Finance Assignment on KORS
1. EXECUTIVE SUMMARY
Stock Pick: Michael Kors (MK) is a global luxury lifestyle brand of consumer products, which range from American luxury sportswear to accessories, footwear and apparel. The company operates in three business segments – retail, wholesale and licensing. MK is traded on the New York Stock Exchange. Although MK was established 30 years ago as a luxury brand, its initial public offering was only on December 2011. (MK Annual Report 2013)
2. KEY HIGHLIGHTS
Rapid Revenue Growth: MK had 67.54% growth by March 2013 compared to last year. The company has an outstanding 54.5% revenue increase and gross profit increased 58.3% within the First Quarterly Fiscal year 2013 itself (MK Investors Financial News Release 2013). Hence, not only the revenue growth is high, the income has also increased.
Margins: The Company has observed an increase in profitability margins over the 5-year period studied. It currently generates a gross profit margin of 60% and an net profit margin of 19%
Return on Capital: From 2009, MK has observed an increase in its return on capital invested. From 20% in 2009 to a 38% return on capital in the last fiscal period, projects a company that is at an outset to yeild returns in comparison to its industry peers in the retail sector. The average industry return on capital calculated for the last 5 years is at 30%.
Price Multiples: MK trades at high PE and PTB multiples in comparison to its industry peers. The PE and PTB observed as of the last fiscal year was 36 and 13.71 as opposed to the industry averages of 17.13 and 5.77.
Trading Commentary: From the period, MK went public, the stock had observed an upward trend and since its listing, it has yielded a holding period return of 172%. As of 2012, it has yielded a return of 92%. Its current YTD holding period return is 42%.
Efficient Market Hypothesis (EMH): The share price increased when the company launched the second public offering in February 2013. By April 2013,
Stock Pick: Michael Kors (MK) is a global luxury lifestyle brand of consumer products, which range from American luxury sportswear to accessories, footwear and apparel. The company operates in three business segments – retail, wholesale and licensing. MK is traded on the New York Stock Exchange. Although MK was established 30 years ago as a luxury brand, its initial public offering was only on December 2011. (MK Annual Report 2013)
2. KEY HIGHLIGHTS
Rapid Revenue Growth: MK had 67.54% growth by March 2013 compared to last year. The company has an outstanding 54.5% revenue increase and gross profit increased 58.3% within the First Quarterly Fiscal year 2013 itself (MK Investors Financial News Release 2013). Hence, not only the revenue growth is high, the income has also increased.
Margins: The Company has observed an increase in profitability margins over the 5-year period studied. It currently generates a gross profit margin of 60% and an net profit margin of 19%
Return on Capital: From 2009, MK has observed an increase in its return on capital invested. From 20% in 2009 to a 38% return on capital in the last fiscal period, projects a company that is at an outset to yeild returns in comparison to its industry peers in the retail sector. The average industry return on capital calculated for the last 5 years is at 30%.
Price Multiples: MK trades at high PE and PTB multiples in comparison to its industry peers. The PE and PTB observed as of the last fiscal year was 36 and 13.71 as opposed to the industry averages of 17.13 and 5.77.
Trading Commentary: From the period, MK went public, the stock had observed an upward trend and since its listing, it has yielded a holding period return of 172%. As of 2012, it has yielded a return of 92%. Its current YTD holding period return is 42%.
Efficient Market Hypothesis (EMH): The share price increased when the company launched the second public offering in February 2013. By April 2013,
References: Altagamma (2013). Available at http://www.altagamma.it/img/sezione3/files/397_975_file.pdf [Accessed October 1, 2013) Bloomberg (2013) Luxury Daily (2013). Available at http://www.luxurydaily.com/tiffany-michael-kors-are-most-purchased-luxury-brands-by-ultra-affluent-women-the-luxury-institute/ [Accessed October 1, 2013) Marketwatch: The Wall Street Journal (2013)