Shares of the global luxury lifestyle brand, Michael Kors Holdings Ltd (KORS) has gained 4.8%, since its third-quarter earnings announcement on Feb 4, 2014. The company’s spectacular third-quarter fiscal 2014 results came on the back of an impressive holiday sales season owing to strong demand for its luxury brands.
The company is seeking to carve a niche in the high-end retail sector by broadening its footprint in strategic markets and offering merchandise that caters to the elite. In addition to its watch and handbag collection, Michael Kors is now focusing on enhancing apparel, footwear and other miscellaneous categories to compete better with peers like Coach Inc. (COH), Hanesbrands Inc. (HBI) and Ralph Lauren Corp. (RL).
Moreover, the company plans to invest additional capital in its fourth quarter, which is expected to be diverted towards the opening of 9 new retail stores as well as its ongoing shop-in-shop conversions and investments to develop infrastructure and systems.
This Zacks Rank #1 (Strong Buy) stock also achieved a new 52-week high of $94.43 on the last trading day, when it eventually closed at $94.22, amassing a return of 66.3% over the last one year.
Facilitated by robust performance across all segments and geographies, the retailer’s revenues for the first time surpassed the $1 billion mark, at $1.01 billion, handily beating the Zacks Consensus Estimate of $860 million and escalating nearly 59% year over year.
The company’s earnings per share came in at $1.11, cruising ahead of the Zacks Consensus Estimate of 86 cents and surging 73.4% year over year. Not only in this quarter, but Michael Kors has performed impressively in the last few quarters, as on an average, the company has delivered a positive earnings surprise of roughly 43.1% over the last 9 quarters.
The company also has long-term EPS growth of 25.4%, significantly greater than the peer group growth rate of 12.3%, further adding optimism to the investors’ outlook.
Robust third-quarter performance prompted management to provide an upbeat fourth quarter and full-year 2014 guidance. Management expects fourth-quarter revenues to be $790–$800 million, comparable store sales to increase 15%–20% and earnings per share to be 63–65 cents. The Zacks Consensus Estimate is pegged at 65 cents that dovetails with the upper end of the company’s guidance range.
Michael Kors currently trades at a forward P/E of 30.2x, an 86.7% premium to the peer group average of 16.18x. The last traded price is 1.3% below the Zacks Consensus average analyst price target of $95.50. Average volume of shares traded over the last 3 months stands at approximately 4,581.7K.
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