Credit Suisse Initiates Coverage on Michael Kors

In a note released before the market open on Tuesday, Credit Suisse analyst Christian Buss initiated coverage on Michael Kors KORS with an Outperform rating and announced a $107 price target. Buss wrote, "We view Michael Kors as a global brand in the making, with a multiyear runway for growth to $7B in revenue and $6.50 in EPS." Looking at how Kors will achieve this growth, Buss pointed to the his estimates for double-digit distribution expansion and at least mid-single digit growth to like-for-like sales. In contrast, Buss anticipates a 300 basis point reduction in operating margin due to investments aimed to bring the company's infrastructure up to a point where it can meet demand. Finally, Buss's model suggest 2.5+ percent free cash flow yield and he is forecasting share repurchases to begin repurchasing up to $500 million shares annually by fiscal 2016.