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UPDATE: Michael Kors (KORS) Pressured as Checks Indicate Heavy Discounting

December 27, 2012 2:12 PM EST Send to a Friend
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Price: $90.11 --0%

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(Updated - December 27, 2012 2:49 PM EST)

Michael Kors Holdings (NYSE: KORS) shares are rebounding after sliding over 5.5 percent mid-day on comments from Citigroup.

Analyst Oliver Chen said checks pointed to discounts on Michael Kors handbags equal or greater to those seen in the second-half of November, particularly Black Friday. Certain models are said to be priced 30 percent to 50 percent below retail.

"Hardmarked deals on select handbags are either equal or better than 2H Nov. (inc. Black Friday) promos," Chen said. "Our checks indicate 30-50% off original prices on models: Uptown Astor Crossbody, Tristan, Astrid, & special Hamilton models (Leopard/Studded); in khaki, python, green, studded."

Despite the weakness, the analyst noted that Michael Kors' comps are still likely outpacing others.

Chen lowered estimates and his price target from $68 to $60. He lowered 3Q EPS to $0.43 from $0.45 versus the Street's $0.41 and guidance $0.37-$0.39 on comps +22-24% and gross profit margin now 61.6% (vs. 62% prior). They also lower 4Q, 2013, 2014 EPS on lower GM and slightly lower comps: FY EPS $1.66 (from $1.73) and 2013 EPS is $2.25 (from $2.35) on growth from a lower base.

Shares are down 4.5 percent today. Amid the weakness, Kors marched over 83 percent higher in 2012 as of yesterday's close.




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