Don't buy Kors for Versace — 'BUY KORS FOR KORS,' Jefferies says (KORS)

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September 25, 2018 6:21 PM

After the $2.1 billion of acquisition of Italian fashion house Versace, Jefferies reiterated its "buy rating" for Micheal Kors with a price target of $93. "Nice Playbook For Versace, But BUY KORS FOR KORS," wrote Randal Konik, an equity analyst with Jefferies.

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Jefferies reiterated its "buy" rating for

Versace could benefit from Kors'

n order to reach its goal, it will expand its retail footprint by opening another 100 stores globally, strengthen its e-commerce business, and grow its accessories and footwear business to 60% of its overall revenue — from 35%.

The note also suggests the purchase of Versace will impact Michael Kors cash flow generation, which was projected to be more than $700 million in fiscal 2019.

"We believe the cash portion and impressive annual cash flow generation could have been put toward a more aggressive stock buyback program or even the initiation of a dividend," says.

"These methods of capital return would have been successful in enlarging the shareholder base near-term with a more clear path of returns, though acknowledge over-delivering on this acquisition could present upside for Capri shareholders over the long term," he added. Alongside the deal, Michael Kors announced it would change its

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