Exceeds First Quarter Guidance; Raises Full
Year Outlook
Michael Kors Holdings Limited (NYSE:KORS) (the “Company”), a
global fashion luxury brand, today announced its financial results
for the fiscal 2018 first quarter ended July 1, 2017.
For the three months ended July 1, 2017:
- Total revenue decreased 3.6% to $952.4
million from $987.9 million in the first quarter of fiscal 2017. On
a constant currency basis, total revenue decreased 2.6%.
- Retail net sales increased 10.1% to
$619.9 million driven in large part by 67 net new store openings
since the end of the first quarter of fiscal 2017 and the impact of
the acquisition of the Greater China license. Comparable sales
decreased 5.9%. On a constant currency basis, retail net sales
increased 11.6%, and comparable sales decreased 4.9%. Wholesale net
sales decreased 23.0% to $303.6 million and on a constant currency
basis, wholesale net sales decreased 22.7%. Licensing revenue
decreased 5.6% to $28.9 million.
- Total revenue in the Americas decreased
8.2% to $634.1 million on a reported basis and decreased 7.9% on a
constant currency basis. European revenue decreased 10.2% to $201.2
million on a reported basis, and decreased 7.5% on a constant
currency basis. Revenue in Asia increased 60.2% to $117.1 million
on a reported basis, and increased 61.9% on a constant currency
basis.
- Gross profit decreased 2.8% to $574.7
million, and as a percentage of total revenue was 60.3%. Foreign
currency translation and transaction favorably impacted gross
profit margin by approximately 10 basis points. This compares to
gross margin of 59.9% in the first quarter of fiscal 2017.
- Income from operations was $149.4
million, or 15.7% as a percentage of total revenue. This compares
to $186.9 million, or 18.9% as a percentage of total revenue, for
the first quarter of fiscal 2017. Excluding the $11.3 million of
one-time costs related to the acquisition of the Company's Greater
China licensee, income from operations for the first quarter of
fiscal 2017 was $198.2 million, or 20.1% as a percentage of total
revenue.
- Net income attributable to MKHL was
$125.5 million, or $0.80 per diluted share, based on a 16.4% tax
rate and 156.9 million weighted average diluted shares outstanding.
Earnings per diluted share exceeded the Company's prior
expectations of $0.60 to $0.64. Net income attributable to MKHL for
the first quarter of fiscal 2017 was $147.1 million, or $0.83 per
diluted share, based on a 21.2% tax rate and 176.6 million weighted
average diluted shares outstanding. Excluding the $11.3 million, or
$0.07 per diluted share, of one-time costs related to the
acquisition of the Company's Greater China licensee, net income
attributable to MKHL for the first quarter of fiscal 2017 was
$158.4 million, or $0.90 per diluted share.
- At July 1, 2017, the Company
operated 838 retail stores, including concessions, compared to 771
retail stores, including concessions, at the end of the same
prior-year period. The Company had 141 additional retail stores,
including concessions, operated through licensing partners.
Including licensed locations, there were 979 Michael Kors stores
worldwide at the end of the first quarter of fiscal 2018.
John D. Idol, the Company’s Chairman and Chief Executive
Officer, said, “Our first quarter performance exceeded our
expectations, driven largely by better than anticipated retail
comparable sales results in both North America and Europe. We are
encouraged by our first quarter performance, although we continue
to believe that fiscal 2018 will be a transition year for our
company, as we focus on laying the foundation for the future by
executing on our strategic plan, Runway 2020. While it is still
early in the process, we are making meaningful progress enhancing
our assortments, deepening our connection with consumers, and
elevating our jet set luxury experience in our stores and digital
flagships."
Mr. Idol continued, "In addition, we are pleased to have
recently announced plans to form a global fashion luxury group. Our
agreement to acquire Jimmy Choo will bring together two iconic
brands that are industry leaders in style and trend. Jimmy Choo has
a rich history as a luxury brand with a 20 year track record of
enduring customer appeal. We are committed to supporting Jimmy
Choo's strong brand equity and fashion leadership as we work with
its talented management team to realize the brand's significant
growth potential. We believe that the development of a global
fashion luxury group will increase long-term shareholder value as
we create a more diverse product portfolio, increase our exposure
to international markets and unlock additional opportunities for
future growth."
Share Repurchase Program
During the first quarter, the Company repurchased 4,543,500 of
the Company's ordinary shares for approximately $157.8 million in
open market transactions. As of July 1, 2017, the remaining
availability under the Company’s share repurchase program was
$842.2 million. Share repurchases may be made in open market or
privately negotiated transactions, subject to market conditions,
applicable legal requirements, trading restrictions under the
Company’s insider trading policy, and other relevant factors. The
program may be suspended or discontinued at any time.
