Although KORS reported revenue that was slightly better than the guidance it provided last quarter, investors should still view the top line as negative because there was no improvement in the issues responsible for decaying retail same store sales (SSS). SSS declined 5.4% in 2FQ17.Michael Kors neck dress SSS has declined in six of the past seven quarters, and the lone quarter of growth was less than one percent. During that time period KORS increased its store count by 43% after deducting the stores added by its acquisition in Asia. I’m not a retail expert, but a consistent downward trend in SSS suggests it is not necessary to spend money building more stores. The chart below illustrates how KORS generated robust SSS until management accelerated store growth.
Looking for investment opportunities in the fashion industry can be perilous due to the fickle nature of tastes and trends. In order to avoid damaging losses investors must purchase shares of established brands that sport an appealing risk reward ratio.Michael Kors neck dress To evaluate these criteria investors must research recent quarterly reports of the target company and its competitors. Kate Spade is a household name that sports an appealing risk/reward ratio when compared to its competitors in the apparel industry. Enterprising investors should consider acquiring shares of the common stock.
Compared to Michael Kors and Coach , Kate Spade’s revenue growth rate has been impressive over the past three years. The following chart shows that Coach, Michael Kors, and Kate Spade have grown revenue at -3.44%, 19.30% and 24.37% annually from fiscal 2013 to 2015. It makes sense to see Kate Spade win this category as it is growing the smallest revenue base. In 2015 Kate Spade had about 27% of the revenue of Kors and Coach.Michael Kors neck dress This suggests there is plenty of market share to grab if Kate Spade can execute their strategy in the long run.Let’s look at margins and profits.Gross margins tell a more complicated story. Over the past three complete years Kate Spade and Michael Kors have enjoyed almost identical gross margins of 61 and 60 percent. Coach has maintained significantly higher gross margins of 69% over the same three year time period. It’s okay that KATE didn’t win this category as its margins are at acceptable levels and don’t seem to be declining.