Michael Kors (KORS) Investors 'Uneasy' into Q1 Print - Deutsche Bank

Deutsche Bank maintained a Buy on Michael Kors (NYSE: KORS) but trimmed its price target to $50.00 (from $60.00). Comments come ahead of the company's Q1 results on Thursday. Analyst Dave Weiner noted investors were "uneasy" into the print.

"Investors are nervous about the Kors’ release on a few fronts, including the timing of NA stabilization, invty. positioning, a potential accessories industry slowdown, & that mgmt. will talk down FY plans. While we believe sentiment around NA stabilization & an industry slowdown are particular risks, we also believe there are levers to support beat-up valuation. Notably, even with tough compares, Kors remains an outsized LT global story with geo. & category expansion opportunities. Also, GM should stabilize as positive geo. & channel (to Retail) shifts offset normalizing promos. & apparel build. Reiterate Buy, but lower PT until we get more visibility around NA stabilization in particular," said Weiner.

"After missing plan for the past three quarters, Kors needs to indicate that NA comps can stabilize & a stronger 2H is feasible. While 1H faces tourism & watch category weakness; easier compares, a conservatively set plan, and strength in the apparel, footwear, jewelry, and men’s categories should support into 2H, we believe," continued the analyst. "Based on our channel checks during the June qtr., we believe that Kors saw more SKUs on sale vs. last year and that the % off MSRP at which those SKUs were offered also widened. However, we believe this was generally already expected within guidance. Looking ahead however, mgmt. will need to reassure investors that inventories into 2H and the holidays are well controlled."

Commenting on guidance, Weiner added, "Given the weakness in KORS stock, candidly, it’s difficult to assess what exactly the market is looking for. That said, with consensus currently below F16 plan and with most investors with whom we’ve spoken concerned into Thursday, we believe the market is clearly looking for a reduction from current $4.40-$4.50 EPS and +LSD cFX comp guidance."

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 $38.71 yesterday.

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