DavidVY Posted May 28, 2015 Author Share Posted May 28, 2015 I dont even think Michael Kors is a turn-around. It is still very profitable, not bleeding cash, no debt, 1B in cash, full self-funding w/cash flow from operations. I think its more a fear-driven aspect and Wall Street crushing its former darling. Its gone from high 20s PE to lows 10s PE. Thats nuts. The question I keep asking is will it get worse before it gets better? Link to comment Share on other sites More sharing options...
constructive Posted May 28, 2015 Share Posted May 28, 2015 I don't think anyone is saying that fashion is a bad business for fashion owners or early-stage-growth-investors. I.e. if you get in at early stage, you can make multimillions as you suggest. It's the value investing in fashion business that is difficult, because usually you can only buy them at value prices if they stumble. And when they stumble their business is far from good. It becomes turnaround investing and turnarounds are tough to call. ;) There are examples of fashion companies that have made money for cheap, value-oriented investors at some point over the past few decades, for example GPS, LB, FOSL, SKX, etc. These were good businesses which encountered a short-term pause in growth. The more faddish stores like ARO, AEO, BODY, PSUN, etc were never high quality businesses in my opinion. COH, VRA and KORS are fundamentally similar but most of the other companies people are discussing are not so much. And really COH and KORS are far more similar than VRA, which has a lower ceiling with a brand image of 'girliness' that appeals to teenagers and older women but not so much young women. So that is a pretty small sample size to be drawing conclusions about KORS growth prospects. My perception is similar to DavidVY, KORS has transitioned from a great business to a good business. Meanwhile they are priced as an average business with no future growth prospects. Link to comment Share on other sites More sharing options...
Jurgis Posted May 28, 2015 Share Posted May 28, 2015 I dont even think Michael Kors is a turn-around. It is still very profitable, not bleeding cash, no debt, 1B in cash, full self-funding w/cash flow from operations. I think its more a fear-driven aspect and Wall Street crushing its former darling. Its gone from high 20s PE to lows 10s PE. Thats nuts. The question I keep asking is will it get worse before it gets better? It depends on whether fear is fact based or baseless. If the fear is fact based and company goes into decline, then it's gonna get much worse. If not, then you gonna make tons of money. :) You pretty much have either: - Have your own view and model of why Kors will continue to do well based on your DD. - Call the low price a MOS and hope that even if company results decline the price will allow you to get out without huge loss. Sorry for abstract answers, I no longer invest in retail fashion brands. Link to comment Share on other sites More sharing options...
Jurgis Posted May 28, 2015 Share Posted May 28, 2015 I don't think anyone is saying that fashion is a bad business for fashion owners or early-stage-growth-investors. I.e. if you get in at early stage, you can make multimillions as you suggest. It's the value investing in fashion business that is difficult, because usually you can only buy them at value prices if they stumble. And when they stumble their business is far from good. It becomes turnaround investing and turnarounds are tough to call. ;) There are examples of fashion companies that have made money for cheap, value-oriented investors at some point over the past few decades, for example GPS, LB, FOSL, SKX, etc. These were good businesses which encountered a short-term pause in growth. The more faddish stores like ARO, AEO, BODY, PSUN, etc were never high quality businesses in my opinion. COH, VRA and KORS are fundamentally similar but most of the other companies people are discussing are not so much. And really COH and KORS are far more similar than VRA, which has a lower ceiling with a brand image of 'girliness' that appeals to teenagers and older women but not so much young women. So that is a pretty small sample size to be drawing conclusions about KORS growth prospects. My perception is similar to DavidVY, KORS has transitioned from a great business to a good business. Meanwhile they are priced as an average business with no future growth prospects. I somewhat agree with you. I have made money on ANF, COH in the past, I remember at least two GPS downturns and then upturns, I think I have owned ARO and AEO for wash. For me though calling a turnaround (or "continuing as good business after a bump") is too hard, so I don't invest in this space anymore. Link to comment Share on other sites More sharing options...