Balance Sheet
As of July 1, 2017, the Company had $155.8 million of debt,
which was recorded within short-term debt in its Consolidated
Balance Sheet. This debt consisted of borrowings under the
Company's revolving credit facilities. The amount available for
future borrowings is approximately $844.8 million.
Outlook
For the second quarter of fiscal 2018, the Company expects total
revenue to be between $1.035 billion and $1.055 billion, which
includes a comparable sales decrease in the mid-single digits
range. The Company expects operating margin to be approximately
14.3%. Diluted earnings per share are expected to be in the range
of $0.80 to $0.84. This assumes 154 million weighted average
diluted shares outstanding and a tax rate of approximately
15.0%.
For fiscal 2018, the Company expects total revenue to be
approximately $4.275 billion and for comparable sales to decrease
in the mid-single digits range. Operating margin is expected to be
approximately 16.0%. Diluted earnings per share are expected to be
in the range of $3.62 to $3.72. This assumes 156 million weighted
average diluted shares outstanding and a tax rate of approximately
17.0%. This guidance excludes $40 million to $60 million in
one-time costs associated with 20 to 40 store closures in Fiscal
2018.
The Company’s outlook does not include any expectations related
to Jimmy Choo as the transaction has not yet been completed. Based
on the Company’s internal forecasts for Jimmy Choo and assuming a
close early in the Company’s third fiscal quarter, incremental
revenue is expected to be approximately $275 million for the second
half of fiscal 2018. For fiscal 2019, the Company expects
incremental revenues of $570 million to $580 million1.
The Company expects this acquisition to be immediately accretive
on a cash basis. The Company believes the acquisition will be
dilutive to EPS in the low single digit percentage range in both
Fiscal 2018 and 2019 and accretive in the low single digits in
Fiscal 2020, excluding one-time transaction and transition costs
related to the acquisition2.
Transaction costs related to the acquisition are expected to be
between $40 million and $50 million, and transition costs to be
between $20 million to $30 million over the next two years. In
addition, to mitigate foreign exchange risk related to the British
pound purchase price, the Company has entered into a foreign
exchange hedge. This type of position is not expected to receive
hedge accounting treatment, and the Company expects to record
mark-to-market gains and losses through its income statement until
the completion of the transaction.
With respect to financing, the acquisition is ultimately
expected to be financed through a combination of a term loan and a
longer term bond. The Company anticipates a weighted average
interest rate of 4.25% to 4.75%.
1
Revenue projections reflect the Company’s
own estimates and do not include any input from, and have not been
endorsed by, Jimmy Choo PLC
2
The forward-looking statements in this
paragraph do not constitute, and should not be construed as, profit
forecasts or estimates for any period for the purposes of the UK
City Code on Takeovers and Mergers and no statement in this
paragraph should be interpreted to mean that earnings or earnings
per share for the Company for the period would necessarily match or
exceed any historical published earnings or earnings per share
Conference Call Information
A conference call to discuss first quarter results is scheduled
for today, August 8, 2017 at 8:00 am. ET. A live webcast of
the conference call will be available in the investor relations
section of the Company’s website, www.michaelkors.com. In addition,
a replay of the call will be available shortly after the conclusion
of the call and remain available until August 15, 2017. To access
the telephone replay, listeners should dial 1-844-512-2921 or
1-412-317-6671 for international callers. The access code for the
replay is 5875694. A replay of the web cast will also be available
within two hours of the conclusion of the call and will remain on
the website for 90 days.
Use of Non-GAAP Financial Measures
Constant currency effects are non-GAAP financial measures, which
are provided to supplement our reported operating results to
facilitate comparisons of our operating results and trends in our
business, excluding the effects of foreign currency rate
fluctuations. Because we are a global Company, foreign currency
exchange rates may have a significant effect on our reported
results. We calculate constant currency measures and the related
foreign currency impacts by translating the current-year’s reported
amounts into comparable amounts using prior year’s foreign exchange
rates for each currency. All constant currency performance measures
discussed below should be considered a supplement to and not in
lieu of our operating performance measures calculated in accordance
with accounting principles generally accepted in the United States
(“U.S. GAAP”).
Additionally, this earnings release includes certain non-GAAP
financial measures relating to certain one-time costs associated
with the acquisition of the Greater China licensee. The Company
uses non-GAAP financial measures, among other things, to evaluate
its operating performance and in order to represent the manner in
which the Company conducts and views its business. The Company
believes that excluding non-recurring items helps its management
and investors compare operating performance based on its ongoing
operations. While the Company considers the non-GAAP measures to be
useful supplemental measures in analyzing its results, they are not
intended to replace, nor act as a substitute for, any amounts
presented in its consolidated financial statements prepared in
conformity with U.S. GAAP and may be different from non-GAAP
measures reported by other companies.
