You Didn’t “Miss” Michael Kors!

Think you’re too late on Michael Kors? Think again. This extremely popular brand is likely still in its infant growth stages.

Jun 20, 2014 at 3:47PM
Kors

MichaelKors.com

So, you missed the boat on Michael Kors Holdings (NYSE:KORS) If so, then you might be hanging your head, but there's actually no reason to feel down. There is a common misconception among investors that they "missed it." The truth for many is that the winners keep winning, and Michael Kors is still in the early stages of its winning trend.

In addition to consistently deliver strong domestic results, the company is now looking to increase its international exposure. But even if you just look domestically, it would be difficult to find another lifestyle-products company that's more on trend. Wait until you see some of the numbers and projections below.

Big hints at future performance
One of the first things Michael Kors states in its 10-Q filing is that it's "rapidly growing." This isn't something you often find in an SEC filing. These filings are meant to be objective and factual, and that's the case here. Michael Kors wasn't attempting to sell anyone by referring to itself as rapidly growing. It was stating a fact.

Another hint at the likelihood of impressive future performance is that it increased its full-price retail store count and outlet store count by 38.8% and 22.3%, respectively, for fiscal-year 2015 (year over year). An increase in store count alone doesn't promise strong future performance, but such significant store count increases show that the company is highly confident in its future prospects. 

A third hint at the likelihood of future success is the company's outlook for fiscal-year 2015. Comps sales (sales at stores open at least one year) are expected to increase in the high teens (percentage-wise), and diluted earnings per share are expected to come in at $3.85-$3.91 compared to $3.22 in fiscal-year 2014.

To get a better idea of the dominance of Michael Kors, consider some key comparisons.

High and above
Comps sales growth is the key to retail, but revenue still plays a big role. Even though new store openings can skew what's really taking place, a retailer won't open a lot of new stores unless it fully expects them to succeed. With that in mind, consider how Michael Kors has performed compared to other lifestyle-product companies Ralph Lauren (NYSE:RL) and Coach (NYSE:COH) on the top line over the past five years:

KORS Revenue (TTM) Chart

Michael Kors revenue (trailing-12 months) data by YCharts

You're probably thinking that revenue means nothing without net income growth. You're correct. That's why the chart below is also imperative for these comparisons:

KORS Net Income (TTM) Chart

Michael Kors net income (trailing-12 months) data by YCharts

Michael Kors is currently trading at 29 times earnings, making it moderately more expensive than Ralph Lauren and Coach; but given the comparisons above, it looks like paying a premium for Michael Kors would be more than justifiable. However, if you're a dividend investor, then you might prefer Ralph Lauren or Coach, with current yields of 1.2% and 3.4%, respectively. Michael Kors doesn't pay a dividend, which makes sense given its substantial growth potential.

Exceptional results
In the fourth quarter, Michael Kors delivered a revenue gain of 53.6%, a comps gain of 26.2%, and diluted earnings-per-share improvement of 56% year over year. All three segments -- retail, wholesale, and licensing -- delivered significant net sales gains: 49.7%, 55.5%, and 79.1%, respectively.

If you break the quarter down geographically, North America revenue increased 43%, with comps popping 20.6%. This was primarily thanks to strength in accessories and watches in retail and strength in footwear and shop-in-shop locations in department stores in wholesale. In Europe, revenue skyrocketed 125%, with comps shooting 62.7% higher. This was primarily due to increased brand awareness.

The numbers above should be exciting to any investor. In addition to the likelihood of continued strength in the U.S. and Europe, Michael Kors plans to increase its global presence in non-established international markets. Given the success and momentum already seen by Michael Kors in established markets, you can only image the growth potential.

The Foolish bottom line
If you're looking to invest in a lifestyle-products brand, then you will be hard-pressed to find a better option than Michael Kors. When investing, it's best to go with what's working and stick with it until it doesn't work anymore. In the case of Michael Kors, there should be a very long runway ahead, perhaps not just years but decades before another brand comes along and steals its thunder.

Combine Michael Kors with this stock and you could have two home runs! 
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

  

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Coach and Michael Kors Holdings. The Motley Fool owns shares of Coach and Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers