The Most Appealing IPO of the Year
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In the times when everyone is trying to make most of their money by restraining themselves from unnecessary spending, there are retailers which pull the crowd with their amazing product line. Here is a company which has recently become public but has been able to take away all the attention of the customers leaving behind the age old players in the industry. Michael Kors (NYSE: KORS) has been the hottest IPO till now as compared to all others such as Facebook (NASDAQ: FB) which shattered all hopes of investors.
The growing attractiveness of Michael Kors was strengthened with its mind blowing first quarter results which rocked Wall Street and made investors overwhelmed. This had a skyrocketing effect on its stock price.
Growing at a gigantic rate
A strong marketing focus on its comparatively newer areas, namely Europe and Japan, helped the retailer record a stupendous growth in revenue. The company’s efforts are endless. All the segments have been actively contributing to this retailer's eye popping growth. Its continuous focus on expansion of new stores brightened the performance of its retail segment. Its focus on shop in shops drove the wholesale segment and the third segment, Licensing, is definitely not behind especially because of an ever increasing demand for its stylish watches manufactured by the luxury watch retailer Fossil.
Michael Kors is one retailer which is experiencing great same store sales growth. Its peers such as Ralph Lauren (NYSE: RL) and Kohl’s (NYSE: KSS) have been finding it difficult to maintain positive same store growth. It is a very important metric for measuring the health of the players in the industry since it shows the actual growth of their existing stores excluding the contribution from new stores opened during the period. Opening new stores boosts the top line, which is obvious, but that does not mean that the company has performed well. Hence, increase in sales without taking into account the effect of new stores is a healthy sign.
Moreover, Kors’ year to date gain has been a whopping 84% as compared to Ralph Lauren and Kohl’s which gained a minor 11% and 3%, respectively. This surely makes the retailer increasingly attractive to the eyes of the investors.
Also, even if we compare the retail debutant with other IPOs, Kors takes the cake. Groupon (NASDAQ: GRPN), the provider of local commerce platform, has lost 73% since the start of the year and Facebook lost a disheartening 45% of its stock price since its IPO in May. This clearly highlights the strength of Kors and the growing demand for its products. In fact, growth at Kors’ older stores continues to be as much as the new ones owing to the increasing interests of shoppers.
Strength in all geographies…
Geographically, the premium products retailer witnesses great growth in its American operation as well as European operations. This is definitely surprising since Kors is quite new to Europe than America, but still consumers have inculcated a preference for the brand. Also, given the uncertain economic conditions in Europe a 110% increase in revenue is certainly an achievement on its part.
The Japanese market has been a potential opportunity for Michael Kors and continues to be the same with great results each time. As stated in my earlier post, the company is expanding its footprint in Japan given the strong demand for its lifestyle products in the region. Kors is expected to open 10 new stores by the year end in order to cater to the growing demand. This surely has a potential upside and looks to drive Kors’ performance further.
Further, the company has a great outlook to look forward to. Kors raised its outlook with a 20% upward revision in its earnings which is quite a bold step, leading investors to go gaga over it. It surely inspires more confidence in investors about the company.
With a great performance each time and continuous surge in its stock price Kors has made a place for itself. The company looks increasingly strong with a great future, especially with its expansion moves in place. Opportunities in Japan also look great, and should benefit the retailer going forward. Most importantly, the company is growing fast, especially given the demand for its great quality lifestyle products. Considering that Kors is growing at a fabulous rate, it looks like the company has got more room to run. The fact that it is trading near its 52-week high shouldn’t discourage investors since Kors has the ability to hit more such highs in the future. Hence, if you still have any doubts over this tear away performer, I think you should remove them and jump into it.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.