Third Quarter Total Revenue Increased 6.3% (Increased 9.9% on a
Constant Currency Basis)
Third Quarter Reported Diluted EPS was $1.59 ($1.65 on a Constant
Currency Basis)
LONDON--(BUSINESS WIRE)--
Michael Kors Holdings Limited (NYSE:KORS) (the “Company”), a global
luxury lifestyle brand, today announced its financial results for the
fiscal 2016 third quarter ended December 26, 2015.
For the third quarter ended December 26, 2015:
-
Total revenue increased 6.3% to $1.40 billion from $1.31 billion in
the third quarter of fiscal 2015. On a constant currency basis, total
revenue increased 9.9%.
-
Retail net sales increased 11.1% to $766.2 million driven primarily by
e-commerce sales from the Company's digital flagships and 114 net new
store openings since the end of the third quarter of fiscal 2015.
Comparable store sales decreased 0.9%. On a constant currency basis,
retail net sales grew 15.7%, and comparable store sales increased
2.0%. Wholesale net sales increased 0.3% to $575.5 million and on a
constant currency basis, wholesale net sales grew 3.0%. Licensing
revenue increased 8.4% to $55.8 million.
-
Total revenue in the Americas increased 0.4% to $1.06 billion on a
reported basis and increased 1.4% on a constant currency basis.
European revenue grew 14.3% to $276.0 million on a reported basis, and
grew 29.1% on a constant currency basis. Revenue in Japan increased
59.1% to $25.5 million on a reported basis, and increased 68.0% on a
constant currency basis.
-
Gross profit increased 4.0% to $832.0 million, and as a percentage of
total revenue was 59.5%. Foreign currency translation and transaction
negatively impacted gross profit margin by approximately 95 basis
points. This compares to gross margin of 60.9% in the third quarter of
fiscal 2015.
-
Income from operations was $409.3 million, or 29.3% as a percentage of
total revenue. This compares to $418.5 million, or 31.8% as a
percentage of total revenue, for the third quarter of fiscal 2015.
-
Net income was $294.6 million, or $1.59 per diluted share, based on a
28.0% tax rate and 184.9 million weighted average diluted shares
outstanding, which included an unfavorable impact related to foreign
currency exchange rates of approximately $0.06 per share. Net income
for the third quarter of fiscal 2015 was $303.7 million, or $1.48 per
diluted share, based on a 27.2% tax rate and 205.6 million weighted
average diluted shares outstanding.
-
At December 26, 2015, the Company operated 623 retail stores,
including concessions, compared to 509 retail stores, including
concessions, at the end of the same prior-year period. The Company had
234 additional retail stores, including concessions, operated through
licensing partners. Including licensed locations, there were 857
Michael Kors stores worldwide at the end of the third quarter of
fiscal 2016.
John D. Idol, the Company’s Chairman and Chief Executive Officer, said,
“We are pleased with our third quarter results, as we delivered revenue,
comparable store sales and earnings growth ahead of our expectations.
Our performance was driven primarily by strong consumer response to our
luxury fashion product offering, particularly in our accessories and
footwear categories, the continued momentum in our digital flagship
business and outstanding growth in our international markets. As we look
ahead, we are excited about our upcoming Spring collections that embody
design innovation and underscore Michael Kors fashion leadership. In
addition, we remain focused on further developing our digital flagship
strategy as we offer our customers a seamless omni-channel experience,
the build-out of our men’s business, and leveraging our strong brand
awareness to expand our business globally. We believe that the continued
execution of these strategic initiatives positions us well to deliver
long term growth.”
For the first nine months ended December 26, 2015:
-
Total revenue increased 6.8% to $3.51 billion from $3.29 billion in
the same period of fiscal 2015. On a constant currency basis, total
revenue increased 11.6%.
-
Retail net sales increased 9.4% to $1.82 billion. Comparable store
sales decreased 5.6%. On a constant currency basis, retail net sales
grew 15.5% and comparable store sales declined 1.6%. Wholesale net
sales increased 3.9% to $1.55 billion and on a constant currency
basis, wholesale net sales grew 7.9%. Licensing revenue increased 5.5%
to $137.7 million.
