Piper Jaffray Cuts Michael Kors Estimates & PT After Looking At Europe Data

In a report published Monday, Piper Jaffray’s fashion and lifestyle Sr. Research Analyst Erinn E. Murphy lowered her estimates and price target for Michael Kors Holdings Ltd KORS as channel checks in Europe suggest moderating brand momentum.

While momentum remains much stronger than in the U.S., decelerating trends in the Old Continent cannot be ignored. Main data points include:

• Slowing “watch trends at wholesale in established markets like the UK -- offset in part by strength in jewelry.”
• An increasing number of affluent tourist shoppers are changing the perception that Michael Kors is a luxury brand.
• Comps are moderating in the UK.

Murphy still sees new growth avenues for the company in Europe (in areas like men's, footwear, outlets and e-commerce). However, she explains that the firm believes estimates still have not bottomed “given the negative trends in North America and the level of investment that is forthcoming this year.”

Piper Jaffray maintained a Neutral rating, but cut the price target from $47 to $44. Earnings estimates were also trimmed from $4.24 per share to $4.00 per share for fiscal 2016, and from $4.54 per share to $4.24 per share for fiscal 2017. The firm expects a revision in the management’s guidance at some point this fiscal year.

Shares of Michael Kors fell 3 percent on Monday. Shares are down more than 43 percent year-to-date.