Canaccord Genuity Cuts Price Target on Michael Kors (KORS) Following Q4

Canaccord Genuity maintains a Hold rating on Michael Kors (NYSE: KORS), and cuts the price target to $48.00 (from $63.00), following Q4 earnings results. KORS reported weak Q4 comps -5.8% vs. Cannaccord's +4% estimate.

Analyst Camilo Lyon commented, "KORS' weak Q4 comps (-5.8% vs. our +4%) and a subsequently weaker F2016 outlook ($4.40-$4.50 vs. our $4.59 est) underscore the concern we have been highlighting -- the lost luster of the brand due to its ubiquity of distribution. As we previewed, weak traffic in NA was the key driver of -6.7% comps (vs. our flat est.) which was exacerbated by slowing tourism in key markets as well as a lack of product differentiation/newness. Despite a couple of one-time issues that negatively affected comps (e.g. port delays and e-commerce fulfillment issues due to weather disruptions) we believe the underlying trend will continue to deteriorate through F2016."

Lyon also added, "Our next concern is that retail trends typically serve as a leading indicator for wholesale. As such, we believe NA wholesale expectations for mid-single-dig it growth are too optimistic and subject to downward revisions. We thus are not convinced that the company's 2016 EPS guide of $4.40-$4.50 fully captures the downside potential should NA wholesale turn negative as we believe it will (vs. guidance of mid-single-digit growth) and the resultant and inevitable build of excess inventory. Lastly, we see further risk to gross margin as KORS seems unwilling to re-calibrate its supply of product into the market to match current levels of demand and/or contract its distribution. Separately, KORS is in high investment mode this year (retail stores, European DC, digital, personnel hires) further pressuring EBIT margins."

For an analyst ratings summary and ratings history on Michael Kors click here. For more ratings news on Michael Kors click here.

Shares of Michael Kors closed at $45.93 yesterday.

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