-
Gross profit for the first nine months increased 4.1% to $2.10
billion, and as a percentage of total revenue, was 59.8%. This
compares to gross margin of 61.3% in the same period of fiscal 2015.
-
Income from operations for the first nine months was $931.0 million
and as a percentage of total revenue was 26.5%. For the same period of
fiscal 2015, income from operations was $1,000.8 million, or 30.4% as
a percentage of total revenue.
-
Net income for the first nine months was $662.1 million, or $3.45 per
diluted share, based on 192.1 million weighted average diluted shares
outstanding, which included an unfavorable impact related to foreign
currency exchange rates of approximately $0.18 per share. Net income
for the same period of fiscal 2015 was $698.4 million, or $3.38 per
diluted share, based on 206.8 million weighted average diluted shares
outstanding.
Share Repurchase Program
During the third quarter, the Company repurchased 4,682,121 of the
Company's ordinary shares for approximately $200.0 million in open
market transactions. As of December 26, 2015, the remaining availability
under the Company’s share repurchase program was $558.1 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.
Outlook
For the fourth quarter of fiscal 2016, the Company expects total revenue
to be in the range of $1.13 billion to $1.15 billion, which includes
approximately $36 million of additional sales due to the 53rd week. On a
constant currency basis, total revenue is expected to increase in the
high-single digit range assuming an impact of approximately $20 million
from the change in foreign currency rates. The Company expects
comparable store sales to be flat on a reported basis and to increase in
the low single digits on a constant currency basis. Operating expense as
a percentage of total revenue is expected to increase 190 to 220 basis
points, primarily due to global investments in digital flagships,
corporate talent, new stores, shop-in-shops, infrastructure and
distribution. Diluted earnings per share are expected to be in the range
of $0.93 to $0.97 for the fourth quarter of fiscal 2016. This assumes
182.5 million weighted average diluted shares outstanding and a tax rate
of approximately 27.5%. The Company expects foreign currency to impact
net income by approximately $3 million and EPS by approximately $0.02.
For fiscal 2016, the Company expects total revenue to be approximately
$4.65 billion. On a constant currency basis, total revenue is expected
to increase in the low-double digit range assuming an impact of
approximately $180 million from the change in foreign currency rates.
The Company expects a mid-single digit comparable store sales decrease
on a reported basis and a low-single digit decrease on a constant
currency basis. Operating expense as a percentage of total revenue is
expected to increase approximately 230 basis points, due to the above
mentioned investments. Diluted earnings per share are expected to be in
the range of $4.38 to $4.42 for fiscal 2016. This assumes 190 million
weighted average diluted shares outstanding and a tax rate of
approximately 28.5%. The Company expects foreign currency to impact net
income by approximately $38 million and EPS by approximately $0.20.
Conference Call Information
A conference call to discuss third quarter results is scheduled for
today, February 2, 2016 at 8:00 a.m. ET. A replay of the call will be
available today at 11:00 a.m. ET; to access the replay, dial
1-877-870-5176 for domestic callers or dial 1-858-384-5517 for
international callers and enter access code 9289594. The conference call
will also be webcast live in the investor relations section of www.michaelkors.com.
The webcast will be accessible on the website for approximately 90 days
after the call.
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 through his Michael Kors
Collection and MICHAEL Michael Kors labels, including accessories,
footwear, watches, jewelry, men’s and women’s ready to wear, and a full
line of fragrance products. Michael Kors stores are operated, either
directly or through licensing partners, in some of the most prestigious
cities in the world, including New York, Beverly Hills, Chicago, London,
Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo and Hong Kong.
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 March 28, 2015 (File No. 001-35368), filed on May 27, 2015
with the U.S. Securities and Exchange Commission.
