Piper Jaffray Remains Neutral on Michael Kors (KORS) After FOSL's Q1 Report

Piper Jaffray reiterates their Neutral rating on Michael Kors (NYSE: KORS) and lowers the target price to $64 (from $70) following a Q1 report from partner FOSL showed that North American watch shipments were down. The report also said that sell-through trends were down. However, ste strength of KORS jewelry remains strong.

Piper Jaffray analyst Erinn Murphy commented that, "While Michael Kors revenue grew overall (ex. FX), Fossil indicated that North American watch shipments were down and sell-through trends declined during Q1. While watch trends for FOSL have been broadly challenged in the last two quarters, Michael Kors has historically been a leader within Fossil's portfolio. In fact, we believe the brand has accounted for Fossil Inc.'s almost entire North American wholesale growth in the last three years. Recall, the brand grew 26% Y/Y in 2014 and accounted for 26% of Fossil revenue. Michael Kors watch/jewelry business for Fossil has grown from $450M in 2012 to just over $920M last year."

Murphy also added that, "Encouragingly, Michael Kors' jewelry delivered strong gains and is helping create a larger opportunity for the branded jewelry category in department stores. However, jewelry is <10% of brand's royalty stream from Fossil by our estimate. Internationally, Michael Kors continued to be a key growth driver, but we note >75% of the company's reported revenue is in North America. Separately, Fossil management indicated that Michael Kors wearables will be debuting in 2016."

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 $62.57 yesterday.

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