Michael Kors announced in their last earnings report on February 5 that their comparable store sales increase 8.6 percent during the quarter, showing stable decrease over the last year (previous three quarters were 16.4 percent, 24.2 percent and 26.2 percent from latest to earliest). However, Michael Kors management believe that it is not a sign of the company making mistakes, but rather that of general slowdown in the industry and natural changes in their business model.
According to Seeking Alpha, all of the company’s direct competitors showed more or less the same tendency.
“When looking at Michael Kors‘ peers within the industry, investors begin to see a trend. Luxury brands Coach (NYSE:COH), Ralph Lauren (NYSE:RL), Mulberry (OTC:MLBGF), Gucci, and Fossil (NASDAQ:FOSL) (some competing more directly than others) all reported comparable store sales that decreased or barely increased in their most recent earnings reports.”
In addition to that, the fact that store sales decrease doesn’t necessarily mean that the company makes less sales. Company’s CEO, John D. Idol, believes that the decrease in sales may be attributed not just to the slowdown in the industry, but to the fact that more and more of their customers drift towards more convenient Internet sales. Had they included ecommerce in the report, it would have been much more optimistic.
It’s hard to say whether this is objective information or the company’s management tries to put up a brave front; the brand has been reported as “out of fashion” for quite some time, and its stocks have been stably decreasing in price over the last year. However, leading financial institutions still express their belief in its future – for example, back in December the Inquisitr reported that Bank of America recommended the brand as a top pick.
“Michael Kors stock continued to drop during its 52-week low, weeks after the company announced its second quarter earnings report. The fashion brand reported that its store sales failed to meet analysts’ expectations. But that didn’t stop Bank of America from setting a $120.00 target price on shares of Michael Kors Holdings (NASDAQ:KORS) stock”.
Nevertheless, the company perceives its position as stable – after all, when taken as a whole it showed stable profit margin of about 17 percent for the last two years, without drastic falls or upswings, which means that whatever their stores sales are, Michael Kors in general seems to be unaffected by them.