Kors: Bullish Into Earnings And Holiday Season

Aug. 1.13 | About: Michael Kors (KORS)

Tuesday July 30th, before the bell, Coach (NYSE:COH) delivered an apparently weak earnings report, leading the stock to drop almost 8%. While revenue came in below estimates, it was still up 5.8% from the year ago quarter. Coach's market share has been forfeited to competitors like Michael Kors, (NYSE:KORS) a company that is poised to announce strong earnings amid solid growth potential. Coach's failings should not dampen the rapid growth of Kors, whose price has risen almost 4% this week ahead of its earnings call on August 6th.

Since its IPO in December 2011, Kors has beat earnings estimates every quarter handily, and will look to keep its record in tact going into next week. In the year ago quarter, Q12012, Kors reported GAAP EPS of $0.34 per share, beating IBES estimates of $0.20 by an astounding 67% (shares surged up to 16% in the after hours following the earnings release). Estimates for the current quarter range from $0.47-$0.54 per share, representing EPS growth of over 50% from last year. Given this positive sentiment, and the optimism looking for the rest of the year, through the holiday season, Kors is a strong play on positive growth and momentum.

With the stock up almost 29% year-to-date, Kors has displayed envious strength, and is near all time-highs. In 2012, Kors finished up over 90% over 12 months, proving itself a strong retail play in an improving economy. And as rising home values, job growth, and higher consumer confidence bolster the American consumer-economy, Kors is poised to take advantage of its niche high-spending clientele.

Looking ahead to the end of the year, with the holiday season looming, it may be valuable to see how management saw Kors positioning among competitors and its ability to attract customers to its unique brand last year. "[T]he global luxury goods market is estimated to grow from $251 billion in 2011 to between $314 billion and $327 billion in 2015. We believe that Michael Kors is very well positioned to fully capitalize on this global growth in the near-term and the long term. Demand for the brand remains strong as evidenced by our performance during the holiday season," explained CEO John Idol during the F3Q13 call. He added, "I think we were very top of mind for gift giving during the holiday seasons on people's gift giving lists." It is not unreasonable for a company experiencing such rapid growth, consuming market share along the way, to be at the top of the shoppers' minds again this year.

As Kors continues to implement its strategy, open new stores, expand into a "booming" European landscape, and maintain high gross margins, it will continue its trek higher. Keep an eye on any weakness in luxury spending discussed in the earnings call, even if it appears as though Coach's troubles seem specific to its own company. If not, it is likely that Kors will be a good hold throughout the rest of the year and holiday shopping season.

Disclosure: I am long KORS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.