Michael Kors earnings came on solid - beating forecasts - but concerns about margins and a build up in inventory spooked investors. Bobbi Rebell reports.
Michael Kors earnings looked great on the surface - beating forecasts - and showing strength in the U.S. as well as Europe and Japan. Retail net sales were up 47 percent - and the company raised its full-year revenue and profit outlook. But on the conference call, there was a change in tone, as the company warned investors margins were going to fall next year. Piper Jaffray's Erinn Murphy: (AUDIO SOUNDBITE) ERINN MURPHY, VICE PRESIDENT & SENIOR RESEARCH ANALYST, PIPER JAFFRAY (ENGLISH) SPEAKING: "The inventory growth was higher than sales, and then secondly the commentary on the conference call that there were higher markdowns during the quarter at retail. So those are the two things that we think are pressuring the stock this morning." But Murphy points out that the inventory growth was largely because of new stores they are opening around the world. She also likes the fact that the company is expanding beyond handbags- into more categories. She says the lower stock price is a buying opportunity. (AUDIO SOUNDBITE) ERINN MURPHY, VICE PRESIDENT & SENIOR RESEARCH ANALYST, PIPER JAFFRAY (ENGLISH) SPEAKING: "I do believe this is still a growth story that is tremendous. There is a lot of opportunity in the near term. This is a stock that this morning is trading under 17 times next year, and they are continuing to deliver well in excess of 30 percent top line and 25% bottom line. So I would be an aggressive buyer here on this pullback. " She is maintaining her $115 price target on the stock- as well as her overweight rating.