Michael Kors Holdings Ltd. (NYSE:KORS) plans to report its first quarter fiscal 2015 financial results on Monday, August 4, 2014, before the market opens. The Company also plans to hold a conference call to discuss its financial results the same day at 8:00 a.m. ET.
Wall Street anticipates that the Consumer Goods company will earn $0.81 per share for the quarter, which is $0.21 to the good of last year's profit of $0.61 per share. iStock expects Michael Kors to beat Wall Street's consensus number; the iEstimate is $0.83, but there could be some downside risk, read on.
Revenue, like earnings per share (EPS), is expected to move higher by a respectable 34.3% year-over-year (YoY). The consensus revenue estimate for Q1 is $860.72 million versus last year's $640.86 million.
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Michael Kors Holdings Limited is engaged in the design, marketing, distribution, and retailing of branded women's apparel and accessories, and men's apparel. The company operates in three segments: Retail, Wholesale, and Licensing. The Retail segment is involved in the sale of women's apparel; accessories, which include handbags and small leather goods, such as wallets; footwear; and licensed products comprising watches, fragrances, and eyewear. As of March 29, 2014, it had 288 retail stores, including concessions in North America; and 117 international retail stores consisting of concessions in Europe and Japan.
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Heading into Monday's reports, Baird Equity Research analyst, Mark Altschwager says, "While we see little risk to FQ1 earnings/guidance, we see less room for upside to current Street expectations, supported by weaker July search trend data and Q3 survey results that point to weaker purchase intent across the handbag category."
A questionnaire by the research firm found "49% of respondents said they would or might buy a new bag vs. 71% in Q1."
Surveys are about what one might do; let's examine Google Trends to see what people might have actually done. According to Search Volume Intensity for the keyword "Michael Kors," web searches increased 25.42% YoY, which would make 34.3% revenue growth pretty hard to achieve.
Meanwhile, quarter-over-quarter SVI dropped by 5.13% in Q1 relative to Q4. For the first three months of 2014, EPS were $0.78. Again, meeting expectations could prove to be difficult if Google Trends translate.
If interest in handbags has dropped like Baird worries and Google Trends show, that will put the focus on margins to make up the difference. In this case, KORS income statement looks good as cost are rising at a slower pace than sales. Gross and operating margins rose in fiscal 2014 relative to 2013, which is good.
Overall: There appears to some downside risk to Michael Kors Holdings Ltd.'s (NYSE:KORS) first quarter earnings announcement. Baird Equity Research's findings and SVI are heading in the wrong direction. If they spillover from data to reality, then KORS could disappoint Monday morning.
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