Since his company's public offering in 2011, Michael Kors has done an admirable job staying at the top of the retail food chain. In the last quarter, Kors's namesake brand pulled in $917.5 million in revenue, a 54 percent boost over last year. But can that rate of growth be maintained for much longer?
Some analysts are starting to question the sustainability of Kors's upward trajectory, issuing research notes that sent stock prices down 7 percent on Tuesday. Among their concerns are slower sales growth in June and an unusual amount of discounting taking place this summer.
Oliver Chen from Citi Investment Research pointed out that June sales growth was only 7.8 percent, down from 15.2 percent in April and 13.7 percent in May, a dip that didn't stack up with improving traffic and weather. That said, the month was a difficult one for many retailers, as shoppers proved uninterested in buying.
As for promotional activity, Ike Boruchow from Sterne Agee noted that although Kors typically does summer sales, the discounts offered were at the higher end of Kors's usual 30 to 50 percent markdowns. Barclays analyst Joan Payson also noticed steeper promotions as of late.
Whether the deeper discounts will hurt Michael Kors's bottom line as it hurt J.Crew's remains to be seen. We'll know more when the company reports quarter one earnings on August 5.
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