Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Michael Kors Sells All of the Bags

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Sometimes what a business really does is obscured by the face that the business presents to the world. For instance, you might think the "pizza slices the size of your head" joint down the road sells pizza, but really it sells heartburn and regret. Similarly, you might think that Michael Kors (NYSE: KORS  ) sells handbags and accessories, but really it just prints cash.

If you're in any doubt, just look at the company's most recent quarterly results. Revenue was up 59%, comparable store sales grew 27.8%, and earnings per share were up 73.4%. What?

Michael Kors is unstoppable
That's a little facetious -- every company is stoppable. Michael Kors is certainly on a tear, though. Investors have been riding the wave to excellent returns -- the stock is up 61% over the last 12 months -- and a positive outlook. Success has come from the brand's incredible strength and luxury factor.

You don't have to look any further than Coach (NYSE: COH  ) to see where Kors is getting its business. The bettered retailer has seen its market share slip-slide away, with North American comparable sales falling 13.6%. You can almost imagine the swing that's happened here. A customer walks into the mall, mows through a Cinnabon, and walks right past the Coach store to the new Michael Kors location, where all their friends are shopping.

Kors is planning to keep the pedal pressed firmly down and is forecasting a comparable-store sales increase of between 15% and 20% in the next quarter. That would be the lowest increase the company has recorded yet, with the current low being 22.9% in the second quarter of fiscal 2013.

What's in store for Michael Kors
While the company seems to be on an undeniable run, it's not cheap to get in on the action. Kors is trading at 31 times its past 12 months of earnings. Coach is trading at just 13 times its earnings, but it's also suffering.

For the rest of 2014, Kors is on track to open four locations in North America and four in Europe. That should help open up the business, as right now Kors earns less than 15% of its revenue in Europe and 85% in North America.

Finally, I expect Kors will continue to outperform its estimates for comparable-store sales. The management team has been conservative in its forecasts, and there's nothing in Coach's lineup that suggests it's going to take any momentum back from Kors. At some point this year, Tory Burch might jump into the fray to shake things up, but that's still a ways off. For the foreseeable future, Kors is just going to keep churning out bills.

Make better investments
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Editor's note: A previous version of this article listed Kors' P/E as 37, not 31. The Fool regrets the error.

Read/Post Comments (2) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 06, 2014, at 10:26 AM, ElCid16 wrote:

    "While the company seems to be on an undeniable run, it's not cheap to get in on the action. Kors is trading at 37 times its past 12 months of earnings."

    Well, that's just not right.

    The past 12 months of earnings are $2.93. The company is trading at $92/share. That's closer to 31 times its past 12 months of earnings.

  • Report this Comment On February 06, 2014, at 11:28 AM, XMFRedRam wrote:


    Oof. You're right. Sorry, I hadn't updated for the most recent quarter which is just sloppy on my part. Should be 31, which still isn't cheap but isn't as bad.



Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2826470, ~/Articles/ArticleHandler.aspx, 9/4/2015 7:35:00 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

Today's Market

updated Moments ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 4:03 PM
KORS $43.94 Down -0.98 -2.18%
Michael Kors Holdi… CAPS Rating: ****
COH $29.16 Down -0.69 -2.31%
Coach CAPS Rating: ****