Use of Non-GAAP Constant Currency 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.”)
|
SCHEDULE 1
|
|
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except share and per share data) (Unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
December 26, 2015
|
|
|
December 27, 2014
|
|
|
December 26, 2015
|
|
|
December 27, 2014
|
Net sales
|
|
|
|
$
|
1,341,678
|
|
|
|
$
|
1,263,226
|
|
|
|
$
|
3,375,766
|
|
|
|
$
|
3,159,932
|
|
Licensing revenue
|
|
|
|
55,801
|
|
|
|
51,500
|
|
|
|
137,669
|
|
|
|
130,553
|
|
Total revenue
|
|
|
|
1,397,479
|
|
|
|
1,314,726
|
|
|
|
3,513,435
|
|
|
|
3,290,485
|
|
Cost of goods sold
|
|
|
|
565,509
|
|
|
|
514,583
|
|
|
|
1,413,401
|
|
|
|
1,273,682
|
|
Gross profit
|
|
|
|
831,970
|
|
|
|
800,143
|
|
|
|
2,100,034
|
|
|
|
2,016,803
|
|
Total operating expenses
|
|
|
|
422,662
|
|
|
|
381,666
|
|
|
|
1,169,017
|
|
|
|
1,015,997
|
|
Income from operations
|
|
|
|
409,308
|
|
|
|
418,477
|
|
|
|
931,017
|
|
|
|
1,000,806
|
|
Other (income) expense, net
|
|
|
|
(54
|
)
|
|
|
188
|
|
|
|
840
|
|
|
|
(1,161
|
)
|
Interest expense, net
|
|
|
|
632
|
|
|
|
116
|
|
|
|
1,116
|
|
|
|
147
|
|
Foreign currency losses
|
|
|
|
136
|
|
|
|
1,163
|
|
|
|
2,255
|
|
|
|
4,711
|
|
Income before provision for income taxes
|
|
|
|
408,594
|
|
|
|
417,010
|
|
|
|
926,806
|
|
|
|
997,109
|
|
Provision for income taxes
|
|
|
|
114,398
|
|
|
|
113,335
|
|
|
|
265,437
|
|
|
|
298,728
|
|
Net income
|
|
|
|
$
|
294,196
|
|
|
|
$
|
303,675
|
|
|
|
$
|
661,369
|
|
|
|
$
|
698,381
|
|
Less: Net loss attributable to noncontrolling interest
|
|
|
|
(390
|
)
|
|
|
—
|
|
|
|
(708
|
)
|
|
|
—
|
|
Net income attributable to MKHL
|
|
|
|
$
|
294,586
|
|
|
|
$
|
303,675
|
|
|
|
$
|
662,077
|
|
|
|
$
|
698,381
|
|
Weighted average ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
182,176,452
|
|
|
|
202,668,541
|
|
|
|
189,336,957
|
|
|
|
203,627,688
|
|
Diluted
|
|
|
|
184,851,616
|
|
|
|
205,647,816
|
|
|
|
192,143,422
|
|
|
|
206,752,103
|
|
Net income per ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
1.62
|
|
|
|
$
|
1.50
|
|
|
|
$
|
3.50
|
|
|
|
$
|
3.43
|
|
Diluted
|
|
|
|
$
|
1.59
|
|
|
|
$
|
1.48
|
|
|
|
$
|
3.45
|
|
|
|
$
|
3.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE 2
|
|
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In thousands, except share data) (Unaudited)
|
|
|
|
December 26, 2015
|
|
March 28, 2015
|
|
December 27, 2014
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
696,823
|
|
|
$
|
978,922
|
|
|
$
|
1,002,830
|
|
Receivables, net
|
|
301,632
|
|
|
363,419
|
|
|
311,086
|
|
Inventories
|
|
588,295
|
|
|
519,908
|
|
|
537,501
|
|
Prepaid expenses and other current assets
|
|
74,921
|
|
|
127,443
|
|
|
110,347
|
|
Total current assets
|
|
1,661,671
|
|
|
1,989,692
|
|
|
1,961,764
|
|
Property and equipment, net
|
|
739,863
|
|
|
562,934
|
|
|
532,304
|
|
Intangible assets, net
