Thursday, February 14th, 2013
By George Leong, B.Comm. for Profit Confidential
As I have said on numerous occasions, Michael Kors Holdings Limited (NYSE/KORS) continues to show why it?s the top stock in the luxury brand stocks group after reporting a fiscal third quarter in which it easily beat Wall Street estimates.
Michael Kors reported astounding revenue growth of 70.4% to $637 million, which was spectacular given the Thomson Financial consensus estimate of $540 million. The earnings report showed a superlative 41.4% rise in comparable store sales, which is pretty impressive, especially given the recent slowing in luxury brand stocks. What really impressed me, though, was the 58.0% surge in comparable store sales in Europe.
A maker of high-end clothing and accessories, Michael Kors also delivered earnings of $0.64 per diluted share, well above the Thomson Financial consensus earnings-per-share (EPS) estimate of $0.41.
As I said in my previous commentary on the luxury brand stocks sector (read ?Luxury Stocks That Are Leading the Pack?), Michael Kors is tops. The company?s revenue and earnings guidance was well above Wall Street expectations.
Michael Kors will continue to be a special stock among luxury brand stocks in the retail sector going forward, especially if it can pick up its sales in the burgeoning China market.
My technical analysis shows that the stock broke out on Tuesday to above $60.00, a new 52-week high, following a sideways channel.
Chart courtesy of www.StockCharts.com
If you are shopping for high-end jewelry, Tiffany & Co. (NYSE/TIF) is the place to be; but unfortunately, the company is struggling, and it has failed to deliver. Tiffany has been short of the Thomson Financial EPS estimates in each of the last four quarters. The estimated revenue growth of 4.5% and 6.3% for fiscal 2013 and fiscal 2014 (ended January) just isn?t good enough. The muted growth for high-end watches and jewelry doesn?t surprise me, given the recession in the eurozone and continued nervousness toward the U.S. economy. I like the products offered by Tiffany, but in luxury brand stocks, I?d stick with Michael Kors.
The wildcard speculative pick among the luxury brand stocks is high-end handbag maker Coach, Inc. (NYSE/COH). The stock had been on fire from March 2009 to March 2012, when it traded at $79.70, but the direction of the stock has been negative since then. I see a potential contrarian play for investors at the stock?s current price, just above its 52-week low.
Chart courtesy of www.StockCharts.com
Coach beat Thomson Financial EPS estimates in three straight quarters, but it didn?t meet estimates in the fiscal second quarter. While its estimated revenue growth of 7.3% and 8.4% for fiscal 2013 and fiscal 2014 are better than Tiffany?s, the growth is well below Michael Kors? 54.0% and 31.6%. Coach could offer a big return for investors looking at luxury brand stocks, but only if the company can ramp up its sales growth.
The bottom line is: stick with Michael Kors for steady growth amongst the luxury brand stocks, but for a more aggressive trade, take a look at Coach.
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Source: http://www.profitconfidential.com/stock-market/why-michael-kors-outdoes-other-luxury-stocks/
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