Michael Kors Holdings Stock Down After Downgrade

The retail design company's shares dropped 6 percent after concerns about the rate it's expanded.
6:59 | 07/15/14

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Transcript for Michael Kors Holdings Stock Down After Downgrade
I'm Michelle -- in New York is the New York financial markets closed for this Tuesday July 15 -- this story stock. Brick and mortar retailers are having Iraq especially retail designer Michael course that stock is getting slammed today. Down 6% after maxim group downgraded its stock investors though -- not seeing the value of buying a company priced at eighty bucks a share. And for that I want to bring in Rick -- from Yahoo! finance. -- Rick. Michelle Michael course is the favorite in the eyes of the investors for a while still 7% in one -- why it's taking a hit now. But there's a lot of concern all of a sudden. That Michael -- mine outfielders. Sustain a very aggressive growth plan. They're there was an article in the Wall Street Journal recently that looked at coach. And other luxury retailer and the troubles in his -- it mainly because it just expanded too quickly. And became too ubiquitous once -- -- with some of these semi luxury brands as it wants everybody can get it. At a recent price that it sort of loses its cash day. And now there's some worry that that might happen to the Michael -- brand. So there Michael course -- -- a very aggressive expansion plan -- still build out a lot of stores. That is a risky proposition in an environment where we know. A lot of shoppers are going on line it's becoming very hard to sustain those profit margins -- physical stores. And another thing it's happening is that specialty retailers which is what Michael cores is. Many of them are really struggling so -- -- is still doing well this is really concerned about whether it's sort of getting out a little bit too far ahead of itself. All right let's break down a little bit what you just went through these points is it just that the stock is overvalued at a price of eighty dollars. Or does the -- company have a bigger underlying issue right now. I think it's worry that the stock has been it is overvalued. The stock is still up something like got 230%. From the time it went public and in 2011 that's obviously a terrific game very hot stock. But it has cooled off this year as you mentioned earlier and I think what what investors are saying -- we're -- we're not sure it's cool enough maybe we need to back off still little -- so this is. You know one of those exciting companies people get excited about it because it seems like a rare opportunity to sort of cash in on some rapid growth that's something that's hard to find these days and now popular saying maybe -- this is just -- a little bit too far too fast. And of course right now the plan is still too aggressively expand its stores from 288 to 400. Do you think that this could be a mistake -- you think that they might change course. But nothing has happened here in the last two days that really tells us anything is. Going wrong with the Michael -- business. So I don't think they're gonna change anything I mean these are the sorts of ups and downs -- happen when your publicly and company. The you know good companies that are well rounded. They don't you know they say they say they don't pay attention to market they all do. But they don't change their plans because of something a stock analyst said or you know a short term move in the in the share price. And I don't think we're gonna see any changes from Michael cores but they do have to -- You know they probably do have to think about these warnings longer term. And just think about the fact that you know this is actually happening specialty retailers are really getting hit hard. Is Michael -- really so exceptional that it's gonna bucked that trend is it really so exceptional it doesn't have to worry about. The strength of online retailers and people just not going to the stores anymore Willits. Brand strength remain that way for for a long time. Then things change and I think investors are saying we're thinking a little bit around the bend here and asking whether things might change for this brand. And some of the analysts and traders on stock with twits are tweeting that they expect the price of course share to fall to 74 dollars. How would you play this right now if you are an investor watching this or you -- -- Well some of those people tweeting about this may expected to fall in some of those may want it to fall I'm guessing that there -- probably some short. Sellers out there who've been gambling. That this stock has been overvalued that's exactly what they want to fall back. I mean this is one of those sort of darling stocks that you know as a lot of fun when it's going up a lot of people want in on it. -- it's -- brand everybody knows that makes it kinda cool but these can be volatile stock to me this is this is not a large retailer when you think about it. So it is a company that is probably susceptible to a lot of volatility just because. What this is a tough industry retail things can change based on one quarters were the sales numbers. And this is a good stock for people who don't mind sharp ups and downs and feel comfortable writing out a lot of other investors they should probably not be playing a stock like this. And you mentioned a lot of those retailers especially the brick and mortar stores are trying to reinvent themselves and Amazon is devouring their market. -- retailers had a chance in this environment. But still the -- that -- able to adapt sure they stand a chance. But you know this is not just. A black and white distinction anymore between physical retailers on one hand and on -- retailers on the other. On Amazon is not going into the physical. Store business. But many of the physical stores in fact all of them are getting into the online business and it's really important stability that well -- Wal-Mart to -- an example. Wal-Mart has sort of double down on its on line. Shopping experience and they have to do that they have to they have to have a good store strategy a good retail strategy and a good online strategy and I think this stores. That think they can only be good at one or the other are probably the ones are going to be hit the hardest and the ones that are able to do two things well have the best shot against Amazon -- -- okay. Amazon of course leading the pack here what other online retail stocks are traders watching. You shopping. Well we're seeing more of these sort of artists channel site certainly at -- is is uninteresting place. That's not a huge site right now but. It is a place where you don't get the all the usual corporate cookie cutter types of products you can get -- -- products and there's definitely. They're definitely signs that people want. You know stuff that seems a little more customized personalized they like the idea of something that's. Local I mean that's clearly a new trend -- -- a lot of sort of -- copycat sites in fact there's one coming out just now from. Alibaba which is the big Chinese. Online retailers coming to United States and it has started -- site called eleven Maine which looks were quite a lot like Etsy. So that -- -- -- a fairly large company at some point Ali Bob was going to be a big player -- starting small because. That's the kind of -- stuff Americans apparently want. Rick Newman and Yahoo! finance thanks for joining us -- Even -- stories stocks David abcnews.com. For your latest headlines I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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