|
|
66,363
|
|
|
61,541
|
|
|
63,644
|
|
Goodwill
|
|
23,215
|
|
|
14,005
|
|
|
14,005
|
|
Deferred tax assets
|
|
24,019
|
|
|
22,958
|
|
|
26,730
|
|
Other assets
|
|
19,086
|
|
|
33,498
|
|
|
33,576
|
|
Total assets
|
|
$
|
2,534,217
|
|
|
$
|
2,684,628
|
|
|
$
|
2,632,023
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
190,740
|
|
|
$
|
142,818
|
|
|
$
|
175,197
|
|
Accrued payroll and payroll related expenses
|
|
49,236
|
|
|
62,869
|
|
|
50,642
|
|
Accrued income taxes
|
|
33,306
|
|
|
25,507
|
|
|
29,757
|
|
Accrued expenses and other current liabilities
|
|
149,788
|
|
|
95,146
|
|
|
105,726
|
|
Total current liabilities
|
|
423,070
|
|
|
326,340
|
|
|
361,322
|
|
Deferred rent
|
|
104,407
|
|
|
88,320
|
|
|
94,926
|
|
Deferred tax liabilities
|
|
4,269
|
|
|
6,966
|
|
|
1,580
|
|
Long-term debt
|
|
3,977
|
|
|
—
|
|
|
—
|
|
Other long-term liabilities
|
|
18,571
|
|
|
22,037
|
|
|
22,710
|
|
Total liabilities
|
|
554,294
|
|
|
443,663
|
|
|
480,538
|
|
Commitments and contingencies
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
Ordinary shares, no par value; 650,000,000 shares authorized;
207,358,367 shares issued and 179,406,768 outstanding at
December 26, 2015; 206,486,699 shares issued and 199,656,833
outstanding at March 28, 2015, and 201,029,249 shares issued
and 195,889,884 outstanding at December 27, 2014
|
|
—
|
|
|
—
|
|
|
—
|
|
Treasury shares, at cost (27,951,599 shares at December 26, 2015; 6,829,866
shares at March 28, 2015; and 5,139,365 shares at December 27,
2014)
|
|
(1,450,114
|
)
|
|
(497,724
|
)
|
|
(405,702
|
)
|
Additional paid-in capital
|
|
692,758
|
|
|
636,732
|
|
|
610,938
|
|
Accumulated other comprehensive loss
|
|
(97,915
|
)
|
|
(66,804
|
)
|
|
(39,870
|
)
|
Retained earnings
|
|
2,830,810
|
|
|
2,168,761
|
|
|
1,986,119
|
|
Total shareholders’ equity of MKHL
|
|
1,975,539
|
|
|
2,240,965
|
|
|
2,151,485
|
|
Noncontrolling interest
|
|
4,384
|
|
|
—
|
|
|
—
|
|
Total shareholders’ equity
|
|
1,979,923
|
|
|
2,240,965
|
|
|
2,151,485
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,534,217
|
|
|
$
|
2,684,628
|
|
|
$
|
2,632,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE 3
|
|
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES CONSOLIDATED
SEGMENT DATA ($ in thousands) (Unaudited)
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
December 26, 2015
|
|
December 27, 2014
|
|
December 26, 2015
|
|
December 27, 2014
|
Revenue by Segment and Region:
|
|
|
|
|
|
|
|
|
Retail net sales:
|
|
The Americas
|
|
$
|
589,551
|
|
|
$
|
551,840
|
|
|
$
|
1,371,114
|
|
|
$
|
1,296,398
|
|
|
|
Europe
|
|
151,173
|
|
|
121,518
|
|
|
383,741
|
|
|
321,558
|
|
|
|
Japan
|
|
25,501
|
|
|
16,030
|
|
|
67,485
|
|
|
47,253
|
|
Total Retail Net Sales
|
|
766,225
|
|
|
689,388
|
|
|
1,822,340
|
|
|
1,665,209
|
|
Wholesale net sales:
|
|
The Americas
|
|
440,051
|
|
|
476,239
