michael kors
Uncategorized / March 28, 2017

In my recent article about Michael Kors (NYSE:KORS), I argued that the company should trade higher if the acquisition of Kate Spade comes through. In this article, I am going to value the company independent of the acquisition on a basis of present value of future cash-flow. There are certain assumptions that are very critical to the valuation and therefore I will comment and justify each of them. Before I start with the estimates, I will comment on strategic initiatives the management has done recently as those are key components in the new structure of the company in terms of ultimate sustainable growth and new operating margin in perpetuity. The company has been challenged recently by cyclical and structural forces that the industry is being affected by. On one hand, there is a shift in consumer behavior toward more digital purchases as opposed to brick and mortar. On the other hand, there is weaker tourist traffic in the US and Europe as a consequence of terrorist attacks in Europe and a strong dollar in the US. There is little the company can do to fight the cyclical forces, but there is a lot the company can do to adjust to…