heathrow terminal 1 Michael Kors

April 26, 2017

Shares of Michael Kors Holdings (NYSE:KORS) have gotten slammed over the last several days. The culprit so it seems is the company’s recent quarterly report.Actually the company’s quarter was not bad. Revenue rose 17.8% in Q4 and earnings came in at $0.90 a share. In both cases, the company missed analysts’ estimates by a penny and slightly missed on the revenue front. Revenue came in at $1.04 billion, slightly below expectations of $1.08 billion.Perhaps the biggest disappointment was in comparable store sales that declined 6.7% versus expectations of a 4.4% rise. The strong dollar might be the culprit here. The company blamed lower tourist traffic in the Northeast and Southwest as well as disruptions at West Coast ports. All these factors hurt sales in North America, said the company’s CFO.

Looking forward, the market was also disappointed by the company’s outlook. The company now forecasts revenue to come in between $4.7 billion and $4.8 billion and earnings of $4.40-$4.50 per share for the year ending March 2016. Analysts were expecting revenue of $5.05 billion and earnings of $4.70. The company said it expected a strong dollar to hurt profits by about $0.20 per share.The question is, is this a reason for the stock to take a beating falling by almost 25% after the announcement? I think not.To begin with, if we believe the company – that sales were impacted by a strong dollar and disruptions in West Coast Ports – then chances are that these are one-off issues, at least as far as port disruptions are concerned. Granted a strong dollar might continue for a long time (and I think it will); however, companies adjust to this over the long term and the impact is only felt short term.

Michael Kors Holdings Limited (NYSE: KORS) is under limelight these days due to its disappointing results in the third quarter of fiscal 2017. The current fiscal year is proving to be disastrous for the company as its stock has declined more than 22% in the last one year as compared to 26% positive performance of the broader market. Despite its disappointing performance in the past year, it’s still not a good investment for the short-term basis. However, the company’s fundamentals are in support of the long-term investment case.

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