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Michael Kors Holdings Limited Message Board

  • qofaslave69 qofaslave69 Nov 9, 2013 2:36 PM Flag

    20% EPS Beats-Thing of the Past?

    In the recent quarter KORS guided to $.62-$.64 and delivered $.71! While that is great for most companies, it breaks the trend of KORS beating their own guidance by 20% or more. Normally, if they guide to $.20 you can count on $.24 or more. Is this an outlier due to "slower mall traffic" the "government shutdown" or "upgrading distribution?" Will KORS resume their string of 20% beats next quarter?

    KORS discussed 25% growth longer term, and guided Q3 to $.82-$.85 (25% YoY growth) this past week, and with the quarter nearly half over, I am sure they have a good idea how much they will earn in Q3! Will KORS now start to beat by a few pennies and come in at $.88 for the quarter? Or, was last quarter a "one-off" and KORS will resume their normal 20% beat or more?

    This is something I will be watching closely as we move through fiscal 2014. KORS has earned $1.32 in the first half of 2014 and their strongest quarters are ahead of them. If they can do $2.95 in 2014 that would be exactly 50% YOY growth in 2014, and that is pretty strong for a form their size. They need to earn $.90 in Q3 and put them at $2.22, and make Q4 a slam dunk for $3 in 2014. This only requires less than a 10% beat of guidance. However, if they do resume their traditional EPS beats of 20% or more, then we may see the first $1 EPS quarter for KORS.

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    • Realize %s will change as the company expands and growth will slow based on the fact that they can only open X number of stores per Q. When KORS was only 100-200 stores and expanding with 40+ stores per Q, they were growing at a ridiculous rate. Now they are up to the 400+ store number and thus expanding at only 10% in new venues, thus overall EPS will slow a bit. Last Feb's report was a total sandbag beat - they guided to .41 after already having beat it the Q before and then having the most sought after X-Mas gifts - thus the 12% jump; however, they then diluted the shares with a secondary, which also affects today's EPS. They are going to keep beating for at least a couple more Qs and then eventually will do what all fashion does - slow down. They hopefully move closer to RL's growth and not loss of sales like ANF or too much outlet dilution like COH.

      My guess - after next Q, 95+ for stock price and they will hit about .90-.95 for the next Q without issue, could be in the range of 1.00. S&P addition will help as well in bringing in more buyers.

      • 1 Reply to jimmach123
      • You have the wrong info on the KORS secondary offering. They did not issue new shares or dilute shares with either of their secondary offerings. It had no effect on earnings dilution. Long term investors sold some of their shares as in founder Mr. Michael Kors who sold 3 mil. A total of 25 million shares were offered but these were already issued shares in private hands and only offered so the initial investors could get cash out. Sportswear Holdings Limited sold 19.7 mil shares which was 2/3 of their stake in KORS.
        The .71 cents was a nice quarter but really did narrow their estimate beat percentage. At some point they cant keep that up but this quarter going into the holiday shopping season should be great. A year or two from now the earnings slow down and we see the dividend payments start.

        Sentiment: Hold

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