Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
RESEARCH Report
Presented by: Jeremy Edwards, Skylar
Thomas, and James Nguyen
Stock Profile
$80.00
$70.00
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
FY12A
59.9%
28.9%
18.2%
FY13A
60.9%
30.5%
20.0%
FY14A
60.6%
28.8%
20.2%
Gross
Margin
EBIT
Margin
Net
Income
Margin
FY15E
58.9%
35.0%
22.8%
FY16E
58.9%
34.1%
22.9%
FY17E
58.9%
32.5%
22.4%
Main Operations
Michael Kors Holdings Limited is a global accessory, footwear, and apparel
company and operates within three distinct segments of the market; retail,
wholesale, and licensing.
Operates in over 100 countries, with North America, Europe, and Japan
being the 3 primary markets
New investments in the European and Japanese markets, which increased
revenue in Europe by 42% and 57% in Japan in the last quarter.
$75
$71
$70 B
$66
$68
$79
$83
8.0%
6.0%
$70
4.0%
$60 B
2.0%
$50 B
0.0%
$40 B
-2.0%
$30 B
$20 B
-4.0%
$10 B
-6.0%
$0 B
-8.0%
FY08A
FY09A
FY10A
Net
Sales
FY11A
FY12A
FY13A
Revenue growth
FY14A
SWOT Analysis
Strengths:
Weaknesses:
Opportunities:
Threats:
Revenue Drivers
Expanded global footprint of retail outlets (an
additional fifteen retail outlets opened worldwide, up
from 85 to 100)
A push to increase the direct-to-user abilities of the
online market.
License revenues also increased due to the related
sales of eyewear, footwear, and jewelry.
Industry Overview
The apparel, accessories and luxury
goods industry is highly fragmented with
three top players accounting for 74.7% of
the markets total revenues. However,
customers have already developed their
loyalty to specific brands.
The competition among top players is
intense in terms of pricing and
promotional materials.
The industry relies both on local
spending and international tourism to
drive up its sales.
Indirect Competitors
In countries such as China, the market
for luxury goods is increasing, yet
customers do not have the disposable
income to afford these goods, so
imitation goods are prevalent.
Amazon sells directly to the consumer,
yet, reduces the revenues generated
through selling to consumer within
retail outlets
Recent Trends
Primary cause for the recent downturn
is lack of recent unique design and the
loss of luxury factor by failing to
maintain pricing power. Kors strong
brand relevance and loyalty among
customers suggests this will only be
temporary as market adjust to changing
design trends
A correlation of -.71 between
accessories and footwear means that
Kors able to still maintain steady
consumer demand despite fluctuations
in market trends
Valuation Overview
Discounted Cash Flow Analysis
Terminal FCF Growth Rate of 2%
WACC of 10.21%
Mid-year Convention
Multiple Method
Terminal EV/EBITDA of 4.5x
Comparable Companies Multiples
Comparable
Companies
-
Apparel,
Accessories
and
Luxury
Goods
Companies,
with
Revenue
More
than
$200M
($
in
Millions
Except
Per
Share
and
Per
Unit
Data)
Operating
Statistics
Company
Name
Coach,
Inc.
Prada
S.p.A
Under
Armour,
Inc.
Fossil
Group,
Inc.
Hanesbrands
Inc.
Burberry
Group
plc
Herms
International
Socit
Hugo
Boss
AG
Ralph
Lauren
Corporation
PVH
Corp.
Ticker
COH
1913
UA
FOSL
HBI
BRBY
RMS
BOSS
RL
PVH
Maximum
75th
Percentile
Median
25th
Percentile
Minimum
Michael
Kors
Share
Price
$
32.28
4.04
95.30
53.88
32.72
21.15
381.57
100.90
113.57
92.08
Capitalization
Equity
Enterprise
Value
Value
$
8,958 $
8,572
10,334
10,638
20,553
21,298
2,594
3,053
12,820
15,315
9,324
8,552
39,833
38,836
6,964
7,164
9,727
9,269
7,601
10,516
$
381.57
99.50
$
72.98
32.39
4.04
$
39,833
12,199
$
9,525
7,940
2,594
Company
Name
Coach,
Inc.
Prada
S.p.A
Under
Armour,
Inc.
Fossil
Group,
Inc.
Hanesbrands
Inc.
Burberry
Group
plc
Herms
International
Socit
Hugo
Boss
AG
Ralph
Lauren
Corporation
PVH
Corp.