About Michael Kors
Michael Kors is a world-renowned, award-winning designer of
luxury accessories and ready-to-wear. His namesake company,
established in 1981, currently produces a range of products under
Michael Kors Collection, MICHAEL Michael Kors and Michael Kors
Mens, including accessories, ready-to-wear, footwear, wearable
technology, watches, and a full line of fragrance products. Michael
Kors stores are operated in the most prestigious cities in the
world. In addition, Michael Kors operates digital flagships across
North America, Europe and Asia, offering customers a seamless
omni-channel experience. Michael Kors Holdings Limited is publicly
listed on the New York Stock Exchange with the ticker KORS.
Forward Looking Statements
This press release contains forward-looking statements. You
should not place undue reliance on such statements because they are
subject to numerous uncertainties and factors relating to the
Company’s operations and business environment, all of which are
difficult to predict and many of which are beyond the Company’s
control. Forward-looking statements include information concerning
the Company’s possible or assumed future results of operations,
including descriptions of its business strategy. These statements
often include words such as “may,” “will,” “should,” “believe,”
“expect,” “seek,” “anticipate,” “intend,” “plan,” “estimate” or
similar expressions. The forward-looking statements contained in
this press release are based on assumptions that the Company has
made in light of management’s experience in the industry as well as
its perceptions of historical trends, current conditions, expected
future developments and other factors that it believes are
appropriate under the circumstances. You should understand that
these statements are not guarantees of performance or results. They
involve known and unknown risks, uncertainties and assumptions.
Although the Company believes that these forward-looking statements
are based on reasonable assumptions, you should be aware that many
factors could affect its actual financial results or results of
operations and could cause actual results to differ materially from
those in these forward-looking statements. These factors are more
fully discussed in the “Risk Factors” section and elsewhere in the
Company’s Annual Report on Form 10-K for the fiscal year ended
April 1, 2017 (File No. 001-35368) and other reports filed with the
U.S. Securities and Exchange Commission.
SCHEDULE 1 MICHAEL KORS
HOLDINGS LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In millions, except share and per
share data) (Unaudited) Three Months Ended July
1,2017 July 2,2016 Net sales $ 923.5 $ 957.3 Licensing
revenue 28.9 30.6 Total revenue 952.4 987.9 Cost of
goods sold 377.7 396.6 Gross profit 574.7 591.3 Total
operating expenses 425.3 404.4 Income from operations
149.4 186.9 Other income, net (0.6 ) (0.3 ) Interest expense, net
1.1 0.3 Foreign currency (income) loss (1.2 ) 1.3 Income
before provision for income taxes 150.1 185.6 Provision for income
taxes 24.6 39.3 Net income 125.5 146.3 Less: Net loss
attributable to noncontrolling interest — (0.8 ) Net income
attributable to MKHL $ 125.5 $ 147.1 Weighted
average ordinary shares outstanding: Basic 154,486,898 174,158,571
Diluted 156,871,518 176,613,751 Net income per ordinary
share: Basic $ 0.81 $ 0.84 Diluted $ 0.80 $ 0.83
SCHEDULE 2 MICHAEL
KORS HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (In millions, except share data)
(Unaudited) July 1,2017 April 1,2017 July 2,2016
Assets Current assets Cash and cash equivalents $ 273.7 $
227.7 $ 337.1 Receivables, net 171.3 265.8 202.8 Inventories 616.1
549.3 606.9 Prepaid expenses and other current assets 123.9
121.9 109.3 Total current assets 1,185.0 1,164.7
1,256.1 Property and equipment, net 585.5 591.5 798.7 Intangible
assets, net 414.3 418.1 464.3 Goodwill 119.7 119.7 122.2 Deferred
tax assets 67.2 73.3 16.9 Other assets 41.3 42.3 32.5
Total assets $ 2,413.0 $ 2,409.6 $ 2,690.7
Liabilities and Shareholders’ Equity Current
