Coach's Dud Won't Sink Michael Kors

Wasn't this the same Coach that increased its quarterly dividend two months ago, signaling to investors that its near-term prospects were rosier than this? It was a big surprise to see Joe's Jeans (NASDAQ: JOEZ ) whiff badly two weeks ago. The luxury denim retailer's net sales growth of 8% was roughly half what Wall Street expected. Joe's Jeans was held back by a brutal 6% slide in same-store sales. If folks aren't aping celebrities in paying at least $158 for a pair of jeans at Joe's or $458 for a leather satchel at Coach, aren't all premium retailers in trouble? No. For starters, Kors is growing a lot faster than Coach or Joe's Jeans.





Handbags, watches fashion Michael Kors upbeat forecast





In total, there were 388 Michael Kors stores worldwide at the end of the third quarter, the company said. "It's the big opportunity for Michael Kors, growing stores, as that means a lot of runway for them to grow for at least two or three more years," said Chen. Comparable-store sales rose 41 percent in North America in the October-December holiday quarter, while larger rival Coach said last month same-store sales fell 2 percent in North America, only its third decrease in 11 years. "They (Michael Kors) are gaining market share from Coach, but it's not only Coach - it's also the little guys that are getting squeezed in a highly competitive market," Morningstar analyst Paul Swinand said. POPULAR ACCESSORIES Chen, the Citi analyst, said that Michael Kors' popularity as a brand allowed the company to be more flexible in pricing than its rivals. He said its focus on smaller handbags and accessories also presented a particular challenge to Coach. Michael Kors Chief Executive John Idol said there was strong demand for luxury items in the third quarter from Europe and North America. He said he expected the global luxury market to keep Michael Kors Purses Made In China growing at the same pace, without specifying a timeframe.





Trade-Ideas: Michael Kors Holdings (KORS) Is Today's Momo Momentum Stock





However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation. Highlights from the ratings report include: Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, MICHAEL KORS HOLDINGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500. KORS's very impressive revenue growth greatly exceeded the industry average of 8.9%. Since the same quarter one year prior, revenues leaped by 57.1%. Growth in the company's revenue appears to have helped boost the earnings per share.