$
8,045
5,609
$
4,060
3,736
2,979
$
8,025
5,608
$
4,197
3,399
2,565
$
8,357
5,860
$
4,789
3,493
2,731
LTM
$
921
965
469
628
960
862
1,748
623
1,221
953
2016E
$
1,063
988
650
484
1,064
600
1,912
652
1,271
1,152
Projected Projected
Reported
Net
Income
Revenue EBITDA
2014A
2015E
2016E
Growth Growth
$
404 $
510 $
597
4.2%
11.1%
471
421
456
3.8%
6.0%
208
232
301
25.4%
26.2%
377
250
239
2.4%
4.1%
405
599
724
3.2%
6.7%
366
321
343
6.5%
5.9%
859
1,013
1,144
9.0%
13.0%
333
339
384
6.0%
6.9%
702
587
657
4.2%
8.1%
439
577
625
4.1%
4.6%
$
1,748
964
$
937
687
469
$
1,692
1,075
$
944
577
465
$
1,912
1,130
$
1,025
650
484
$
859
463
$
404
369
208
EBITDA
Margin
2015E
2016E
21.4%
22.8%
24.9%
25.4%
13.1%
13.2%
14.2%
14.4%
17.0%
17.6%
22.1%
22.0%
34.7%
36.0%
21.9%
22.0%
15.4%
16.0%
13.7%
13.8%
26.2%
10.4%
6.8%
5.9%
4.1%
35.7%
22.2%
19.6%
16.3%
11.8%
34.7%
22.0%
19.2%
14.5%
13.1%
36.0%
22.6%
19.8%
14.8%
13.2%
KORS
$ 39.46 $ 8,123 $ 7,111 $ 4,512 $ 7,278 $ 9,323 $ 1,356 $ 2,179 $ 2,791 $ 881 $ 1,334 $ 1,731
28.1%
28.1%
30.0%
29.9%
29.9%
COH
1913
UA
FOSL
HBI
BRBY
RMS
BOSS
RL
PVH
Share
Price
$
32.28
4.04
95.30
53.88
32.72
21.15
381.57
100.90
113.57
92.08
Capitalization
Equity
Enterprise
Value
Value
$
8,958 $
8,572
10,334
10,638
20,553
21,298
2,594
3,053
12,820
15,315
9,324
8,552
39,833
38,836
6,964
7,164
9,727
9,269
7,601
10,516
$
381.57
99.50
$
72.98
32.39
4.04
$
39,833
12,199
$
9,525
7,940
2,594
KORS
Enterprise
Value
/
Revenue
LTM
2015E
2016E
2.0
x
1.9
x
1.8
x
2.7
x
2.8
x
2.7
x
5.8
x
5.4
x
4.3
x
0.9
x
0.9
x
0.9
x
2.6
x
2.6
x
2.5
x
2.2
x
3.3
x
3.1
x
1.7
x
1.8
x
1.6
x
2.9
x
3.1
x
2.9
x
1.1
x
1.1
x
1.1
x
1.1
x
1.1
x
1.0
x
Enterprise
Value
/
EBITDA
LTM
2015E
2016E
9.3
x
9.0
x
8.1
x
11.0
x
11.4
x
10.8
x
45.4
x
41.4
x
32.8
x
4.9
x
6.6
x
6.3
x
16.0
x
15.4
x
14.4
x
9.9
x
15.1
x
14.3
x
4.9
x
5.1
x
4.5
x
13.7
x
14.0
x
13.1
x
7.0
x
7.3
x
6.7
x
9.0
x
7.8
x
7.4
x
2014A
22.2
x
22.0
x
98.8
x
6.9
x
31.7
x
25.5
x
10.9
x
28.0
x
13.3
x
21.2
x
$
1,013
584
$
465
326
232
LTM
22.0%
24.5%
12.7%
18.3%
16.4%
22.2%
35.7%
20.9%
16.3%
11.8%
25.4%
6.4%
4.2%
3.8%
2.4%
Maximum
75th
Percentile
Median
25th
Percentile
Minimum
Michael
Kors
2016E
$
4,656
3,891
4,922
3,361
6,042
2,731
5,312
2,957
7,934
8,357
EBITDA
2015E
$
957
932
515
465
998
566
1,692
610
1,176
1,101
$
1,144
649
$
526
353
239
Valuation Statistics
$
38,836
14,146
$
9,892
8,557
3,053
LTM
$
4,183
3,938
3,688
3,424
5,845
3,881
4,900
2,979
7,506
8,045
Revenue
2015E
$
4,469
3,750
3,924
