I have to sell Michael Kors (KORS) from the Growth Portfolio. KORS closed at $61 yesterday, opened at $50 today, and has steadily declined all day, selling for just above $46 as I write this.
KORS reported earnings of $0.90 this morning which missed my estimate by 2 cents. But what was worse is North American same store sales growth went negative — a fear that had been sending the stock down for a while. The number was bad too: -5.8% on a constant currency basis. I know Michael Kors stuff isn’t as popular as it used to be, but at this rate the company will have to close some stores soon.
Europe, which had been the growth engine, had 11% SSS growth on a constant currency basis, but -6% when factoring in the dollar. Japan had great growth of 30% without factoring in the dollar, but its a small country.
Watch sales were weak last qtr, probably because of the Apple Watch.
What gets me is now is the company expects $0.74 to $0.78 next qtr, down from the $1.05 estimate I had from last qtr. That would be negative profit growth for the qtr and likely lead to other qtrs of negative growth. I see the stock having trouble climbing in that case.
I truly thought KORS would rebound from this current slump as the P/E last qtr was just 14. But now I feel the look of the product is so bland that the US sales deterioration is carrying over into Europe and this will take a long time to fix. I also don’t like the inconsistency of the stock and feel I’d be better off putting this money in something growing at a lower rate.
I originally bought KORS in 2012 for $45, and have since sold much of my shares. It has been a good investment, but I wanted to stay in for the long-term and hope to have the stock comppound over time. Now I feel this company is in a rut it may not get out of — that maybe the stock will trend sideways for many years. I will sell KORS tomorrow, hoping for a tick-up in the stock price, as it seems everyone is running for the gates today.
