NEW YORK (TheStreet) -- Shares of luxury handbag, clothing, shoes and accessories retailer Michael Kors are lower this morning after the stock was downgraded by Credit Suisse analysts. WHAT'S NEW: Credit Suisse downgraded Michael Kors to Neutral from Outperform and lowered its price target on the stock to $79 from $103 as the company is facing an increase in competition in the U.S. retail space, resulting in more discounted merchandise. The firm said it is "increasingly concerned" about the level of promotions in the premium department store channel, adding that the percent of Stock Keeping Units, or SKUs, on sale in premium department stores increased to 31% in December from 5% in October. The firm found Michael Kors handbags to have the highest average percentage of SKUs on sale and noted Michael Kors was the most promotional company e-commerce site out of six brands studied. The firm also said it is worried Michael Kors' discounting will "spill over" into the mid-tier channel in 2015. WHAT'S NOTABLE: Separately, Michael Kors rival Coach confirmed this morning plans to buy Stuart Weitzman Holdings, a designer and manufacturer of women's luxury footwear, from Sycamore Partners. Under the terms of the deal, which is expected to close by May, Coach will make initial cash payments of around $530M and up to $44M in contingent payments upon the completion of select revenue targets over the three years following the closing of the deal. The acquisition will be funded by Coach with cash on hand and it is expected to be accretive to earnings per share. The Wall Street Journal said in December that Coach and Brown Shoe Company were among the bidders for Stuart Weitzman. ANALYST REACTION: In a note to clients, Sterne Agee called Coach's acquisition of Stuart Weitzman "a little surprising" given Coach's current struggles in its core brand. The firm believes the acquisition could be accretive by 9c-11c in the first year if the company can hit Coach's three-year revenue targets and realize cost synergies of 3%-5% of sales, but notes that management "has their work cut out for them" and that the company may have "too many balls in the air right now." Sterne Agee kept a Neutral rating on Coach shares. PRICE ACTION: In morning trading, shares of Michael Kors slid $5.17, or 7.08%to $67.83, while Coach rose 0.3% to $36.84. OTHERS TO WATCH: Peers in the retail space include Kate Spade , which is down 3.9% to $29.71, and Fossil , which slipped 0.7% to $108. Brown Shoe shares are down 1.7% to $30.67. Reporting by Laurie Pasternack Chan.
Click to view a price quote on KORS. Click to research the Specialty Retail industry.
from Latest TSC Headlines http://ift.tt/1xOh2lb
No comments:
Post a Comment