Since its public debut last year, Michael Kors
Kors is actually based in Hong Kong, but the company's stores are concentrated in the U.S. At the end of its last quarter, Kors operated 204 stores in North America and only 49 internationally. There is a similar split between American and international wholesale outlets, such as department stores, with 2,061 in America and 748 international locations. That means that the company really needs to focus on international growth, if it's going to continue growing at its current rate.
If we compare it to Coach
So far, international sales have been good, but still lag behind their U.S. counterparts. Last quarter, same-store sales in Europe were up 24%, while comps in Japan were up 20%. Right now, international sales also account for almost nothing in terms of total revenue. Revenue generated through both retail and wholesale internationally only accounted for 9% of last quarter's total revenue.
Why international matters
Kors needs to get its international ball rolling to keep up with the picture it's painted of itself. Right now, the company is predicting an increase in same-store sales of over 20% for its fiscal year. That's a distinct drop from this last quarter, and means that the end of 30%+ growth is in sight. The company is going to have to enter new markets internationally. That's been done successfully at other high-end retailers like Tiffany
Contrast that execution with the self-imposed catapulting that Best Buy
How to succeed in international business
Kors needs to start pushing its international growth a bit more. This isn't just because the company needs to expand that base, but because it also needs to get a better handle on how international tastes differ from domestic ones. Many companies push out the same store designs and products that have made them successful in the U.S. without taking differing tastes into account. Tiffany has been criticized for its failures a few years ago in China for just this reason.
The biggest hesitation I have with Kors right now is the lack of a clear plan. From reading its SEC filings and listening to the company's discussion, the domestic plan is crystal clear, but the international plan is fuzzy. Europe is profitable right now, but only mildly profitable. Kors' management has said that getting truly set up in Japan is still five years off, due to brand perceptions. But it all hinges on brand penetration.
I still like Kors over the long run, but it's not a cheap buy. The company has attracted a lot of attention from the investing community, and it's trading at a forward P/E of 35. If you're looking for a more under-the-radar stock to add to your portfolio, check out the Fool's report: "3 Stocks Wall Street's Too Rich to Notice." These three companies are doing great things, but don't have the sexy factor that makes Kors so noticeable (and expensive). Get your free copy today to find out all the details.