Bank Of America: Michael Kors Is 'Most Attractive' Vs. Peers

In a report published Wednesday, Bank of America analyst Robert Ohmes suggested that Michael Kors Holdings Ltd KORS shareholders consider weather, foreign exchange, damage to its e-commerce distribution center and port disruption concerns as a buying opportunity.

Ohmes stated that Michael Kors' fourth quarter sales are heavily weighted towards March (relative to January and February) and could re-accelerate in late March and into the first quarter 2016 due to pent-up demand from weather, an earlier Easter versus last year, improving in-stock levels as port and e-commerce distribution issues are navigated.

The analyst added that his March store and online checks imply demand for the Kors brand remains "high" and that discounting activity cooled off. At Macy's, Kors had "solid" traffic and was the least promotional brand in the department store and held no products in the sub $200 handbag clearance piles.

Ohmes also suggested that demand for the Kors brand remains high, especially versus its peers based on search trends that are still growing, albeit at a slower pace.

"The volume of search trends for ‘Michael Kors' globally on an absolute basis still outpaces those of peers, but the growth of "Michael Kors" searches is decelerating," Ohmes argued. "We view the deceleration as a natural transition of the brand going from a hyper growth brand to a sustainable growth brand and is supported by our search trend analysis of "Michael Kors" relative to peers."

Bottom line, Michael Kors remains under-penetrated in retail square footage relative to its peers and retail square footage growth will come from upsizing productive stores, international growth in Europe and Japan, licensing buy-backs in South Korea (expected in fiscal 2017) and China (expected after fiscal 2018) and men's store expansion.

Shares are Buy rated with a $100 price target.