Q3 Preview: First Report from Michael Kors (KORS) Looks Promising, Say Analysts

FREE Breaking News Alerts from StreetInsider.com!

KORS Hot Sheet

Rating Summary:
7 Buy, 0 Hold, 0 Sell

Rating Trend: = Flat

Today's Overall Ratings:
Up: 0 | Down: 0 | New: 0

Michael Kors Holdings, Ltd. (NYSE: KORS), is trading higher Monday morning heading into its first quarterly report since the company IPO'd in December.

Ahead of the bell Tuesday, Kors should report revenue of $348.6 million and earnings of 8 cents per share. For comparison, sales in the last quarter were $520.2 million with earnings of 35 cents per share.

Since opening at $25 on December 15th, shares have gained 38 percent through the last two-months to the mid-$30 range.

Data from Bloomberg has 10 analysts at Buy, and none at either Hold or Sell ratings. The Street's price target average is $34, with a low of $32 and high of $40.

Analyst Comments

Goldman Sachs sees earnings of 7 cents per share for Kors. The firm initiated Kors with a Buy rating "(1) attractive positioning – KORS targets the underserved “accessible luxury” segment of the growing accessories market, (2) significant momentum – as awareness of the still young MICHAEL Michael Kors brand & store base ramps, and (3) sizable room to grow – a comparison to accessible luxury brands RL and COH suggest potential to quadruple revenues and expand margins over time."

One key risk Goldman notes include multiple points of distribution could lead to execution issues and shorten the duration of accretive growth.
J.P. Morgan is looking for earnings of 10 cents per share. For the next quarter, JPMorgan alludes to comments made by Coach (NYSE: COH) management for its fourth-quarter: "We estimate that the addressable US women’'s handbag and accessory category rose 5% to 10% during our fiscal fourth quarter. Over the same period, Coach's bag and accessory sales rose about 14% across all channels in North America, including in our own stores. For the fiscal year ended June, we estimate that the addressable category rose about 10% to approximately $9.3 billion, while Coach’s North American bag and accessory sales rose 14% across all channels and 17% in our own stores over the same period. Separately, it's worth noting, our customers’ outlook for the economy has been stable over the last few quarters, with a third of those surveyed still believing that the US economy is improving."

Since starting covering on Kors just a little while ago, JPMorgan offered insight into fiscal 2012 expectations. The firm sees 71 percent retail growth, 44 percent wholesale growth, and 32 percent increase in licensing revs. Further, gross margins should expand 40 basis points to 55.9 percent, with first-half expansion partially offset by second-half pressure as the company normalizes markdowns/vendor allowances.
Wedbush sees earnings of 9 cents per share on revs of $241 million. Wedbush echoed much of what Goldman and JPMorgan said in that there is plenty of global expansion opportunities for the retailer.

Sales of Kors watches will be a key to increasing comps in 2012 and rapid expansion of its retail footprint is also expected.

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Kors' past performance at Streetinsider's Kors' Income Statement.

Discover Wall Street's best ratings calls with the pros - Ratings Insider Elite. Free Trial!