liabilities Accounts payable $ 153.4 $ 176.3 $ 167.4 Accrued
payroll and payroll related expenses 47.1 61.1 43.1 Accrued income
taxes 62.8 60.3 45.0 Short-term debt 155.8 133.1 248.6 Accrued
expenses and other current liabilities 161.9 135.0
197.8 Total current liabilities 581.0 565.8 701.9 Deferred
rent 134.7 137.8 120.5 Deferred tax liabilities 79.2 80.0 88.5
Other long-term liabilities 36.8 31.0 22.1
Total liabilities 831.7 814.6 933.0 Commitments and contingencies
Shareholders’ equity
Ordinary shares, no par value; 650,000,000
shares authorized;209,713,232 shares issued and 151,593,388
outstanding at July 1, 2017;209,332,493 shares issued and
155,833,304 outstanding at April 1, 2017, and208,759,289 shares
issued and 168,997,105 outstanding at July 2, 2016
— — —
Treasury shares, at cost (58,119,844
shares at July 1, 2017; 53,499,189shares at April 1, 2017; and
39,762,184 shares at July 2, 2016)
(2,815.2 ) (2,654.9 ) (2,054.5 ) Additional paid-in capital 778.7
767.8 732.5 Accumulated other comprehensive loss (68.2 ) (80.6 )
(78.3 ) Retained earnings 3,685.6 3,560.3 3,154.9
Total shareholders’ equity of MKHL 1,580.9 1,592.6 1,754.6
Noncontrolling interest 0.4 2.4 3.1 Total
shareholders’ equity 1,581.3 1,595.0 1,757.7
Total liabilities and shareholders’ equity $ 2,413.0 $
2,409.6 $ 2,690.7
SCHEDULE
3 MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED SEGMENT DATA ($ in millions)
(Unaudited) Three Months Ended July 1,2017
July 2,2016
Revenue by Segment and Region: Retail net sales:
The Americas $ 392.1 $ 392.2 Europe 122.1
119.1 Asia 105.7 51.6
Total Retail Net Sales
619.9 562.9 Wholesale net sales: The Americas 227.2 282.1 Europe
65.0 90.8 Asia 11.4 21.5
Total Wholesale Net
Sales 303.6 394.4 Licensing revenue: The Americas 14.8 16.5
Europe 14.1 14.1
Total Licensing Revenue 28.9
30.6
Total Revenue $ 952.4
$ 987.9 Income from
Operations: Retail $ 92.2 $ 66.6 Wholesale 43.5 105.0 Licensing
13.7 15.3
Total Income from Operations
$ 149.4 $ 186.9
Operating Margin: Retail 14.9 % 11.8 % Wholesale 14.3 % 26.6
% Licensing 47.4 % 50.0 %
Total Operating Margin 15.7
% 18.9 % July 1,2017
Store Count and
Square Footage by Region: Store Count Square Footage The
Americas (U.S., Canada and Latin America) 399 1,287,871 Europe 203
551,729 Asia 236 455,588
Total 838
2,295,188
SCHEDULE
4 MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSTANT CURRENCY DATA (In millions)
(Unaudited) Three Months Ended % Change July 1,2017
July 2,2016 As
Reported
Constant
Currency
Retail net sales $ 619.9 $ 562.9 10.1 % 11.6 % Wholesale net sales
303.6 394.4 (23.0 )% (22.7 )% Licensing revenue 28.9 30.6
(5.6 )% (5.6 )%
Total revenue $ 952.4
$ 987.9 (3.6 )%
(2.6 )% NON-GAAP
RECONCILIATION OF REPORTED TO ADJUSTED MEASURES, EXCLUDING
TRANSACTION COSTS RELATED TO ACQUISITION OF THE GREATER
CHINA BUSINESS (In millions, except share and per share
data) (Unaudited) Three Months Ended July 2, 2016
As Reported Transaction
Costs As Adjusted Total
revenue $ 987.9 $ — $ 987.9 Operating expenses 404.4 (11.3 ) 393.1
Operating expense as percentage of revenue 40.9 % (1.1 )% 39.8 %
Total income from operations 186.9 11.3 198.2 Total operating
margin 18.9 % 1.2 % 20.1 % Retail net sales 562.9 — 562.9
Retail operating income 66.6 11.3 77.9 Retail operating margin 11.8
% 2.0 % 13.8 % Net income attributable to MKHL 147.1 11.3
158.4
Weighted average diluted ordinary shares
outstanding
176,613,751 — 176,613,751
Diluted net income per ordinary
shareattributable to MKHL
$ 0.83 $ 0.07 $ 0.90
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170808005721/en/
Michael Kors Holdings LimitedChristina Coronios, (201)
691-6133InvestorRelations@MichaelKors.comorICR, Inc.Jean Fontana,
(203) 682-8200jean.fontana@icrinc.comorMedia:ICR, Inc.Alecia
Pulman, (646) 277-1231KorsPR@icrinc.com
Michael Kors Holdings Limited Ordinary Shares (delisted) (NYSE:KORS)
Historical Stock Chart
From Aug 2024 to Sep 2024
Michael Kors Holdings Limited Ordinary Shares (delisted) (NYSE:KORS)
Historical Stock Chart
From Sep 2023 to Sep 2024