Michael Kors Holdings Ltd (KORS): Weak Hands and Strong Earnings

The other news hitting the stock were the Q2 earnings. As Frankfort put it, Coach was “… disappointed by our performance in North America, where the holiday season proved challenging. Most broadly, the consumer was impacted by a muted macroeconomic environment, while in the women’s handbag category competition intensified.” For competition, read Michael Kors. While international sales were up 12% and the men’s accessories were gaining traction it wasn’t enough to thrill the Street.

Either you pick a company whose CEO has conviction but is threatened by a strong competitor (Coach) or you have the strong company whose management is selling out (Michael Kors). You might be tempted to buy Fossil, Inc. (NASDAQ:FOSL), which offers watches, accessories, and apparel under its own proprietary brands as well as licensed designer brands including Michael Kors. It has almost 200 retail and outlet stores in the US and almost 200 globally.

Fossil is sort of the monkey in the middle here with a 17.96 P/E and forward P/E of 14.46, a PEG of .95, and no yield. The stock is down over 13% over the last year. Fossil has much more debt than these other two and talk of an Apple Inc. (NASDAQ:AAPL) iWatch has brought concern to shareholders. However, Fossil beat on revenues of $948 million and met expectations on EPS of $2.27 when it reported on Feb. 12. EPS grew 34% over the year ago quarter and margins increased.

Fossil received two downgrades after reporting and sentiment is turning more bearish. Despite a deal with hot designer Tory Burch for watches (which won’t come to market until 2014) Fossil may just tread water barring a catalyst. But it does have CEO conviction with Kosta Kartsotis holding 6,189,530 shares as of Jan. 18.

Jumping Off the High End

Whether you think Michael Kors trading below the secondary price of $61.50 is a buying opportunity or Coach at 52-week lows is one, you’ll want to be very careful with these three. Each has their strengths but the high end is seemingly out of favor with Nordstrom, Inc. (NYSE:JWN) selling off after lowering guidance. Wait until all the weak hands shake out and there is your buying opportunity.

The article Weak Hands and Strong Earnings originally appeared on Fool.com and is written by AnnaLisa Kraft.

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