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1. Margins: Michael Kors has margins that any company would be envious of. Gross margins are currently over 72%, michael kors factory outlet greater than Louis Vuitton and Ralph Lauren Corporation (RL), each of which are under 60%. This means that it costs Michael Kors only $0.28 to manufacture every $1 of goods for sale, a tremendous margin. Net profit margins are consistently upwards of 20%, also above both LV and RL. Although margins will likely compress slightly going forward so that Michael Kors can compete in both the upscale and midscale markets, it will still remain one of the strongest in the industry.
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2. Strong Balance Sheet: Michael Kors is very conservatively financed, with a debt /equity ratio of only .575. michael kors factory outlet online with over $850 million cash, and long term debt of under half a million dollars, it is in a very flexible financial position. This would allow the company room for significant capital expenditures to accelerate growth, or allow for increased share buybacks. Michael Kors has been aggressively buying back stock, decreasing its outstanding share count from 372 million in 2007 to about 280 million currently.
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3. Dividend: Michael Kors is now yielding 2.56% with a payout ratio of only 33%. Since Michael kors initiated its dividend in 2009, it has been raised 87%, 53% and 30%, respectively. While this massive dividend growth cannot be expected to continue going forward, I could see Michael kors easily attaining 15% increases annually during the next five years, due to its low payout ratio and large cash position. michael kors outlet store with another expected increase coming in the next two months, michael kors can make it five consecutive years of dividend hikes.
Although I do think Michael Kors will outperform the market going forward, it is important to be careful and know the risks involved. Like I have stated above, the stock is at a 52 week low, meaning that Wall Street has reason to believe it is in decline. Concerns over revenue growth (or lack thereof) and margin pressure are driving the pessimism in the stock. Economic troubles in China would also cause problems for Michael Kors, as it considers the Asian market its prime target for growth opportunities.