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Actionable news in KORS: MICHAEL KORS HOLDINGS LIMITED,

The Hot Stock: It’s in the Bag

Cowen's Oliver Chen and team write that Kors is "making substantial and attractive progress." They explain:

We believe KORS is making substantial and attractive progress across product, store rationalization, promotional pullbacks, inventory management, pricing architecture, and digital flagship intensification; however, we remain on the sidelines given earlier innings of the journey and note that KORS does not begin to fully lap strategic promotional pullback until 1Q19, which is expected to be a near-term headwind to traffic as KORS guided 3Q18 comps to -HSD vs. -6.9% reported (-6.4% C/C) in 3Q17 and 2Q18’s -1.8% reported (-2.5% C/C) vs. -5.4% reported (-5.6% C/C) in 2Q17. Reduced promotional days (40% less days in digital & lifestyle stores in 2Q and 66% reduction planned in 3Q) are traffic headwinds which are prudent strategies for the long-term health of the brand. From a product perspective, several dynamics are underway, including: (1) small bags and wallets/small leather goods continuing to drive Kors' accessories business, though KORS highlighted backpacks as one of its fastest growing classifications, which is supporting higher AUR and helping offset some softness in its tote business; (2) more women wearing sneakers/trainers to work, which is driving shift away from totes that have a utilitarian look towards greater emphasis on bags with embellishments; and (3) continued weakness in fashion watches which is only partly offset by the recent launch of Kors' new Sofie ACCESS smartwatches in 2Q.

Michael Kors Holdings' market capitalization rose to $8.3 billion today from $7.2 billion on Friday.


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