3,281
5,853
2,565
4,873
2,789
7,612
8,025
P
/
E
Multiple
2015E
2016E
17.6
x
15.0
x
24.5
x
22.7
x
88.7
x
68.3
x
10.4
x
10.9
x
21.4
x
17.7
x
29.0
x
27.2
x
9.2
x
8.1
x
27.5
x
24.3
x
15.9
x
14.2
x
16.2
x
14.9
x
$
38,836
14,146
$
9,892
8,557
3,053
5.8
x
2.7
x
2.1
x
1.3
x
0.9
x
5.4
x
3.0
x
2.3
x
1.3
x
0.9
x
4.3
x
2.9
x
2.2
x
1.2
x
0.9
x
45.4
x
13.1
x
9.6
x
7.5
x
4.9
x
41.4
x
14.8
x
10.2
x
7.4
x
5.1
x
32.8
x
14.0
x
9.4
x
6.9
x
4.5
x
98.8
x
27.3
x
22.1
x
15.3
x
6.9
x
88.7
x
26.8
x
19.5
x
16.0
x
9.2
x
68.3
x
23.9
x
16.4
x
14.4
x
8.1
x
1.6 x
1.0 x
0.8 x
5.2 x
3.3 x
2.5 x
9.2 x
6.1 x
4.7 x
DCF Calculation
DCF
Calculation:
($
in
Millions
Except
Per
Share
and
Per
Unit
Data)
Annual
Unlevered
FCF
Projection
Revenue:
EBIT:
EBIT(1-t):
Non-cash
Adjustments:
Changes
in
NOWC:
CapEx:
FCFF:
FCFF,
remaining
periods:
Present
Value
of
FCFF:
Sum
of
PV
of
FCFF:
FY14A
$
4,371
1,258
825
161
(184)
(356)
446
FY16E
$
9,323
2,639
1,731
249
(230)
(801)
948
948
865
FY17E
$
11,466
3,273
2,147
278
(241)
(1,202)
982
982
813
FY20E
$
17,172
5,138
3,370
352
(162)
(2,597)
964
964
596
FY21E
$
18,556
5,561
3,648
372
(158)
(3,116)
746
746
419
FY22E
$
19,650
5,894
3,867
388
(124)
(3,428)
703
703
358
FY15E
$
7,278
2,034
1,334
220
(205)
(534)
815
360
353
4,717
Projected
FY18E
FY19E
$
13,730 $
15,752
3,946
4,704
2,588
3,086
307
332
(255)
(248)
(1,803)
(2,164)
836
1,006
836
1,006
628
686
83.0%
FY14A
16.3%
3.6%
-14.8%
20.3%
-4.1%
-22.6%
-5.8%
Projected
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
815
948
982
836
1,006
964
746
703
360
948
982
836
1,006
964
746
703
353
865
813
628
686
596
419
358
4,717
WACC Analysis
Cost
of
Capital
Risk-free
Rate:
Market
Risk
Premium:
Beta:
Cost
of
Equity:
Default
Spread:
Pre-tax
Cost
of
Debt:
Cost
of
Preferred
Stock:
2.94%
6.42%
1.25
10.97%
0.40%
3.34%
0.00%
Levered
Beta
0.97
Unlevered
%
Debt %
Equity Tax
Rate
Beta
17.2%
82.8%
35.0%
1.10
%
Debt
Equity
17.2%
6,729
0.0%
8,123
Levered
%
Equity Tax
Rate
Beta
82.8%
34.4%
1.25
100.0%
34.4%
1.10
9.46%
10.97%
10.21%
Valuation Summary
We considered two scenarios:
Base Case: Abnormal growth disappears in FY22. CapEx grows aggressively
to be in-line with the guidance of 400 new stores to be opened. SG&A slightly
decreases to 28% in 7 years.
Bear Case: Revenue tumbles to $18.5 B in FY22 due to brand saturation.
Michael Kors appears to be undervalued in the Base Case. Even in the more
pessimistic scenario, the implied share price is close to its current value.
