KORS blimey ! JIMMY got CHOO’d up
ANOTHER UK COMPANY SOLD OFF JIMMY CHOO MADE A NET PROFIT OF £15 MILLION IN 2016 COULD JIMMY CHOO GO DOWNMARKET? LONG ON MK AT A TARGET PRICE OF $30 PER SHARE
On the 25th July 2017 Michael Kors purchased Jimmy Choos at a price tag of £896 million pound, $1,170 billion dollars. Not bad for a small stilettos firm born out of Hackney East London. A key sign to take from this is that before brexit, £896 million would have cost Michael Kors $1,344 billion, some could say brexit saved MK $174 million dollars, hmmmm. Jimmy Choo stilettos price range goes from £250 to over £4,000 and its handbag range starts from £300 to over £5,000, these price ranges are there to attract to the upper class and the upper middle class. The company also has a luxury sunglasses range and has recently indulged into clothes, this is where I feel the value lays. WHAT DOES JIMMY OFFER AND WHERE IS THE VALUE? Jimmy Choo is not really a big company, it only has 150 stores worldwide and around 60 franchises with a revenue of £363 million in 2016, total assets of £819 million with a total debt of £363 million. During 2016 Jimmy Choo made a net profit of £15 million, so you could say that price tag of £896 million could be a bit hefty for a company that made just £15 million in 2016? Yes but no. The net asset value of the company is still £465 million pound, if all assets were sold off and all debt was paid today. So for a foreign retail company, post-brexit in a low interest rate enviroment, Jimmy Choo was literally a great bargain. This is what led me to buy Jimmy Choo shares when brexit occurred. The brand mainly attracts the upper class and the upper middle class and its price range is kind of high. The value lies with the downmarketing and the expansion process of its brand; these are a few of the best options because the profits reaped from the current clientele do not provide great value for Michael Kors. The expansion process does. Jimmy Choo will most likely follow the Michael Kors route with lowering its prices and expanding its company into the clothing market and possibly the accessories market. With Michael Kors being an American global company and Jimmy Choo being a localized company born out of east London, the potential for maximizing global sales is enhanced. If all these agendas take place then Jimmy Choo is ripe for possible mass globalization of its brand. These basic fundamentals lead me to add Michael Kors to the portfolio at a target price of around $30 per share. The possible rates rise in the US combined with the GBP to USD conversion volatility could also add another advantage to the trade.
JIMMY CHOO share price – July 16 to July 17 / 107p to 228p (+113%)
MICHAEL KORS share price – July 16 to July 17 / $52 to $35 (-33%)
LONG ON MICHAEL KORS AT A PRICE OF AROUND $30 PER SHARE, 100 SHARES ADDED TO THE PORTFOLIO AT A POSSIBLE COST OF AROUND £2,300. So do keep your eye out for the MK share price and the possibility of the Jimmy Choo brand being seen in various new outlets and possibly marketed online and on T.V. and on billboards Time shall tell.