It may seem paradoxical, but luxury retailer stocks sometimes are priced at compelling values. Are there any luxury retailers trading at values that represent a good deal?
Michael Kors Investors Cashing Out
Michael Kors, a fashion designer is planning to sell 3 million shares of his holdings in his namesake stock Michael Kors Holdings Ltd (NYSE:KORS) as part of a secondary offering of 25 million shares in the company. His holdings in the company will be reduced to 4.8 million shares, representing a 2.4% stake in the company, down from 3.9%. Sportswear Holdings, a private equity firm, which is thr largest investor in the company, would sell approximately 19.7 million shares in the company or 62.9% of its holdings in the company.
Post sale, Sportswear Holdings would have only a 5.8% stake in the company. Investment vehicles which were created for the benefit of the children of John Idol, the company’s CEO, would sell 2 million shares during the offer. Since all the sales would be made by the investors, the company would receive no proceeds from the offer. The company has raised its full-year forecast after declaring an increase in sales during the holiday season, consisting of a 41% increase in comparable sales in North America during the last quarter. The company is taking away the market share of its competitor, Coach, Inc. (NYSE:COH).
Cynics may question the motives of such stock sales by insiders. I do not see this as being a clear negative for the company since investors are retaining significant holdings.
Coach Leadership Change
Coach appointed Victor Luis as the head of the company’s international business, succeeding Lew Frankfort, the company’s CEO next year. Frankfort would become the company’s Executive Chairman as of January and appointed Luis as the President and Chief Commercial Officer in the interim; he will be soon appointed on the company’s board. Mr. Luis led the company’s businesses in Japan and China before taking responsibility of the President of International Retail in 2010 and then became the head of the entire operations outside North America last February. Before becoming a part of the company, Luis conducted the North American operations of Baccarat, a French luxury brand.
Mr. Frankfort joined the company as Vice President of New Business Development in 1979, and he led the company’s transition into a publicly traded company in 2000. He created the company as a dominant U.S. handbag company having approximately 30% market share. The company’s CEO focuses on expanding across China, where the company has created 117 stores as of Dec. 29. Recently, the company has focused on male customers with stores of their own as well as dual-gender locations. He also assisted Reed Krakoff, the Executive Creative Director of the company, in developing a women’s apparel brand and accessories line, “Reed Krakoff.”
The company’s same-store sales in North America have declined due to increasing competition from Michael Kors, Tory Burch, and other companies. Coach is planning to transform itself into a lifestyle brand by creating its own jewelry, footwear, and clothing lines to expand its business. According to Liz Dunn, an analyst with Macquarie Group, “The succession comes at a time when the company is undergoing significant strategic change. It is the right move to support Coach’s geographic growth opportunities and expansion into new lifestyle categories.” The company’s net income increased by 1.5% to $352.8 million or $1.23 per share for the quarter ending December 2012. According to Bloomberg, analysts expected $1.28.
Innovation at Nordstrom
Nordstrom, Inc. (NYSE: JWN) reported a 20% increase in its net income in the fourth quarter as high-end shoppers continue to spend on clothing and makeup. However, the company’s annual guidance was a disappointment to investors as the department store continues to invest across e-commerce operations heavily and expand its low-priced Nordstrom Rack stores.