25th to Mean
LTM Reported P / E:
Mean to 75th
12/31/2015E Reported P / E:
12/31/2016E Reported P / E:
$50.00
$100.00
$150.00
$200.00
$250.00
Min to 25th
LTM Reported P / E:
25th to Mean
12/31/2015E Reported P / E:
12/31/2016E Reported P / E:
$50.00
$100.00
$150.00
$200.00
$250.00
Conclusion
We think Michael Korss stock price will appreciate in the next 12-18
months for the following reasons:
Strong brand relevance & customer loyalty
Highly possible price increase for accessories & the launch of new
handbag groups
Overseas expansion
Q&A
Financial
Ratios
Profitability
Ratios
Return
on
Assets
Return
on
Capital
Return
on
Equity
FY10A
FY11A
FY12A
FY13A
FY14A
FY15E
FY16E
FY17E
FY18E
FY19E
FY20E
FY21E
FY22E
25.8%
39.9%
83.2%
29.2%
43.7%
50.7%
40.1%
51.7%
52.9%
36.0%
44.2%
46.4%
32.0%
38.8%
43.5%
38.0%
45.6%
45.6%
32.6%
38.6%
38.6%
28.6%
33.2%
33.2%
25.6%
29.1%
29.1%
23.3%
26.2%
26.2%
20.2%
22.3%
22.3%
17.9%
19.5%
19.5%
15.9%
17.2%
17.2%
2.4
x
7.9
x
11.1
x
33.0
3.9
x
93.0
N/A
N/A
N/A
2.4
x
9.0
x
12.6
x
29.1
3.6
x
101.2
9.1
x
39.9
90.3
2.2
x
10.6
x
13.1
x
27.9
3.9
x
94.7
11.6
x
31.3
91.3
1.9
x
11.2
x
13.1
x
27.8
3.7
x
97.8
11.4
x
31.9
93.7
1.8
x
9.6
x
13.2
x
27.6
3.6
x
100.2
12.0
x
30.3
97.5
1.7
x
7.6
x
15.8
x
23.2
4.5
x
81.0
14.4
x
25.4
78.7
1.5
x
5.8
x
14.6
x
25.0
4.2
x
87.7
12.3
x
29.7
83.0
1.3
x
4.3
x
14.3
x
25.5
4.1
x
89.3
12.1
x
30.3
84.5
1.2
x
3.2
x
14.2
x
25.8
4.0
x
90.4
11.9
x
30.6
85.5
1.1
x
2.5
x
13.9
x
26.3
4.0
x
92.2
11.7
x
31.2
87.2
0.9
x
2.0
x
13.6
x
26.9
3.9
x
94.4
11.4
x
32.0
89.4
0.8
x
1.6
x
13.5
x
27.0
3.8
x
94.8
11.4
x
32.1
89.7
0.7
x
1.3
x
13.4
x
27.3
3.8
x
95.8
11.2
x
32.5
90.6
Margin
Analysis
Gross
Margin
SG&A
Margin
EBITDA
Margin
EBIT
Margin
Net
Income
Margin
55.5%
34.8%
20.7%
17.5%
9.0%
57.8%
35.7%
22.2%
19.3%
11.3%
59.9%
28.5%
31.4%
28.9%
18.2%
60.9%
28.0%
32.9%
30.5%
20.0%
60.6%
28.6%
31.9%
28.8%
20.2%
58.9%
29.0%
29.9%
27.9%
18.3%
58.9%
29.0%
29.9%
28.3%
18.6%
58.9%
29.0%
29.9%
28.5%
18.7%
58.9%
29.0%
29.9%
28.7%
18.9%
58.9%
28.0%
30.9%
29.9%
19.6%
58.9%
28.0%
30.9%
29.9%
19.6%
58.9%
28.0%
30.9%
30.0%
19.7%
58.9%
28.0%
30.9%
30.0%
19.7%
1.9
x
0.8
x
2.8
x
1.4
x
6.0
x
4.1
x
5.8
x
4.1
x
6.1
x
4.1
x
6.1
x
4.6
x
6.7
x
5.2
x
7.1
x
5.5
x
7.1
x
5.6
x
7.5
x
5.9
x
7.8
x
6.2
x
7.9
x
6.3
x
8.0
x
6.5
x
47.7%
68.6%
75.6
x
0.7
x
4.7%
32.4%
167.9
x
0.1
x
NM
18.8%
NM
NM
NM
18.5%
NM
NM
NM
16.8%
NM
NM
NM
16.8%
NM
NM
NM
14.7%
NM
NM
NM
13.0%
NM
NM
NM
11.6%
NM
NM
NM
10.2%
NM
NM
NM
8.9%
NM
NM
NM
8.0%
NM
NM
NM
7.1%
NM
NM
DuPont
Analysis
Net
Income
Margin
Total
Asset
Turnover
Equity
Multiplier
ROE
9.0%
2.4
x
3.9
x
83.2%
11.3%
2.4
x
1.8
x
50.7%
18.2%
2.2
x
1.3
x
52.9%
20.0%
1.9
x
1.2
x
46.4%
20.2%
1.8
x
1.2
x
43.5%
18.3%
1.7
x
1.5
x
45.6%
18.6%
1.5
x
1.4
x
38.6%
18.7%
1.3
x
1.3
x
33.2%
18.9%
1.2
x
1.3
x
29.1%
19.6%
1.1
x
1.3
x
26.2%
19.6%
0.9
x
1.2
x
22.3%
19.7%
0.8
x
1.2
x
19.5%
19.7%
0.7
x
1.2
x
17.2%
Efficiency
Ratios
Total
Asset
Turnover
Fixed
Asset
Turnover
Accounts
Receivable
Turnover
DSO
Inventory
Turnover
DIO
Accounts
Payable
Turnover
DPO
CCC