Michael Kors Is In A Lot Of Trouble

Summary

KORS produced a horrendous Q3.

Comps continue to fall off a cliff and the pullback in wholesale is also very painful.

At 9.5 times forward earnings, KORS is probably still too expensive.

Cheap Michael Kors Bags (NYSE:KORS) is a stock I've defended in the past as I long thought the growth story was simply on hold, not dead. But it seems I've been proven wrong as evidence continues to pile up that would suggest KORS is going to have an extremely challenging time posting any sort of meaningful growth anytime soon. The Q3 report was pretty rough and guidance for the next quarter wasn't exactly great either. Even at 9.5 times next year's earnings, it seems KORS may still be fairly valued at best.

Total revenue was down better than 3% despite the fact that the retail business owns 193 more stores now than it did last year. That accounted for a huge jump in revenue but was offset by not only weakness in comps, but weak wholesale revenue as well.

Comps were down by 6.9% in what has become more of the norm for Discount Michael Kors Bags than a shock. It's quite telling when a 7% decline in comp sales doesn't shock people but KORS has reached that point. It has become a victim of the decline in mall traffic and given its utterly complete dependence upon mall traffic in order to generate retail revenue, the outlook is bleak indeed. Mall traffic has been a problem for many retailers but Knock off Michael Kors Bags seems to be taking it on the chin more than others.