Michael Kors (NYSE:KORS) traded 13% lower on Wednesday morning after reporting a decent quarter. However, operating margins were lower but for the most part it appears the market was just looking for more.
The company reported earnings per share of $0.63 and total revenue of $1.18 billion, above to analyst expectations of $0.60 and $1.15 billion. It also reported that comparable sales increased by +2.3%, which exceeded analyst estimates of a -1.3% decrease.
KORS forecast earnings guidance for FY 2019 of between $4.65 to $4.75, compared to the average estimate of $4.74. While the average is within its range, it’s on the high end. Further, operating income increased only 2% to $152 million, and its operating margin decreased from 14.2% to 13.1%, seemingly the reason investors were very disappointed.
With KORS having gained 88% over the last year, we believed a top was forming. It now appears to be a "Major M Top." In analyzing market cycles on the chart below, our view is for an interim low in a couple weeks. After that, a bounce could be an opportunity to sell.
