Piper Jaffray analyst Erinn Murphy reiterate an Underweight rating and $38 price target on Michael Kors (NYSE: KORS) following Q2 results. There is no change to the firm's bearish thesis.

Murphy commented, "We reiterate our UW rating on shares of KORS following the company's Q2 results. While results were better than expected, we were concerned by the following: 1) gross margin degradation; 2) higher inventory; 3) heightened levels of promotional activity; 4) on-going pressure within watches (both in the US & increasingly so in Europe); and 5) crowded wholesale environment. While our FY16 EPS moves up (share count related), we are reiterating our $3.50 EPS for FY17. We recognize that on a PE basis shares appear inexpensive relative to peers (12x vs mid-to-high teens for peers) but believe earnings are still in a downward trend. Even with a pick up in comp trends in October (led by e-com now being included in comp), the company lowered its 2H comp and EPS guidance. We expect wholesale sales to reverse in 2H & see op margin pressure to continue."

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Shares of Michael Kors closed at $42.57 yesterday.