Michael Kors Holdings Ltd. – Value Analysis (NYSE:KORS) : August 8, 2017

Capitalcube gives Michael Kors Holdings Ltd. a score of 75.

Our analysis is based on comparing Michael Kors Holdings Ltd. with the following peers – Ralph Lauren Corporation Class A, Coach, Inc., Fossil Group, Inc. and Differential Brands Group Inc. (RL-US, COH-US, FOSL-US and DFBG-US).

Investment Outlook

Michael Kors Holdings Ltd. has a fundamental score of 75 and has a relative valuation of NEUTRAL.

Fundamental Score

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Company Overview

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It currently trades at a Price/Book ratio of (3.64).
  • We classify KORS-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • KORS-US has a successful operating model with relatively high net profit margins and asset turns.
  • Changes in the company’s annual revenue and earnings are around the median among its peers.
  • KORS-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While KORS-US‘s revenue growth in recent years has been above the peer median, the stock’s P/E ratio is less than the peer median suggesting that the company’s earnings may be peaking and the market expects a decline in its growth expectations.
  • The company’s level of capital investment suggests it might be under-investing in a business with above median returns.
  • KORS-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

KORS-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 2.28% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 14.16%), and a well-cushioned interest coverage level of 216.76x, KORS-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 4 peers for the company have an outstanding debt balance.

KORS-US has maintained its Quick & Able profile from the prior year-end.

  • KORS-US‘s interest coverage is its lowest over the last four years and compares to a high of 5,840.63x in 2015.
  • The decrease in its interest coverage to 216.76x from 691.24x (in 2016) was also accompanied by a decrease in its peer median during this period to 33.94x from 35.71x.
  • Interest coverage fell 472.71 points relative to peers.
  • KORS-US‘s debt-EV is its highest over the last four years and compares to a low of 0% in 2015.
  • The increase in its debt-EV to 2.28% from 0.02% (in 2016) was also accompanied by an increase in its peer median during this period to 14.16% from 12.59%.
  • Relative to peers, debt-EV rose 0.69 percentage points.

Access the detailed analysis for Michael Kors Holdings Ltd.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Ralph Lauren Corporation Class A 14.16 2.54 54.44 77.21
Coach, Inc. 5.74 4.35 33.94 138.09
Fossil Group, Inc. 53.51 3.31 4.28 22.53
Differential Brands Group Inc. 80.6 1.64 -0.78 12.62
Michael Kors Holdings Ltd 2.28 2.06 216.76 1408.57
Peer Median 14.16 2.54 33.94 77.21
Best In Class 2.28 4.35 216.76 1408.57

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Company Profile

Michael Kors Holdings Ltd. engages in the design and distribution of sportswear, accessories, footwear and apparel of branded women’s apparel and accessories and men’s apparel bearing the Michael Kors trade name. The company operates its business through three segments: Retail, Wholesale and Licensing. The Retail segment operates collection stores, lifestyle stores, including concessions and outlet stores located primarily in the United States, Canada, Europe and Japan. The Wholesale segment sells the company’s products to department stores, as well as specialty retail stores and travel shopping locations. The Licensing segment licenses its trademarks on products such as fragrances, cosmetics, eyewear, leather goods, jewelry, watches, coats, men’s suits, swimwear, furs and ties. Michael Kors was founded by Michael David Kors on December 13, 2002 and is headquartered in London, the United Kingdom.


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