Michael Kors Holdings Ltd., the luxury-clothing company, is seeking to raise as much as $792.3 million in a U.S. initial public offering as the company’s founder and the biggest investor trim their stakes.
The company said in a regulatory filing today that it is offering 41.7 million shares on behalf of existing shareholders, for $17 to $19 each. At the midpoint, the company would have a market capitalization of about $3.4 billion. Michael Kors Holdings isn’t selling any shares in the offering.
Michael Kors, the designer who founded the company in 1981, is planning to cut his stake as retailers of luxury goods outperform mid-priced department stores and discounters this year. Net income in the fiscal year ended April 2 jumped 85 percent to $72.5 million on rising sales.
“It strikes me as opportunistic,” said Steven Dennis, founder of the luxury consulting firm Sageberry Consulting LLC in Dallas. “The stock market is better, and the luxury market has had a good run-up since the recession, and you can take some money off the table while you still have some momentum.”
Michael Kors, who is a judge on the fashion-design show “Project Runway” with Heidi Klum, sells “accessible luxury” goods, with his handbags priced at $400 to $500, as opposed to those starting at $800, Dennis said.
“He is fashion-forward, but not too so, so kind of safe fashion,” he said. “He has a very solid business.”
At the midpoint of its price range, Michael Kors Holdings will be valued at 3.4 times trailing 12-month revenue. Competitor Coach Inc. (COH) trades at 4.3 times, while Polo Ralph Lauren Corp. (RL) trades at 2.1 times, according to data compiled by Bloomberg.
“It feels a bit rich to me, but there are growth opportunities there left to tap,” said Jeffry Aronsson, chairman of Aronsson Group LLC in New York, which helps develop fashion brands. “They’ve clearly done a remarkable job. They weathered the recession of 2008 and 2009 and just kept going.”
Founder Kors is planning to sell 5.8 million shares, trimming his stake to 8.6 percent following the IPO from about 12 percent. Sportswear Holdings Ltd., the company’s largest investor, plans to sell 25.9 million shares, cutting its stake to 38 percent from 52 percent. Kors Chief Executive Officer John Idol is planning to reduce his stake to 5.1 percent. The 41.7 million total shares being offered represent 22 percent of the company’s outstanding stock.
Lawrence Stroll and Silas Chou, of Sportswear Holdings, a private-equity firm, helped develop the Tommy Hilfiger brand, and Idol previously ran Donna Karan International Inc.
“The company has done spectacularly well,” said Marc Cooper, head of the retail practice at New York-based investment bank Peter J. Solomon Co. “They are super operators, they know how to build brands.”
Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc. are managing the IPO, according to the filing. The stock will trade on the New York Stock Exchange under the ticker KORS.
Michael Kors Holdings has principal executive offices in Hong Kong, while designer Kors, who is the chief creative officer, leads a New York-based team that is responsible for the company’s products, according to the prospectus.
The IPO is scheduled to price on Dec. 14, according to data compiled by Bloomberg. The company won’t receive any proceeds from the IPO.
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