Bag Big Profits with Michael Kors Holdings Ltd (KORS) Stock
With stocks continuing to skirt the stratosphere, you would think it would be challenging to find low-risk entries for new bullish plays. After all, the S&P 500 has risen virtually uninterrupted for three weeks. But fortunately, a few strong trending stocks like Michael Kors Holdings Ltd (NYSE:KORS) have quietly retreated to support. Indeed, KORS stock is a rousing buy here.
Though its history is one plagued by outsized earnings gaps, Michael Kors has cobbled together quite the quality uptrend in recent months. Since bottoming in late May after a disappointing quarterly report, the stock has rallied 47%.
The dominance of buyers has also been on full display in the volume indicator. Ever since the early-August price jump, we’ve seen nary a whimper of distribution.The rise is pulling the 20-day and 50-day moving averages higher, but in an impressive feat of strength, we’ve actually seen the sluggish 200-day moving average turn northward for the first time in over a year.
At the same time, accumulation days continue to show up, with the latest arriving yesterday.
And speaking of yesterday, the rebound off of the 20-day moving average is signaling that KORS is ready to begin rallying anew.
The KORS Trade
To capitalize on a run to $50, buy the Nov $47.50/$50 bull call spread for $1. The position consists of buying to open the Nov $47.50 call while selling to open the Nov $50 call. If the stock fails to launch, your risk is limited to the initial $1 cost.
If KORS can muster the strength to rise above $50 over the next month your potential reward is $1.50 which means this spread offers a 150% return.
To minimize the damage if the stock sours from here, consider placing a stop loss below $46.25.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
Michael Kors Holdings Limited Announces Pricing of 4.000% $450,000,000 Senior Notes
LONDON–(BUSINESS WIRE)–Michael Kors Holdings Limited (NYSE: KORS) (the “Company”) today announced that Michael Kors (USA), Inc., a wholly owned subsidiary of the Company (the “Issuer”), priced $450,000,000 aggregate principal amount of its 4.000% senior notes due 2024 (the “Notes”) at an issue price of 99.508%. The closing of the offering is expected to occur on October 20, 2017 and is subject to customary conditions. The Issuer intends to use the net proceeds of the offering to finance, in part, the Company’s pending acquisition of Jimmy Choo PLC, a public company organized under the laws of England and Wales, and its subsidiaries (collectively, “Jimmy Choo”) (the “Acquisition”) and certain related refinancing transactions.
The Notes will be senior unsecured notes and will be guaranteed by the Company and the Company’s existing and future subsidiaries that guarantee or are borrowers under the Company’s new $2.0 billion senior unsecured credit facilities (the “New Credit Facilities”) (subject to certain exceptions, including for subsidiaries organized in China), including, following the closing of the Acquisition, Jimmy Choo and all of its existing and future subsidiaries who are guarantors or borrowers under the New Credit Facilities (subject to certain exceptions, including for subsidiaries organized in China).
The Notes are being offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside of the United States in compliance with Regulation S under the Securities Act. The issuance and sale of the Notes have not been registered under the Securities Act, and the Notes may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities referred to herein, nor shall there be any offer, solicitation or sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.
Cautionary Note Regarding Forward-Looking Statements
This Press Release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. The forward-looking statements involve risks and uncertainties. Actual results may differ materially from expectations discussed in such forward-looking statements. Although the Company believes that its forward-looking statements are based on reasonable assumptions, expected results may not be achieved, and actual results may differ materially from its expectations.
The Company’s forward-looking statements should not be relied upon except as statements of the Company’s present intentions and of the Company’s present expectations, which may or may not occur. Cautionary statements should be read as being applicable to all forward-looking statements wherever they appear. Except as required by law, the Company undertakes no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures the Company has made in this release, as well as the Company’s filings with the Securities and Exchange Commission (the “SEC”). In particular, see the Company’s Annual Report on Form 10-K, filed with the SEC on May 31, 2017, and Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2017, copies of which are available upon request from the Company. The Company does not assume any obligation to update the forward looking information contained in this release.
Michael Kors to open at Norfolk Premium Outlets
NORFOLK, Va. – Norfolk Premium Outlets is adding a Michael Kors store to its retail lineup.
The store is set to open on October 20 and will be located between Under Armour and Carter’s.
Shoppers can save up to 65 percent off on Michael Kors luxury accessories, ready-to-wear, footwear and a full line of fragrance products.
“We always strive to bring an enhanced experience to our guests who want to shop and save in style,” said Chris Wayman, general manager of Norfolk Premium Outlets. “We know our shoppers have been eagerly awaiting the arrival of Michael Kors, so we are very excited they’re opening with us.”
The store is opening ahead of the outlets’ holiday celebration taking place on Friday, November 10 to Saturday, November 11.
Can Michael Kors Strategic Growth Plan Combat Comps Woes?
Michael Kors Holdings Limited ‘s KORSpositive earnings surprise, store optimization and global expansion bode well. Further, the company’s decision to acquire Jimmy Choo gives an indication that it is focused on international fashion brands. However, waning top-line along with dismal comps and wholesale segment performance continues to act as headwinds. The company has taken several strategic initiatives to bring both the top line and comps back on growth trajectory.
Turn Around Strategy
Michael Kors’ acquisition of Jimmy Choo will help diversify portfolio and tap international markets. The buyout is likely to be accretive in the low-single digits in fiscal 2020. In order to drive top-line growth, the company has been focusing on store expansion. In fiscal 2016, the company opened 142 new stores, which included 47 in the Americas and 95 worldwide. In fiscal 2017, it opened 159 net new stores openings, which includes 111 outlets related to the acquisition of the earlier licensed operation in Greater China. Given the scope for high profitability from company-owned stores, management is putting more emphasis on opening retail outlets.
Sales from Asia have shown tremendous improvement. The company had stated that it will continue with the expansion drive in Asia and also believes it has an opportunity worth $1 billion in the long term.
In an effort to increase the profitability in stores fleet, the company has announced its intention to close between 100 to 125 full priced retail stores over the next two years. Moreover, the company stated that it will incur one-time costs of nearly $100-$125 million related to store closures. Meanwhile, it anticipates annual saving of $60 million due to store closures as well as fall in depreciation and amortization related with these impairment charges.
Hurdles to Cross
Michael Kors’ wholesale segment continues to pose concern. In first-quarter fiscal 2017, wholesale segment sales declined 23% to $303.6 million primarily due to dismal performance of Americas, European and Asia region, while on a constant currency basis, it fell 22.7%. In the fourth, third, second and first quarter of fiscal 2017, wholesale segment sales declined 22.8%, 17.8%, 18.4% and 7%, respectively.
Stiff competition, falling comps, aggressive promotional environment and waning mall traffic are making things tough for Michael Kors. We noted that comparable sales had fallen 5.9% in the first quarter of fiscal 2018, following declines of 14.1%, 6.9%, 5.4% and 7.4% in the fourth, third, second and first quarters, respectively.
Michael Kors which shares space with Gildan Activewear Inc. GIL , PVH Corp. PVH and Lululemon Athletica Inc. LULU is struggling with top-line performance. After registering meager growth of 0.2% in first-quarter fiscal 2017, it had declined 3.7%, 3.2% and 11.2% in the second, third and fourth quarters of fiscal 2017. In first-quarter fiscal 2018, revenues declined 3.6%.
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