CorpRaider Posted May 28, 2015 Share Posted May 28, 2015 If they didn't just put in a poison pill and were talking about giving me some of that cash flow, I would be more interested. Guided to negative double digit same store comps, but man they have a lot of virgin territory outside the U.S. Maybe a basket of KORS, COH and VRA...COH is 40+ years older than the other two, but I doubt any of them are going to stop throwing off cash soon. Yeah, I've caught a couple 2 - 3 bag moves in ANF over the years. I think its pretty much done now though. It seems hard to turn these things around while remaining public and getting pounded on quarterly calls about sales growth and comp store sales when really they need to shrink or just stabilize the sales for a while and just take solace in those fat margins. Link to comment Share on other sites More sharing options...
kab60 Posted May 28, 2015 Share Posted May 28, 2015 If they didn't just put in a poison pill and were talking about giving me some of that cash flow, I would be more interested ... It seems hard to turn these things around while remaining public and getting pounded on quarterly calls about sales growth and comp store sales when really they need to shrink or just stabilize the sales for a while and just take solace in those fat margins. Which is why you'd probably want to partner with owner-operators and good capital allocators. Fashion isn't going out of fashion. :) Link to comment Share on other sites More sharing options...
cloud Posted July 10, 2015 Share Posted July 10, 2015 Michael Kors Holdings Ltd suffered huge drop recently. It's typical Mr.Market over reaction. He's too depressed right now and offers the business for deep discount. This is a rare opportunity. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 10, 2015 Share Posted July 10, 2015 Please stick to the KORS thread here: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/kors-michael-kors/msg223032/ Link to comment Share on other sites More sharing options...
Simple Investor Posted July 29, 2015 Share Posted July 29, 2015 Currently trades at a PE of 9. If you use a DCF it’s priced at 3% growth for 20 years (using a 12% discount rate). Link to comment Share on other sites More sharing options...
DavidVY Posted July 30, 2015 Author Share Posted July 30, 2015 Bought more recently. I think it should be priced in the mid-high teens P/E. We shall see going into earnings! Link to comment Share on other sites More sharing options...
Simple Investor Posted November 4, 2015 Share Posted November 4, 2015 Good day for Kors. Link to comment Share on other sites More sharing options...
Guest Grey512 Posted November 4, 2015 Share Posted November 4, 2015 I (possibly against my better judgement) was very concentrated in KORS ahead of today, with a 15% position; sold TWX & FOXA to buy it. Happy that I did. The thesis is simple: this company is a cannibal. Link to comment Share on other sites More sharing options...
Simple Investor Posted November 4, 2015 Share Posted November 4, 2015 I believe this was the first quarter they have purchased stock. 400mm. Not sure what they issued back out. Link to comment Share on other sites More sharing options...
Guest Grey512 Posted November 5, 2015 Share Posted November 5, 2015 No. 4th consecutive quarter of buybacks. Spent about $1.2b on buybacks in the trailing 12 month period. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted February 7, 2017 Share Posted February 7, 2017 Hey all: Anybody still following/looking at this one? Perhaps a great way to make money is to sell stocks that have large buybacks? It seems like they are always buying back at bad prices... Anyway, KORS had a mildly disappointing sales report today...stock is about $35/share. It is down $6 today. I am poking around at it...considering taking a position. Any thoughts? Link to comment Share on other sites More sharing options...
Oreo Posted February 7, 2017 Share Posted February 7, 2017 I have not listened to the call but my understanding is that the management team has (speaking relative to prior earnings calls) played down the "our stock is cheap" card and played up the "make strategic moves" card, which the market is interpreting as Idol desiring to go out and buy Kate Spade. I've done the $36 to $50+ flip before, but for me to do this again given the non-zero probability that Idol will buy Spade and the potential impact of "manufacture more in America" trend (i.e. Trump), personally I'd want to see KORS trade in the low $30s before I consider buying again. Link to comment Share on other sites More sharing options...
Oreo Posted February 7, 2017 Share Posted February 7, 2017 One more point: Consider the following thought experiment. Say you have $6 bil. You can spend it to either buy 100% of KORS or 100% of Ralph Lauren. Which one would you pick for the long-term? RL has been steadily trading down last 2 years. I'd imagine retail sector-focused value folks would rotate out of KORS and into RL, at least to some extent. Link to comment Share on other sites More sharing options...
constructive Posted February 7, 2017 Share Posted February 7, 2017 RL has been steadily trading down last 2 years. I'd imagine retail sector-focused value folks would rotate out of KORS and into RL, at least to some extent. I don't understand your point. KORS has had better earnings than RL over the last two years but worse stock performance. If anything, rotation should happen the opposite direction. Link to comment Share on other sites More sharing options...
Oreo Posted February 7, 2017 Share Posted February 7, 2017 RL has been steadily trading down last 2 years. I'd imagine retail sector-focused value folks would rotate out of KORS and into RL, at least to some extent. I don't understand your point. KORS has had better earnings than RL over the last two years but worse stock performance. If anything, rotation should happen the opposite direction. Past 2 years, KORS stock went from $75 to $37. Past 2 years, RL stock went from $183 to $76. So, to your point, KORS has not had "worse" stock performance. + More subjectively, I do not think that RL's intrinsic value suffered a % worsening similar to KORS. Link to comment Share on other sites More sharing options...
