It’s spring break again. So why not poke our divining rods into the suitcases of those students bound for their getaway playgrounds? What could be tucked within are some hot stock picks among premium fashion labels.
Bye-bye rugby
With this year-to-date performance, the company projects that its full fiscal 2013 consolidated net revenues to increase by about 2%. This would be a deceleration from the 21% revenue growth in fiscal 2012, during which a $6.9 billion sales total was posted. For the fiscal 2013 fourth quarter, the company said it expects a mid-single-digit percentage increase in consolidated net revenues.
Ralph Lauren’s sales growth appears hobbled by store closures as the company repositions its greater China sales network and by the phasing out of the Rugby and American Living brands. The opening of new stores and Ralph Lauren’s e-commerce initiatives helped cushion the impact of the store shutdowns and the brand phase-outs, as well as partly deflected the negative impact of currency conversions.
Kors racks it up
If sales growth is solely to be the gauge for the best fashion label stock pick, Michael Kors Holdings Ltd (NYSE:KORS) sure has an inside track. It led Bing’s roster of the 10 most sea annkors rched fashion designers last year. For its third quarter, ended December 2012, the company’s total revenue rose 70.4% to $636.8 million. Gross income for the period amounted to $383.5 million, up 72.8% and represents 60.2% of total revenue, a further improvement from the 59.4% in the year-earlier quarter.
For the fiscal 2013 fourth quarter, the company sees total revenue of between $515 million and $525 million, assuming a low- to mid-20% comparable store sales increase. For its entire fiscal 2013, Michael Kors Holdings Ltd (NYSE:KORS) forecasts total revenue at about $2.1 billion, assuming that the gain in its comparable store sales hits a mid-30% clip.
Total revenue for Michael Kors fiscal 2012 rose 62.1% to $1.3 billion from $803.3 million posted in fiscal 2011. Fiscal 2012 gross profit increased 68.8% to $753.1 million, representing 57.8% of total revenue, higher than the 55.5% rise in fiscal 2011.
Ann Inc (NYSE:ANN)’s slip shows
Perusing ladies’ luggage bound for spring break will likely turn up Ann Taylor and LOFT brands, which are owned by Ann , a specialty retailer not only of women’s apparel but also shoes and accessories. Sales-wise though, Ann can’t match the double-digit growth of Michael Kors.
This ladies’ clothier recently revised guidance for its full fiscal 2012, projecting a 3% increase in sales to $2.376 billion for the year. With a gross margin rate expected at about 54.8%, the company, however, expects record earnings per share and double-digit net income growth. Ann Inc (NYSE:ANN)’s net sales for its fiscal 2012 fourth quarter are now projected to drop 1% to $608 million though.
Better grip for Michael Kors
Without delving into the metrics of their current stock price levels, Michael Kors appears to have the upper hand in delivering higher shareholder value moving forward. As shown by its recent robust sales growth, the company currently has a better handle on the fashion market than Ralph Lauren and Ann.
Notably, Michael Kors (founded 1981) and Ralph Lauren (founded 1967) are both established but mature brands. What they have been doing to keep a firm grip on the ever-shifting fashion market is to revitalize their presence among the high-end consumers. One way of achieving this is by introducing product category extensions.
Ralph Lauren has obviously failed in this department. This was demonstrated in the phase-out of its American Living and Rugby market entries. Significantly, Rugby also has an e-commerce website that was shut down this February along with the brand developed as the younger version of the Ralph Lauren line.
As for Ann, the vital missing link is presence in the menswear market. In the U.S. alone, this market was estimated at $10.7 billion in 2012, and projected to grow by 5.3% annually and eventually reach $139.2 billion by 2017.
Michael Kors, on the other hand, appears to be better at reinventing the wheel with a simple play on its original brand identity, coming up with a range of labels such as MICHAEL Michael Kors and KORS Michael Kors. It also helps tremendously that the founder of the company, the world famous designer Michael Kors, at 53, still personally leads its product design team.
The article Fashion Labels for the Picking this Spring Break originally appeared on Fool.com and is written by Arturo Cuevas.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
