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Early Clues That Kors Would Be an IPO Winner

Investors could have spotted the signs by a quick look at the S-1


Given the plunges in the shares of Facebook (NASDAQ:FB), Groupon (NASDAQ:GRPN) and Zynga (NASDAQ:ZNGA), it’s no wonder investors are skittish about IPOs. Yet this year has seen some solid winners for public offerings. Just look at Michael Kors Holdings (NYSE:KORS).

A top luxury apparel designer, the company came public back in mid-December at $20. Since then, the shares have reached $52.

Then again, KORS has put together a solid run of earnings reports:

Quarter End. Dec. 31 Quarter End March 31 Quarter End June 30 Quarter End Sept. 29
Revenue Growth 68% 58.3% 71% 74%
Operating Income Growth 44% 84.9% 148% 166%

As you can see, growth has actually accelerated in 2012. And according to the latest quarterly report, KORS noted that the momentum will continue. The company upped its full-year earnings guidance by 9 cents to a range of $1.48 to $1.50 a share and revenue guidance by $10 million to a range of $1.86 billion to $1.96 billion.

OK, so how could have investors spotted this IPO opportunity? Well, the company’s S-1 filing certainly contained lots of strong clues. First of all, the financials showed consistently strong growth. In fiscal 2011, revenues spiked by 58.1%, and earnings were up by 84.7%. KORS also indicated that the trends were sustainable.

Of course, company co-founder Michael Kors is a critical element. Over the past 30 years, he has demonstrated an innate genius for creating must-have apparel items and accessories. His goods have attracted celebrities like Angelina Jolie, Heidi Klum, Blake Lively, Penelope Cruz, Gwyneth Paltrow and Catherine Zeta-Jones.

But he was also smart to name John Idol as CEO back in 2003. A veteran executive, Idol set forth a plan that would provide a long-term growth ramp for KORS. For example, he built a multi-format retail footprint, which included collection stores, lifestyle stores and outlet stores.

But there was also an aggressive move to develop “shop-in-shops” at retailers like Saks Fifth Avenue (NYSE:SKS), Neiman Marcus, Nordstrom (NYSE:JWN) and Macy’s (NYSE:M). All of these efforts became huge revenue generators.

Idol also was savvy about expanding the licensing business. For example, KORS now gets revenues from watches, eyewear and fragrances.

While it’s true that the fashion business can be fickle, there were few signs that KORS was suffering from saturation. All in all, the company has been able to find the right balance between creativity and business savvy.

And the good news is that all this information was easy to find — on pages 2 and 3 in the company’s S-1.

Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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