Michael Kors stock downgraded by Credit Suisse

Wednesday, 07 January 2015

Michael Kors, famous for its affordable accessories, has been downgraded by Credit Suisse as the company's hangbags are increasingly being discounted.

According to the Financial Times, analysts lowered their rating to “neutral” from “outperform” and cut their price target to 79 from 103 US dollars making it the worst performing stock on the US benchmark.

In the UK the Michael Kors brand enjoys wide distribution throughout shopping malls, where stores run promotions to attract more customers.

“We are increasingly concerned about the level of promotions in the premium department store channel,” Christian Buss, an analyst at Credit Suisse, said.

Analysts at Credit Suisse had previously expected that the US handbag and accessories maker could sustain earnings growth of more than 15 per cent despite slowing comparable sales in the US because the company had “appropriate control” over distribution.

“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,” Mr Buss said.

Michael Kors shares has dropped more than 24 percent in the past six months, despite enormous growth since it first became listed in 2011.

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