Market Overview

Michael Kors and Other Retail Stocks Recommended by Jefferies

Analysts at Jefferies are betting that, as the U.S. economy recovers, consumer discretionary spending will rise.

They have recommended that investors buy Deckers Outdoor (NASDAQ: DECK), Fossil (NASDAQ: FOSL), Michael Kors Holdings (NYSE: KORS) and Tumi Holdings (NYSE: TUMI).

Below we take a glance at how these four stocks have fared and what analysts expect from them.

In addition, the Jefferies analysts also recommended shopping mall regulars Abercrombie & Fitch (NYSE: ANF), Aeropostale (NYSE: ARO) and The Gap (NYSE: GPS).

Deckers Outdoor

This maker of UGG boots and other footwear and accessories is expected to report a net loss for the current quarter, following a surprise net loss in the most recent quarter. Headquartered in Goleta, California, the company sports a market capitalization of almost $2 billion. It does not offer a dividend.

Deckers Outdoor's price-to-earnings (P/E) ratio is lower than the industry average. The operating margin is in line with the industry average, and the return on equity is more than 15 percent. Note that short interest was more than 29 percent of the float at the most recent settlement date.

Seven of the 16 analysts surveyed by Thomson/First Call who follow this stock recommend buying shares. The mean price target, or where the analysts expect the share price to go, is about 10 percent higher than the current share price. However, the Jefferies price target indicates more than 44 percent upside potential.

Shares of Deckers Outdoor are more than 41 percent higher year-to-date, though they have traded mostly between $53 and $56 since late April. Over the past six months, the stock has outperformed the broader markets and the likes of Coach (NYSE: COH) and Nike (NYSE: NKE).

Fossil

This maker of accessories such as watches, handbags, sunglasses and tee shirts topped first-quarter earnings per share (EPS) estimates and raised its full-year outlook. It is headquartered in Richardson, Texas, and its market cap is more than $6 billion. Fossil does not offer a dividend.

The long-term EPS growth forecast is about 15 percent, but the P/E ratio is higher than the industry average. The operating margin is greater than the industry average. The return on equity is more than 30 percent. Short interest in Fossil was more than five percent of the float in mid-May.

The consensus recommendation of the analysts surveyed is to hold shares. Four of them rate the stock at Strong Buy, while only one recommends selling. The mean price target implies more than seven percent potential upside relative to the current share price. The Jefferies target is more than 18 percent higher than the share price.

The share price jumped more than 15 percent in early May but has retreated more than four percent since then. It is up more than 11 percent year-to-date. Over the past six months, this stock outperformed the broader markets, though it narrowly performed competitor Guess? (NYSE: GES).

Michael Kors

This luxury retailer said its fourth-quarter profit nearly doubled, and it beat consensus estimates on both the top and bottom lines. It was a Jim Cramer pick as well. Hong Kong-based Michael Kors has a market cap of more than $12 billion, but it does not offer a dividend either.

The P/E ratio is lower than the industry average and the long-term EPS growth forecast is more than 28 percent. The operating margin is greater than the industry average and the return on equity is more than 52 percent. The number of shares sold short represents less than three percent of the float.

All but two of the 17 analysts polled recommend buying shares, with 10 of them rating the stock at Strong Buy. The analysts believe shares have room to run, as their price target is more than 17 percent higher than the current share price. The Jefferies target signals more than 22 percent upside potential.

The share price reached a multiyear high last week but has pulled back about five percent since then, though it still is up almost 21 percent year-to-date. The stock has outperformed the broader markets and competitor Ralph Lauren (NYSE: RL) over the past six months.

Tumi Holdings

This purveyor of business and travel accessories, such as garment bags, satchels, wallets and toiletry kits, also reported better-than-expected results in the most recent quarter. The South Plainfield, New Jersey-based company has a more than $1 billion market cap. It does not offer a dividend.

The company has a long-term EPS growth forecast of about 17 percent. The P/E ratio is a higher than the industry average, but so is Tumi's operating margin. The number of shares sold short was less than four percent of the company's float at the most recent settlement date.

Three of the seven surveyed analysts rate shares at Strong Buy, and two others also recommend buying shares. Their mean price target is more than eight percent higher than the current share price. However, the Jefferies price objective suggests there is more than 15 percent potential upside.

Note that shares have traded mostly between $20 and $24 since August, but that the share price is more than 24 percent higher than at the beginning of the year. Over the past six months, the stock has outperformed Coach, but it has narrowly underperformed as the broader markets.

Posted-In: abercrombie & fitch Aeropostale Coach Deckers Outdoor FossilLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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