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This is never the right time to miss a turnover, but the financial deficit of the second quarter of Michael Kors Holdings Ltd. has been particularly bad, according to analysts: shortly after the announcement of the acquisition of Versace.
Michael Kors
KORS, -14.62%
, whose portfolio also includes the namesake brand and Jimmy Choo, reported total revenue of $ 1.25 billion, up from $ 1.15 billion last year, but below consensus by FactSet for $ 1.26 billion.
Shares are down 15.3% in trading on Wednesday.
The turnover of the Michael Kors brand decreased by 0.8% and same-store sales fell by 10%.
"The downturn in their core business, Michael Kors, could not be worse, as the company recently announced the acquisition of Versace – which was already a problem for many investors – and Michael Kors is now following an unfavorable trajectory. about to be superimposed on an agreement that is expected to be a high single-digit dilution factor, "wrote Wells Fargo analysts led by Ike Boruchow.
The $ 2.1 billion contract for the purchase of Gianni Versace SpA was announced on September 25th.
Michael Kors acquired Jimmy Choo about a year ago.
Lily: Michael Kors fought to recover a high-end image – but is he ready to use Versace?
The Michael Kors brand has pulled out of the wholesale business to reduce product discounts and protect the brand's health, a step taken by Tapestry Inc.
TPR -0.07%
Brand Coach.
The latest results represent a step backward for the Michael Kors brand, explains Wells Fargo, and raise questions about the future of the brand over the next 12 to 18 months.
"[G]Given the slowdown in the Michael Kors brand and the upcoming dilution of mergers and acquisitions, EPS's next fiscal year is likely to decline in the absence of a change in trajectory, "said Wells Fargo.
Shares of Wells Fargo's Michael Kors stock market are characterized by a price target of $ 50 from $ 74.
"[A]After slowly climbing the steep slope of the recovery, Michael Kors now seems to be reversing in reverse, "said Neil Saunders, managing director of GlobalData Retail.
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Saunders said he was also "cautious" about the Versace acquisition as the Michael Kors brand still needs to establish a clearer brand positioning to justify the "luxury" status.
"This deters some potential customers and therefore limits the growth of some consumer segments in search of a more refined label," he said.
The Versace deal could divert attention from these issues.
"While some economies of scale and the power of this name push Michael Kors into the luxury pack, this deal could be a further source of distraction in solving the core brand's core problems," he says. writes Saunders.
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"Despite its status, Versace is also not a top health brand: there is still much to do to boost sales and revitalize the company."
Michael Kors has fallen 22.8% since the beginning of the year while the S & P 500 index
SPX, + 2.12%
gained nearly 5% for the period.
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