Why Michael Kors Holdings Ltd Stock Fell Today

Markets Motley Fool

What happened

Continue Reading Below

Shares of Michael Kors Holdings Ltd (NYSE: KORS) tumbled today after research firm MKM Partners initiated coverage on the stock with a sell rating. As of 11:14 a.m. EDT, the stock was down 5.8%.

So what

Analyst Roxanne Meyer put a $26 price target on the fashion label's shares and said she didn't see the company matching the analyst earnings consensus this year or next. Currently, the average EPS estimate is $3.55 for this year and $3.65 for fiscal 2019, the following year.

Meyer explained the reasons for her sell rating: "Downside to comps and margins, in light of a slow infusion of innovation, changes to the merchandising and promotional strategy, over-exposure to wholesale, as well as our view that the operating margin is structurally headed lower."

Now what

Continue Reading Below

It's no secret that Michael Kors has been struggling. Shares were flirting with a five-year low today following Meyer's report as she summed up all of the problems facing the brand. Comparable sales have plummeted as the company has overexpanded, and it said a month ago it would close 100 to 125 stores over the next two years. Declining traffic at malls and department stores has also pressured sales at retail partners like Macy's.

The company knows it needs to make its brand more scarce in order to regain cachet, but that's difficult in today's rapidly changing retail environment. I tend to agree with Meyer than Kors' troubles will continue.

10 stocks we like better than Michael Kors Holdings
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Michael Kors Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of July 6, 2017

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Michael Kors Holdings. The Motley Fool has a disclosure policy.