BG2008 Posted February 7, 2017 Share Posted February 7, 2017 I think any Fashion stock purchase decisions should start with "My wife or my girlfriend" told me this... If you disagree, I encourage you to read One Up on Wall Street by Peter Lynch Link to comment Share on other sites More sharing options...
DooDiligence Posted February 8, 2017 Share Posted February 8, 2017 Management stated they're taking an aggressive stance towards promotional activity with department stores (previously stores would run promos every 2 to 3 weeks & now they're targeting 4 times per year.) A look at the Amazon channel also shows strong promo reduction (handbags show minimal resellers (Zappos is frequent) for new merchandise with no used availability when I sampled 3 different items & when I hit the "Sell on Amazon" button & logged it to my seller account I got a msg stating "Sorry, this product is not eligible for Amazon Marketplace selling at this time." Management stated that Access watches sold through & that they had lines for the product but Amazon reviews are mixed with the biggest complaint being that iOS integration is poor. Also FakeSpot indicates gamed reviews on watches ranging from a C rating for a watch with 40 reviews to a D for one with 300 reviews (overall company rating is a B which is probably based on bags & shoes, etc.) Said they'd be making some kind of announcement at Basel re: wearable tech (as to Fossil & Kosta partnership, I haven't read up in this.) Management further stated they expect to gain traction & become "the second largest wearable watch business in the world" amid a declining fashion watch market. Mr. Idol stated that their #1 priority with capital allocation is share buybacks (not interested in small acquisitions as they would be a distraction but a large acquisition would be interesting if priced well.) Also spending on Asian expansion. Overall management is very candid regarding same store reductions & they don't try to obfuscate (focus on new design & channel intros & curtailing promos both in house & omni channel.) A side note Louis Vuitton actually shreds bags rather than allow them to hit secondary markets (wish that company was on sale like Kors - that IMHO would truly be a no brainer purchase...) I'm not strong on valuation skills (GIGO) so this is just a quick read on qualitative. Anyone have more to add? Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted May 31, 2017 Share Posted May 31, 2017 Was asking some friends who have a little more familiarity with the brand than I do. It's cheap and caught my eye as I've been adding retail names that I am familiar with in recent months. She mentioned that the brand had "cheapened" substantially and was no longer as desirable as it once was. Maybe that was a smart move if they were shifting from higher-end to mid-market hoping to make it up in volume, but that also seems to make it harder to distinguish yourself when hard times come along for retail - like now. I'd be more comfortable owning RL than KORS given that feedback as RL seems to still hold brand appeal, sells the one of the most recognized staple in men's fashion, and has been around longer to navigate more cycles. Link to comment Share on other sites More sharing options...
clutch Posted May 31, 2017 Share Posted May 31, 2017 Was asking some friends who have a little more familiarity with the brand than I do. It's cheap and caught my eye as I've been adding retail names that I am familiar with in recent months. She mentioned that the brand had "cheapened" substantially and was no longer as desirable as it once was. Maybe that was a smart move if they were shifting from higher-end to mid-market hoping to make it up in volume, but that also seems to make it harder to distinguish yourself when hard times come along for retail - like now. I'd be more comfortable owning RL than KORS given that feedback as RL seems to still hold brand appeal, sells the one of the most recognized staple in men's fashion, and has been around longer to navigate more cycles. This is why I bought RL as well. When I saw Larrson left because he and Ralph Lauren couldn't agree on the brand's strategy, I saw this as a good sign. I assume Larrson wanted to shift the business to mid-market much like other semi-luxury brands were doing (given his background at H&M). I liked the fact that Ralph Lauren resisted this and prioritizing in keeping its brand value. After all, the brand value will keep RL more profitable in the long run, after this seismic shift in retail ends. Whether it's at a physical store or online, it will be the brand value that will help them sell. Link to comment Share on other sites More sharing options...
DooDiligence Posted May 31, 2017 Share Posted May 31, 2017 Yep. KORS should have gone with the LVMH bag shredding model and shred 'em publicly... Link to comment Share on other sites More sharing options...
mbreject Posted May 31, 2017 Share Posted May 31, 2017 LVMH is in a class of its own. Every once in a while I hear stuff about how they're accused of racism against black people and black people still buy their bags. KORS, on the other hand, is just a COH for young people. Affordable, flashy, and made for the mass. Shredding bags would've just left money on the table. Things might've been different if they still made their bags in Italy, but then they probably wouldn't have had their wave of success. Link to comment Share on other sites More sharing options...
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