UPDATE: Citi Cuts Michael Kors (KORS) to Neutral on Valuation, Cautious Read-Through

January 7, 2014 7:52 AM EST Send to a Friend
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Price: $77.90 +1.06%

Rating Summary:
    15 Buy, 11 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 27 | Down: 26 | New: 17
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(Updated - January 7, 2014 9:00 AM EST)

Citi downgraded Michael Kors (NYSE: KORS) from Buy to Neutral with a price target of $93 (from $95). Analyst Oliver Chen still thinks Michael Kors has the best comps in the sector, but he views valuation as fair and noted cautious read-throughs from Macy's (NYSE: M) and Fossil Group, Inc. (Nasdaq: FOSL).

"We're lowering our rating to Neutral based on the view of fairer intrinsic valuation given KORS' +60% stock run in 2013, strong comps which will likely still exceed guidance (+15-20%) but to a lesser extent, accessory sector read-throughs which convey a possibility of lack of upside," said Chen.

"Upside could be less likely given: (1) Macy's noted weakness during 3Q in watches; (2) FOSL maintained sales guidance but lowered margins slightly and called out slugging traffic & promotional needs; (3) In the most recent earnings report, LVMH noted watch sales were up only +LSD growth with continued weakness in the US & Mainland China for both sell-in and sell-out; (4) Swiss watch data also indicated a slowdown for trends in watch sales in the US (-3% Nov vs. Oct +6%, Jan-Sep +3%, 2012 +10%); (5) increased competition as COH also recently focused its strategy to elevate factory store promotions running ~70% off," added the analyst.

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 $82.04 yesterday.


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