|
|
|
1,175,316
|
|
|
1,203,960
|
|
|
|
Europe
|
|
101,432
|
|
|
97,599
|
|
|
295,862
|
|
|
290,763
|
|
|
|
Asia
|
|
33,970
|
|
|
—
|
|
|
82,248
|
|
|
—
|
|
Total Wholesale Net Sales
|
|
575,453
|
|
|
573,838
|
|
|
1,553,426
|
|
|
1,494,723
|
|
Licensing revenue:
|
|
The Americas
|
|
32,414
|
|
|
29,201
|
|
|
81,096
|
|
|
78,037
|
|
|
|
Europe
|
|
23,387
|
|
|
22,299
|
|
|
56,573
|
|
|
52,516
|
|
Total Licensing Revenue
|
|
55,801
|
|
|
51,500
|
|
|
137,669
|
|
|
130,553
|
|
Total Revenue
|
|
$
|
1,397,479
|
|
|
$
|
1,314,726
|
|
|
$
|
3,513,435
|
|
|
$
|
3,290,485
|
|
|
|
|
|
|
|
|
|
|
Income from Operations:
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
$
|
212,856
|
|
|
$
|
214,928
|
|
|
$
|
433,689
|
|
|
$
|
484,951
|
|
Wholesale
|
|
|
|
160,269
|
|
|
170,487
|
|
|
423,459
|
|
|
444,811
|
|
Licensing
|
|
|
|
36,183
|
|
|
33,062
|
|
|
73,869
|
|
|
71,044
|
|
Total Income from Operations
|
|
$
|
409,308
|
|
|
$
|
418,477
|
|
|
$
|
931,017
|
|
|
$
|
1,000,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin:
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
27.8
|
%
|
|
31.2
|
%
|
|
23.8
|
%
|
|
29.1
|
%
|
Wholesale
|
|
|
|
27.9
|
%
|
|
29.7
|
%
|
|
27.3
|
%
|
|
29.8
|
%
|
Licensing
|
|
|
|
64.8
|
%
|
|
64.2
|
%
|
|
53.7
|
%
|
|
54.4
|
%
|
Total Operating Margin
|
|
|
|
29.3
|
%
|
|
31.8
|
%
|
|
26.5
|
%
|
|
30.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2015
|
Store Count and Square Footage by Region:
|
|
|
|
|
|
Store Count
|
|
Square Footage
|
The Americas
|
|
|
|
|
|
392
|
|
|
1,179,818
|
|
Europe
|
|
|
|
|
|
171
|
|
|
448,725
|
|
Japan
|
|
|
|
|
|
60
|
|
|
88,625
|
|
Total
|
|
|
|
|
|
623
|
|
|
1,717,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE 4
|
|
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES CONSTANT
CURRENCY DATA (In thousands) (Unaudited)
|
|
|
|
Three Months Ended
|
|
% Change
|
|
|
December 26, 2015
|
|
December 27, 2014
|
|
As Reported
|
|
Constant Currency
|
Retail net sales
|
|
$
|
766,225
|
|
|
$
|
689,388
|
|
|
11.1
|
%
|
|
15.7
|
%
|
Wholesale net sales
|
|
575,453
|
|
|
573,838
|
|
|
0.3
|
%
|
|
3.0
|
%
|
Licensing revenue
|
|
55,801
|
|
|
51,500
|
|
|
8.4
|
%
|
|
8.4
|
%
|
Total revenue
|
|
$
|
1,397,479
|
|
|
$
|
1,314,726
|
|
|
6.3
|
%
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
% Change
|
|
|
December 26, 2015
|
|
December 27, 2014
|
|
As Reported
|
|
Constant Currency
|
Retail net sales
|
|
$
|
1,822,340
|
|
|
$
|
1,665,209
|
|
|
9.4
|
%
|
|
15.5
|
%
|
Wholesale net sales
|
|
1,553,426
|
|
|
1,494,723
|
|
|
3.9
|
%
|
|
7.9
|
%
|
Licensing revenue
|
|
137,669
|
|
|
130,553
|
|
|
5.5
|
%
|
|
5.5
|
%
|
Total revenue
|
|
$
|
3,513,435
|
|
|
$
|
3,290,485
|
|
|
6.8
|
%
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

View source version on businesswire.com: http://www.businesswire.com/news/home/20160202005592/en/
Source: Michael Kors Holdings Limited