Sentiment towards luxury retailer Michael Kors has soured over the last year and a further blow was delivered on Tuesday as analysts at Credit Suisse downgraded the stock because of what they described as a “dramatic” increase in discounts for the retailer’s handbags, the Financial Times said.
Michael Kors, which for much of its time as a public company has been a favorite among investors, has lost that favor in recent months because of an increase in discounting, a strategy often used by mall-based retailers to attract customers, the report said.
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Christian Buss, an analyst at Credit Suisse, said, “We are increasingly concerned about the level of promotions in the premium department store channel”.
Credit Suisse had expected the American handbag and accessories maker could sustain earnings growth in the mid-teens despite slowing same-store sales in the U.S., because the company had control over distribution, according to the Times.
“This no longer appears to be the case, as a combination of rising inventories and softening traffic has led to a dramatic step up in promotional activity across Michael Kors stores, eCommerce sites, and premium wholesale distribution partners, ” Buss said.
The analysts at Credit Suisse lowered their rating to “neutral” from “outperform” and cut their price target to $79 from $103, making it the worst performing stock on the S&P 500, the report said.
Shares of Michael Kors fell 9.6 per cent to $67.01 and have fallen over 24 per cent in the past six months. But the stock has more than doubled since its 2011 listing, the Times said.
Michael Kors is a high-end handbag, clothing, shoes and accessories retailer.
