Michael Kors Stock Falls as Fossil Lowers Outlook

Tuesday, 08 May 2012 03:29 PM

 

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Shares of Michael Kors Holdings Ltd., the Hong Kong-based luxury-clothing company, headed to the biggest drop in four weeks in New York as specialty-retailer Fossil Inc. reduced its 2012 earnings forecast.

Michael Kors, named for its designer-founder, tumbled 6.2 percent to $41.36 by 2:35 p.m. Trading totaled 4.8 million shares, or 179 percent of the stock’s daily average three-month volume, according to data compiled by Bloomberg.

Richardson, Texas-based Fossil, which obtained one-third of its 2011 revenue from Europe, fell 37 percent to $78.87, the biggest decline on the Standard & Poor’s 500 Index, after reducing its full-year earnings forecast “amid a softening macro environment” in Europe. Fossil, which manufactures Kors watches along with other licensed brands, said sales of those items grew 48 percent in the first quarter.

“Kors is getting unfairly punished here,” Corinna Freedman, an analyst at Wedbush Securities Inc. in New York who rates the stock outperform, said by phone. “For Kors, Europe is a small part of its business though it is a growth area.”

Freedman has an outperform rating on Kors with a 12-month price target of $48. Kors has 29 retail stores in the region and plans to open 10 to 15 additional outlets per year, Kors Chief Executive John Idol said during a February investor conference call.

Earnings per share in 2012 will be as much as $5.33, Fossil said today. Previously, it had forecast a maximum of $5.50. Analysts projected $5.56, the average of estimates compiled by Bloomberg.

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