 million up 58.3% from $240 million
** Fiscal 2012 revenue was $1.3 billion up 61.8% from $803.34 million
** Fiscal 2012 revenue per share $6.60 per share
** 4Q earnings were $0.22 up from $0.10
** Fiscal 2012 earnings were $0.78 up from $0.40
** Diluted share count 196.855 million up from 179.2 million
** Cash flow for the year was 27.1 million down from $52.96 million
** Cash flow for the year was $27.1 million or $0.14 per share
** Trading range between June 12, 2012 and August 14, 2012 was $36.81 to $45.20: PE ratio range was 47.19 to 57.95: PS ratio range was 5.58 to 6.85: Cash flow yield not meaningful

August 14, 2012 1Q:2013 earnings’ highlights:
** Revenue was $414.865 million up 70.6% from $243.126 million
** TTM revenue was $1.47 billion or $7.38 per share
** Earnings were $0.34 up from $0.13
** TTM earnings were $0.99
** Diluted share count 199.39 million
** Cash flow for the quarter was $41.2 million up from $36.8 million
** TTM cash flow was $31.5 million or $0.16
** Cash $162 million: debt $27.7 million
** Gross margins were 63%: operating margins 26.98%
** Trading range between August 14, 2012 and November 13, 2012 was $47.15 to $58.62: PE ratio range was 47.63 to 59.22: PS ratio range was 6.39 to 7.94 cash flow yield not meaningful

November 13, 2012 2Q:2013 earnings’ highlights:
** Revenue was $532.935 million up 74.4% from $305.532 million
** TTM revenue was $1.7 billion or $8.48 per share
** Earnings were $0.49 up from $0.22
** TTM earnings were $1.26
** Diluted share count 200.192 million
** Cash flow for six months was $70.839 million up from negative ($12.127 million)
** TTM cash flow was $110.1 million or $0.55 per share
** Trading range between November 13, 2012 and February 12, 2013 was $46.66 to $60.00 PE ratio range was 37.03 to 47.62: PS ratio range was 5.5 to 7.08: Cash flow yield range was .09% to 1.2%

February 12, 2013 3Q:2013 earnings’ highlights:
** Revenue was $636.8 million up 70.4% from $373.606 million
** TTM revenue was $1.96 billion or $9.68
** Earnings were $0.64 up from $0.20
** TTM earnings were $1.70 per share
** Diluted share count 202.82 million
** Cash flow for nine months was $174.332 million up from $60.55 million
** TTM cash flow was $140.88 million or $0.70
** Cash $405.78 million: debt 0
** Trading range between February 12, 2013 and May 29, 2013 was $51.63 to $65.10: PE ratio range was 30.37 to 38.29: PS ratio range was 5.33 to 6.73: Cash Flow yield range was 1.1% to 1.36%

May 29, 2013 4Q:2013 earnings’ highlights:
** 4Q revenue was $597.154 million up from $379.99 million
** Fiscal 2013 revenue was $2.182 billion up from $1.302 billion
** TTM revenue per share was $10.71 per share
** 4Q earnings were $0.50 up from $0.22
** Fiscal 2013 $1.97 up from $0.78
** Diluted share count was 203.785 million
** Cash flow for the year was $235 million or $1.15 per share up from $27.1 million
** Capital expenditures for the year were $121.321 million up from $88.187 million
** Stock based compensation $20.932 million down from $27.02 million
** Trading range between May 29, 2013 and August 8, 2013 was $56.16 to $71.73: PE ratio range was 28.51 to 36.41: PS ratio range was 5.24 to 6.7: Cash flow yield range was 1.6% to 2.04%

August 8, 2013 1Q:2014 earnings’ highlights:
** Revenue was $640.859 million up 54.47% from $414.865 million
** TTM revenue was $2.41 billion or $11.78 per share
** Net income was $0.61 up from $0.34
** TTM earnings were $2.24
** Diluted share count 204.336 million
** Cash $639 million: debt $104.647 million
** Cash flow for the quarter $149.34 million up from $41.212 million
** TTM cash flow was $343.128 million or $1.68 per share
**Stores 328 including concessions
** Gross margins 61.99%: Operating margins 30.8%
** Trading range between August 8, 2013 and the present August 24, 2013 was $68.83 to $72.98: PE ratio range was 30.73 to 32.58: Cash flow yield range was 2.3% to 2.44%

Q1:2014 Notes:

Revenue for the quarter was $640.859 million up 54.47% from $414.865 million. TTM revenue was $2.41 billion or $11.78 per share up from $1.47 billion or $7.38 per share. TTM revenue per share was up 59.6%.

Net income for the quarter was $124.996 million up from $68.645 million. Net income per share was $0.61 up from $0.34. TTM net income per share was $2.24 up 126% from $0.99. Gross margins for the quarter was 61.99% down from 63% while operating margins were 30.8% up from 26.98%.

Cash flow for the quarter was $149.34 million up from $41.212 million. TTM cash flow was $343.128 million or $1.68 per share up from $31.5 million or $0.16 per share. TTM cash flow per share was up 950%.

Balance sheet and shares outstanding: The Company has $639 million in cash and debt of $104.647 million. The balance sheet has improved since last year when they reported cash of $162 million and debt of $27.7 million.

thompsonFN estimates: February 26, 2013
4Q: 2013 $0.38
Fiscal 2013 $1.85
1Q:2014 $0.48
Fiscal 2014 $2.41

At the end of the second quarter 2014, they had 328 retail stores, including concessions. Retail sales for the quarter were $325.672 million up 51.5% from $215.004 million. They have 249 stores in North America and 79 stores internationally. They are on track to open 50 stores in North America this year and they believe they can open 400 locations on the continent.

Their wholesale business was up 59.34% to $290.576 million from $182.366 million last year. Their wholesale business grew faster than their retail business as they have begun to transform department stores into KORS shop in shops at those department stores. That move gave a big boost to their wholesale business. Licensing revenue was $24.611 million up 40.68% from $17.495 million last year.

Conclusion:

I purchased KORS stock earlier, but I only bought a small position. I regret the “small” now. I wasn’t going to write a page post on them because I felt, I didn’t really have enough information, but as I checked my notes – I decided to go ahead and write my first one. I wanted to write it because a study of COH and FOSL is incomplete without knowledge of KORS. And the more I read about them, the more I think this is going to be an incredible holiday season for the company.

They are growing very rapidly. Sales for the quarter were up 54.47% to $640 million. That is up slightly from their holiday quarter when they reported sales of $640.9 million. If sale are doing this well a few quarters from the holiday quarter, how well will they do when their February report is announced? I am thinking very well.

The valuation isn’t that stretched. The PE ratio is 32.4 and the cash flow yield is 2.3%. As I studied KORS, FOSL and COH – I thought of something that should have been obvious but that I missed horribly. There is a difference in corporate designed fashion and individual designed fashion. Perhaps the trend is moving toward individually designed fashion and that people like Michael Kors and Tory Burch could change things within their product price range category. It isn't a new thing. COH has certainly gone head to head with past fashion designers such as Guccio Gucci and Giorgio Armani, but it is something I really hadn't considered and now want to consider in more detail.

KORS stock isn’t cheap. FOSL and COH are much cheaper, but they aren't growing as quickly. FOSL is a great way to play KORS and Tory Burch since they make the watches that they sell, or at least they will when the Tory Burch watches are ready for sale later this year. I like all three companies. I will be watching this company much more closely.

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