Kors: Big results, improvement in the margins

Last Thursday the company of the designer of Long Island, Michael Kors, presented excellent third trimester results of the 2015 fiscal exercise, which finished last December 27. In previous articles we said “In brief, good results for the first trimester, even if, the margin reduction predicted by the CEO of the company, for next months, have blurred that success”.

So well without anticipating events, in Word of John D.Idol, president of the company and CEO, “Our third trimester marked the thirteenth consecutive period of growth in the incomes. The own electronic commerce increased a 73% in the trimester, compared to the sales of the outsourced system”.

Let see the analysis of the results:
The total incomes raised to $ 1.314.726 miles, what represents an increase of the 29,88%, about last year same period. In the nine accumulated months, net sales were placed in $ 3.290.485 miles, implying a rise of the 37,48% about 2014.

By segment:

• The net retail sales, that pose the 50,61% of the total incomes, has grown a 36,95% quarterly and a 40,57% so far this year.
• Wholesale, which represents a 45,43% of the total, has increased a 24,37% in the trimester and a 35,41% accumulated in the first nine months.
• Licenses (3,97% of total turnover), increased a 8,55% in the trimester and a 4,38% so far this year.

By region

• North America, 71,58% of the total sales, has increased her quarterly sales in a 29,80%.
• Europe, with a 22,85% of the billing, increased the quarterly incomes in a 100,07%.
• Last, Japan (4,57% of the total admitted), increased the quarterly sales in a 40,53%.

The gross benefit , in the trimester, raised to $ 800.143, with an increase, compared to the same quarter last year, of the 29,16%. In the first nine months, the gross benefit stood in $ 2.016.803 miles, implying an increase of the 37,51%. The gross Margin accumulated in the year amounts to a 61,29%, without variation with the same margin of last year. The main reason is the increase of the selling costs in a 37,44%.

The BAII, in the trimester, was increased in a 21,92%, after getting $ 418.477 miles. In the first nine months, the operative benefit raised to $ 1.000.806 miles, implying an increase of the 31,29%, over the same period last year.The operative margin fell in 143 p.b., mainly due to, the increase of the selling expenses, generals and administrative (41,12.), Depreciation and amortization (80,57%) and general expenses (44,24%).

By segments:

• Retail: Has grown a 25,48% in the trimester and a 28,45% so far this year. Although the cumulative margin has decreased in a 104 p.b.
• Wholesale: Grew a 21,18% in the trimester and a 38,89% so far this year. The cumulative margin has rasen 14 p.b.
• Licensing: Grew a 5,72% in the trimester and a 10,19% in the nine months. The cumulative margin has fall in 53 p.b.

The net incomes quarterly stood in $ 303.675 miles, representing a increase of the 32,24%. In the cumulative nine months, the net incomes amounted to $ 698.381 miles, with an increase of the 39,55%. The net Margin stood in the 21,22%, with a increase of 34 p.b. The earnings per share, is located in the nine months of the fiscal year in $ 3,38.

Continuing with the cautious policy of the Company (quarter to quarter, repeat), for the fourth quarter of the fiscal year 2015, the company expects that the total incomes are placed in the range of 1,05-1,08 million dollars. This assumes an increase in the single digit sales. The Debt Ratio has worsened, also as the Quality Ratio of debt, what represents a negative point inasmuch as, somewhat, the company that has undercapitalized should consider a deeper political in the rationalization and distribution of his debt.

Even there an improvement in the Liquidity and cash Ratio, the Company, I understand that is underutilizing the current assets, his realizable and available. A positive point has been the increase of his Working Capital in a 10,43%. Very good Return in the equity, standing in a 14%, as well as his Return on assets (16%).

In brief, the Company has presented robust results, both in sales growth and in the results. Especially if we compare them with their immediate competitors.There are certain concerns about the stagnation (negative cumulative margin) of the retail (shops), which can mean a slower growth in the near future, even if, as I anticipated at the beginning of the article, the increase of the internet sales, can be the reason and the compensation to that data.I remain concerned the dripping down, quarter to quarter, of the operative and BAI margins. Is MK becoming an outlet company?

Technical analysis of the value

If we analyze the weekly graphic, we are at the top in a bearish analysis (red canal). The value has bounced in a important support (64,77) and is testing the top of the bearish cannel. The projection of the bullish cannel breaking (blue canal), his projection of fall would be 58,00. Conversely, the bearish cannel breaking, would give us a projection of 86,60. The indicators and relative strength trend are positive and buyers. Ichimoku´s cloud, is above the prices and, as we can see, narrowing.

If we observe the daily graphic, the trend indicators are positive, although are not followed by the relative strength, that discourage to be in the value. Ichimoku´s cloud is above the prices, making of resistance to the Price of value in 74,00.

In brief, if the prices break the 74.00, we can see rises to levels of 86,60. Conversely (and is the actual trend), the rupture of the 58,00 would lead to falls, at least, until the 49,30.

«The new worlds must be lived, before being explained”,Alejo Carpentier.

Analysis: Miguel Angel Abad Chamon, Minister of Eurodeal Sociedad de Valores,AbadMaachamon
Disclosure: This report is provided for information purposes. The opinions contained in it are based on information obtained from sources believed to solvents but we can not guarantee its accuracy and correctness. Our opinions are discharged at a given time and are subject to change over time. Eurodeal not accept any liability for losses to follow the recommendations expressed in this report.