Michael Kors Holdings, the eponymous company of fashion designer Michael Kors, launches its IPO this week, making it the latest luxury brand to go public this year.
Shares of the Hong Kong-based fashion and accessory house are expected to price in the range of $17 to $19 per share, making Mr. Kors a very rich man (a cool $110 million profit) -- if Kors' 5.8 million shares go out at the top of that range. Michael Kors follows in the footsteps of Italian fashion designers Prada and Salvatore Ferragamo, both of which completed successful public offerings earlier this year. Prada has lost nearly 15 percent in value since its listing while Ferragamo stock has gained more than 25 percent.
Howard Davidowitz, chairman of Davidowitz & Associates and a long-time retail consultant, says Michael Kors' pricing strategy and style sense appeals to both fashionistas and investors.
"This is a company with revenues exploding ... a fantastic company," he tells Aaron in the accompanying video. "The price points are just right. It's affordable luxury."
Davidowitz says Michael Kors could be the next Coach -- a handbag and accessory powerhouse that's a perennial favorite of middle- to higher-end consumers. On Wall Street, Michael Kors' metrics resemble those of Prada, and investors could value the company at $3.6 billion this Thursday when nearly 42 million shares begin trading on the New York Stock Exchange.
The fashion world is unforgiving to designers, and stock investors can show the same cruelty, rejecting a poorly performing company as quickly as the fascination began. Michael Kors' stock could very well be the stylish IPO of the moment. Several major companies went public this year, including LinkedIn and Groupon, and much like the "must have" fashion accessory that everyone craves but has no use for after that season, they have sharply fallen from their IPO peaks, causing investors to question why they splurged on the shares.
Michael Kors may be "going on all cylinders ... with unlimited margins and a growing business," according to Davidowitz, but the thousands of layoffs at Wall Street firms will eat into the company's profits. The handbags, shoes, clothing and accessories that bear the Michael Kors insignia are more affordable compared to ultra-high luxury brands like Hermes and Louis Vuitton, yet prices are still steep for the middle-class consumer. Now is the "perfect" time to go public, Davidowitz adds, because "luxury is at its peak."
In a tough year for retailers, Michael Kors remains one bright spot. The company reported a fiscal 2011 profit of $72.5 million and said it plans to expand the number of its North American retail stores to 4oo from the current 169. Whether consumers will continue to spend on discretionary goods in a tough economy remains the core question for Michael Kors and investors. November retail sales were a big disappointment, and many experts have been disputing the strong holiday retail numbers being reported by top industry trade groups.
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