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NEW YORK — Over 200 investors filed into The Pierre hotel here Thursday for the New York stop on the Michael Kors initial public offering road show.
Though Securities and Exchange Commission rules bar press coverage of the briefing, market sources said the luncheon presentation in the Cotillion Room focused mostly on the company’s U.S. and European retail growth opportunities and its continued emphasis on accessories.
The Kors IPO is expected to be priced on Dec. 14, and the company is prepared to go public Dec. 15. Shares are expected to be priced between $17 and $19, and the company plans to sell up to 48 million shares — 41.7 million initially and an additional 6.3 million if demand warrants. As reported, the IPO could value Michael Kors Holdings Ltd. at $3.63 billion.
“This will be a very desired offering. The company has experienced incredibly rapid growth,” said Laurence C. Leeds Jr., chairman of Buckingham Capital Management.
During an hour-long presentation by John Idol, chief executive officer, and Joe Parsons, chief financial officer and chief operating officer, sources said they gave a detailed picture of the $803.3 million company’s growth prospects. Neither Kors nor his partners, Silas Chou and Lawrence Stroll, were in attendance. Idol spoke about the rollout of 400 stores throughout the U.S. and Europe, as well as the fact that it took control of its Japanese business at the end of last year. He also discussed plans to open 150 doors in Japan, with 10 already open. With a penchant for corner properties, Idol said the company’s real estate strategy is to open “sexy corners” in cities around the world, including malls and airports.
Kors has found a niche in manufacturing luxury accessories that are well priced. Idol quipped that the designer always likes to say: “We’re the Hermès of Staten Island.”
Idol told the packed room that Kors has 71 percent name recognition in the U.S. and 35 percent in Europe. Companies like Ralph Lauren have over 90 percent name recognition, so the Kors team feels there’s room for growth. Idol said its business model is more along the lines of Coach and Burberry and is truly focused on accessories. Idol also pointed out that Kors is the second largest designer watch company after Chanel, and that the firm has three licensees and isn’t looking to add any more at this time. He noted that the success of “Project Runway” in the last nine years has been a real boost to the brand’s recognition.
Idol recalled when he first joined the firm he asked Kors what the average age of his consumer was, and Kors said, “35.” Kors told him that every woman who’s 50 wants to look 35, and every girl who’s 19 wants to be 35.
The ceo described the company’s strong financial picture, and positive comp-store growth. He also took the opportunity to show images from the company’s fall ad campaign and to discuss its social media efforts. Parsons then took to the podium and described the company’s operations, and noted that the firm will open a 500,000-square-foot warehouse in Whittier, Calif.
Idol and Parsons plan to hit several more cities over the next week, including Kansas City, Mo.; Denver; San Francisco, and Los Angeles, before pricing the stock.
David Menlow, president of IPOfinancial.com, a Millburn, N.J.-based company, said in a telephone interview Wednesday that the IPO process was very compressed. “Part of it is they are a Hong Kong-based company and there are a different set of procedures with foreign offerings,” he said. He believes that the stock will have a premium of 5 percent from the opening of trading.
“I think it’s a horrible environment. Valuations are so low,” said Menlow. “Converse of that, if it’s bad for the issuer, it’s good for the buyer. I would counsel any company not to go public right now. This is not the right time if you are an issuing company. If the market continues to improve, and Michael Kors came to the market a year from now, I believe the valuation would be substantially higher.”
Josef Schuster, ceo and founder of IPOX Schuster, Chicago-based financial services firm, said, “I think they’re using a window of opportunity. There are a lot of global luxury goods players going public. Stars are aligning for the company to capture the imagination of the luxury goods sector. The markets don’t look bad, and the S&P is flat for the year. Typically, it can happen pretty quickly. The window will close between Christmas and January, so why not pursue it now?”
He believes the stock will be priced between $17 and $19 but more “toward the middle, toward the high end. I think there will be fairly good demand.” He said he plans to buy stock in the company.