Shares of Michael Kors Holdings Ltd. KORS touched a 52-week low of $45.23 yesterday, before closing trade at $45.37. Year to date, shares of this retailer of branded apparel and accessories have nosedived roughly 39%. Moreover, the stock has plunged 25% following the company’s fourth-quarter fiscal 2015 results.
Despite witnessing year-over-year growth of 17.8% and 15.4% in the top and bottom lines, respectively, the company’s dismal comparable-store sales (comps) performance and subdued outlook for fiscal 2016 turned investors away from the stock.
Comps for the fourth quarter fell 5.8% as against a 26.2% increase registered in the prior-year quarter, and were nowhere near management’s projection of a mid single-digit rise. A slowdown in traffic in North America, soft performance of the company’s watch business, forex headwinds and delays due to disruption at the West Coast ports, were chief reasons for the decline.
Management projects flat comps for fiscal 2016, as against a 10.3% rise registered in fiscal 2015. Moreover, the company hinted that comps in the first quarter would decline in low-double digits. In addition, Michael Kors provided a cautious first-quarter and fiscal 2016 earnings per share outlook, and warned that currency headwinds may hurt the bottom line by 7 cents and 20 cents a share, respectively. Management now envisions earnings in the band of 74–78 cents for the first quarter and between $4.40 and $4.50 per share for fiscal 2016.
Following the company’s subdued guidance, analysts realigned their estimates, thus triggering a downtrend in the Zacks Consensus Estimate. Over the past 30 days, the Zacks Consensus Estimate of $4.38 and $4.66 per share for fiscal 2016 and fiscal 2017 has declined 6.4% and 7.7%, respectively.
Currently, Michael Kors carries a Zacks Rank #5 (Strong Sell).
Stocks that Warrant a Look
Better-ranked retail stocks that look promising include American Eagle Outfitters, Inc. AEO, G-III Apparel Group, Ltd. GIII, both sporting a Zacks Rank #1 (Strong Buy), and Bebe Stores Inc. BEBE, carrying a Zacks Rank #2 (Buy).
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