Affordable luxury retailer Michael Kors also struggled last year as its sales growth turned negative last quarter because of stiff competition from rivals such as Coach (NYSE: COH ), lower mall traffic, and the cannibalization of its higher-end goods by its cheaper outlet ones. The company expects its revenue to fall 3% this year, compared with 8% growth last year.
Kors initially looks like another victim of the meltdown in the retail sector caused by competition from "fast-fashion" players such as H&M and e-tailers. However, the affordable luxury market also looks ripe for consolidation. LVMH was reportedly courting Kors earlier this year, but those talks stalled out. Kors rival Kate Spade (NYSE: KATE ) also recently surged on buyout rumors, with Coach being cited as a likely candidate.
I believe that Kors remains a strong buyout candidate, since its P/E of 10 is much lower than Kate Spade's 19, Coach's 20, and the industry average of 26. Its P/S ratio of 1.5 is also lower than Kate's 1.8 and Coach's 2.2.
Per: The Motley Fool