NEW YORK, United States — Michael Kors has been riding high with investors, but the retailer's stock is falling this week as some analysts take a look at slowing sales growth and deeper discounts. Two analysts cut their price targets on the stock.
The retailer, which offers luxury handbags, clothing and accessories, debuted on the New York Stock Exchange in December 2011. Its shares have more than tripled since that time, thanks to strong demand for its goods.
But the stock is declining this week, with Oliver Chen of Citi Investment Research noticing some slowing sales growth.
In a client note, Chen said that Kors' sales rose about 15.2 percent in April and approximately 13.7 percent in May. The analyst anticipates that Easter and Mother's Day contributed to those sales. However, in June sales growth slowed to 7.8 percent. The analyst questioned why sales would slow, as weather was improving and traffic was up.
Chen lowered Kors' price target to $98 from $107.
Sterne, Agee & Leach's Ike Boruchow wasn't as concerned with the sales performance. The analyst said that while Kors' U.S. sales growth is moderating a bit and may continue to moderate, its U.S. same-store sales still rank among the best in the sector.
Boruchow took issue, however, with broader and deeper markdowns. The analyst said that Kors' usual summer semi-annual sale was offering a discount of 30 percent to 50 percent on certain merchandise. While this is similar to prior years, Boruchow said he noticed that markdowns were more toward the higher end of the range. He also noticed markdowns being taken on more expensive, rarely discounted items, like the Michael Kors collection.
Boruchow said Kors' inventory level was up 60 percent at the end of the fourth quarter, which could pose a "meaningful" risk to gross margins if sales growth slows.
The analyst cut Kors' price target to $92 from $100 and kept a "Neutral" rating.
Shares of Michael Kors Holdings Ltd. dropped $4.88, or 5.7 percent, to $80.79 in midday trading. Its shares have risen more than 5 percent so far this year through Monday's close.