Actionable news
All posts from Actionable news

Michael Kors: Good Business At A Cheap Price


Michael Kors remains a powerful business model.

The stock has plummeted due to an overreaction by investors.

My conservative DCF model demonstrates that the stock is currently undervalued.


Michael Kors (NYSE: KORS), established in 1981, is a global luxury brand business company with presence in over 100 countries. KORS offers a range of products under the signature Michael Kors collection (luxury) and MICHAEL collection (accessible luxury), which include accessories, footwear, watches, jewelry, eyewear and fragrances. The company is divided in three segments: retail, wholesale and licensing. Figure 1 shows the company's total revenue for the last three fiscal years classified by segments and regions.

Figure 1 - Source: Michael Kors, FY2015 10K

The largest company source of revenue is North America, which accounts for 78% of global total income.

Michael Kors's largest competitors are Coach (NYSE:COH) and Polo Ralph Lauren (NYSE:RL). The company has other minor competitors like Perry Internationals, BEBE Stores (NASDAQ:BEBE), Movado (NYSE:MOV) and Guess (NYSE:GES).

KORS has 193.42M shares outstanding trading at a historically low P/E ratio of x10.1. The company's market cap is $8.26B. The current KORS stock price is $40.07.

Why Michael Kors is a powerful business?

Brand power - KORS's recent increase in number of stores leaves some people wondering how the company will maintain a balance between exclusiveness and accessibility. In a recent survey, I asked a group of 15 women between the ages of 20 and 30 what they prefer, a day in a Michael Kors store, Coach Store, Bebe store, Ralph Lauren store or Guess store. 13 out of 15 women preferred KORS. The other two preferred a day in a Guess store. The survey results might show how the brand is doing in the mind of a fashion group of women. As mentioned in Q1 FY 2015 conference call, KORS management is implementing a strategy that will "capture inspirational moments of the Michael Kors woman" across all communication channels. Michael Kors followers in social media platforms have been increasing year-over-year, demonstrating how the brand is a fashion model in consumers and how people desire the company's products. In the last quarter...