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Will Michael Kors (KORS) Earnings Q1 Miss on Soft Buying?

Zacks Equity Research

Michael Kors Holding Ltd. (KORS), a global luxury lifestyle company, is slated to report first-quarter fiscal 2015 results on Aug 4. In the last quarter, it posted a positive surprise of 14.7%. Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

Michael Kors sells products that are discretionary in nature, and in turn, depend upon consumers’ disposable income. With consumer environment remaining soft, the company could suffer from an intense promotional backdrop, which could weigh upon its margins. The heightened promotional activity is assumed to prevail in the retail sector for the long term, with the first quarter not being any exception.

Earnings Whispers?

Our proven model does not conclusively show that Michael Kors is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: Michael Kors has an Earnings ESP of -2.47%. This is because the Most Accurate estimate stands at 79 cents, while the Zacks Consensus Estimate is pegged higher at 81 cents.

Zacks Rank: Michael Kors has a Zacks Rank #3 (Hold) but we need to have a positive ESP to be confident about an earnings surprise. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some other companies you may want to consider as our model shows that these have the right combination of elements:

Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +0.79% and a Zacks Rank #1 (Strong Buy).

Abercrombie & Fitch Co. (ANF) has an earnings ESP of +18.18% and a Zacks Rank #2 (Buy).

Conns Inc. (CONN) has an earnings ESP of +2.70% and a Zacks Rank #2.

Read the Full Research Report on KORS
Read the Full Research Report on CMG
Read the Full Research Report on ANF
Read the Full Research Report on CONN

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