Mr. Kors will have a fabulous summer
Handbag and accessory retailer Michael Kors Holdings Ltd (NYSE:KORS) is often regarded as the hottest fashion growth stock in the market today, and for good reason. Ever since its public debut in December 2011, the Hong Kong-based company has made it a habit of posting triple-digit profit growth on top of double-digit sales gains. The company’s recently reported fourth quarter earnings continued this hot streak, with earnings more than doubling to $0.50 per share, while revenue soared 57% to $597.2 million. Global same-stores sales rose 36.7%.
Same-store sales in North America, its largest market, rose 35%. In addition to its own stores, the company is adding shop-in-shop boutiques to department stores, which helped boost its wholesale segment’s revenue by 57%. Same-store sales in Europe also grew 63%. Michael Kors Holdings Ltd (NYSE:KORS) is currently expanding into Asia as well, to catch up to its primary rival, Coach, Inc. (NYSE:COH). In addition to its popular handbags, Michael Kors Holdings Ltd (NYSE:KORS) also sells licensed watches (made by Fossil) and eyewear (made by Marchon).
Therefore, designer Michael Kors Holdings Ltd (NYSE:KORS), who rose to fame as a judge on Project Runway, looks to have a very profitable summer ahead. However, there are concerns that the stock, like any growth stock, is getting overheated. The stock has risen 60% over the past twelve months, and still trades with a trailing P/E of 38.5, at a steep premium to the industry average of 33. Yet CEO John Idol isn’t worried. “Our jet-set luxury accessories and ready to wear are resonating with consumers worldwide and we are excited by our prospects for future growth,” he recently stated.
In conclusion, I believe that all three of these fashion forward names will continue rising throughout the summer. Luxottica Group SpA (ADR) (NYSE:LUX) creates the eyewear, Tiffany & Co. (NYSE:TIF) sells the posh accessories while Michael Kors Holdings Ltd (NYSE:KORS) provides stylish in-demand handbags and watches. If consumer sentiment continues to improve and shoppers – especially female ones – open up their wallets more, this fashion triumvirate will post some big returns.
The article A Fashion Forward Trio for a Fabulous Summer originally appeared on Fool.com and is written by Leo Sun.
Leo Sun has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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