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For Michael Kors Insiders, Cashing Out Is Very Much in Fashion

Posted Mar 19 2013 7:30am
It took more than three  Michael Kors Bags Outlet decades for the clothing designer Michael Kors to reach the pinnacle of the fashion world. But it has taken just 14 months for him to become enormously rich. Since the initial public offering of Michael Kors Holdings in December 2011, Mr. Kors has sold about $700 million worth of the company’s stock. His latest sale, of about three million shares, or $180 million, came on Thursday as part of a large offering by Michael Kors insiders. Even with all the sales, Mr. Kors retains a 2.5 percent stake, worth about $300 million — not bad for a Fashion Institute of Technology dropout. The aggressive selling by Mr. Kors and his colleagues added to the large volume of share sales by public company executives in recent weeks. As the major stock market indexes trade near their five-year high, corporate insiders are taking advantage of the rally to profit from their holdings. In the last week alone, executives at 153 companies in the Standard & Poor’s 500 stock market index sold shares, with sales outnumbering purchases by 17 to 1, according to research compiled by Pavilion Financial, a Montreal brokerage firm, and Bloomberg. Prominent sales included those by Larry Page, chief executive of Google, who sold about $65 million worth of stock, and Rupert Murdoch, who offloaded about $40 million of News Corporation stock. “Insiders are not buying the current rally,” Pierre Lapointe, the research chief at Pavilion, wrote in a note to clients. “The recent gains have given them reason to sell their own stock. History tells us that high insider selling is usually followed by disappointing S.&.P. 500 returns in the following months.” There has been nothing disappointing about the performance of Michael Kors stock. The company’s shares have tripled since the I.P.O. Mr. Kors, 53, and his fellow insiders have taken advantage of the steep rise, selling big blocks of stock three times, with each sale at a higher price than the previous one. Yet the recent stock sales by the Michael Kors executive team came the week after the company reported excellent earnings and the promise of continued growth. “Another stellar quarter Michael, you’re the man!” exclaimed a report by Randal Konik, an analyst for Jefferies, who raised his price target on the company’s stock to $80 a share. Brian J. Tunick, a JPMorgan analyst, increased his estimates, noting “the company’s strong brand momentum and seasoned management team are extremely well positioned to continue gaining market share in the global accessories market.” He contrasted Michael Kors’s strong numbers with the weak financial results posted by its rival, Coach, underscoring Michael Kors’s dominance in the “affordable luxury” category. The company’s management also delivered a rosy outlook. “We believe that the Michael Kors brand is ideally positioned within the global luxury lifestyle market, and we look forward to delivering on our long-term objectives,” said John D. Idol, the company’s chairman and chief executive. Despite the positive view, Mr. Idol, who has run the company since 2003, has also been a big seller of his stock holdings. After a sale on Thursday of
Michael Kors bags
about two million shares, Mr. Idol, a longtime fashion executive who previously served in senior posts at Ralph Lauren and Donna Karan, has unloaded more than $400 million in shares owned by him and his family since the I.P.O. He retains about a 1 percent stake in the company. A spokeswoman for Michael Kors Holdings declined to comment on the stock sales, citing a mandatory “quiet period” surrounding the transactions. But the money raised by Mr. Kors and Mr. Idol looks modest compared with the stock sales made by Michael Kors’s private equity investors, Lawrence S. Stroll and Silas K..F. Chou. Mr. Stroll, a Canadian, and Mr. Chou, a Hong Kong resident, are fashion-industry tycoons who run Sportswear Holdings Limited, which acquired the Michael Kors company in 2003 for about $100 million. With Kors, the two have replicated the success that they had 20 years ago, when they backed another up-and-coming fashion designer, Tommy Hilfiger. Heading into the I.P.O., Mr. Stroll and Mr. Chou controlled slightly more than half of the Michael Kors company. On Thursday, they sold about two-thirds of their remaining stake, and now own about 6 percent. They have sold roughly $3 billion worth of shares over the last 14 months. The aggressive cash-outs by Mr. Kors and the others have been part of the case against buying Michael  Kors stock. But anyone who has resisted buying its shares has rued that decision. Yet with this latest round of sales, investors appear concerned. The company’s shares, which peaked at $65 a share on Tuesday, have dropped nearly 10 percent since the company announced its latest stock sale. They closed on Thursday at $59 share, down about 4 percent for the day. Not every Wall Street analyst believes that insider selling is a reliable indicator of a company’s future performance, or of the market’s. Laszlo Birinyi, president of the research firm Birinyi Associates, thinks that investors should not glean anything from insider sales, because they are driven by individuals’ decisions about their personal holdings and not necessarily reflective of any broader trend. “Given what Michael Kors stock has done,” Mr. Birinyi said, “I’d be selling, too!” click here
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