Michael Kors (KORS) has been a Wall Street favorite this year, jumping more than 80% in the past twelve months, yet the company�s white-hot sales may finally be cooling–but not too much, according to Citi.
In a note out today, Oliver Chen reiterated his Buy rating on the stock, but lowered his price target by $8 to $60, citing �incrementally cautious reads from our channel checks.� Nonetheless, that’s still more than 20% upside from current levels. Chen thinks that Michael Kors� sales trends are still well above its peers and its merchandise continues to resonate with consumer; however, �he notes that slowing department store traffic could hurt the brand, and some of its products�he highlights handbags�are on clearance in some stores even below Black Friday prices, with up to 50% off some items.
Yet overall Chen maintained his bullish tone, given positive data from his channel checks: �(1) clearance items exclude classic silhouettes such as the Jet Set or most Hamilton, (2) we are noticing improved execution in small leather goods & neon which is a substantial market share opportunity vs. Coach (COH), (3) jewelry execution is working and this product category is strong protection if in-store watch trends are moderating, (4) increasing awareness levels in non-coastal areas and on success of shop-in-shops is likely to be a positive driver to traffic.�
He is modeling for more than 30% growth in earnings per share for the firm, given its premium brand, ongoing growth and opportunities in Europe.
Here are his new, lowered earnings estimates: � Our 3Q EPS is $0.43 from $0.45 vs. street�s $0.41 & guidance $0.37-$0.39 on comps +22-24% and gross profit margin now 61.6% (vs. 62% prior). We also lower 4Q, 2013, 2014 EPS on lower GM and slightly lower comps: FY EPS $1.66 (from $1.73) and 2013 EPS is $2.25 (from $2.35) on growth from a lower base. We lower target to $60 (from $68) on 24x our new CY2014 EPS. We apply 24x (from 30x) given greater gross margin risk and as we roll forward to 2014.�
Shares of Michael Kors were recently down 1.4% in late afternoon trading.
No comments:
Post a Comment