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Michael Kors reports 3.2 percent drop in Q3 revenues

By Prachi Singh

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Business

Revenues at Michael Kors for third quarter ended December 31, 2016 decreased 3.2 percent to 1.35 billion dollars from 1.40 billion dollars in the same quarter of fiscal 2016. On a constant currency basis, total revenue decreased 2.6 percent.

“Overall, we were disappointed with our North American and European comparable store sales performance during the quarter. We believe that headwinds in these markets will continue throughout the spring season as we face reduced traffic trends in shopping malls, currency fluctuation, uncertainty surrounding certain political changes in European countries and the implementation of our reduced promotional cadence in North America,” said John D. Idol, the company’s Chairman and Chief Executive Officer in a statement.

Michael Kors Q3 retail sales up 9.2 percent

Retail net sales increased 9.2 percent to 836.7 million dollars, which the company said were driven primarily by 193 net new store openings since the end of the third quarter of fiscal 2016, including 143 stores associated with the company's recent acquisitions of the previously licensed operations in Greater China and South Korea.

Comparable sales decreased 6.9 percent. On a constant currency basis, retail net sales increased 10 percent, and comparable sales decreased 6.4 percent. Wholesale net sales decreased 17.8 percent to 473.1 million dollars and on a constant currency basis, wholesale net sales decreased 17.5 percent, while licensing revenue were down 22.9 percent to 43 million dollars.

Total revenue in the Americas decreased 7.4 percent to 983.8 million dollars on a reported basis and 7.5 percent on a constant currency basis. European revenue decreased 7 percent to 256.7 million dollars on a reported basis, and 2.7 percent on a constant currency basis. Revenue in Asia increased 89.1 percent to 112.3 million dollars on a reported basis, and 84 percent on a constant currency basis.

Gross profit for the quarter decreased 3.1 percent to 805.7 million dollars, and as a percentage of total revenue was 59.6 percent. Foreign currency translation and transaction favorably impacted gross profit margin by approximately 30 basis points. Net income attributable to MKHL was 271.3 million dollars or 1.64 dollars per diluted share compared to 294.6 million dollars or 1.59 dollars per diluted share, same quarter of 2016.

At December 31, 2016, the company operated 816 retail stores, including concessions, compared to 623 retail stores, including concessions, at the end of the same prior-year period. The Company had 128 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 944 Michael Kors stores worldwide at the end of the third quarter of fiscal 2017.

First nine months revenue decline 2.4 percent

Total revenue decreased 2.4 percent to 3.43 billion dollars in the first nine month period and on a constant currency basis, total revenue decreased 2.3 percent. Retail net sales increased 9.6 percent to 2 billion dollars but comparable store sales decreased 6.6 percent. On a constant currency basis, retail net sales grew 9.9 percent and comparable sales decreased 6.5 percent.

Wholesale net sales decreased 15 percent to 1.32 billion dollars and on a constant currency basis, wholesale net sales decreased 15 percent. Licensing revenue decreased 18.4 percent to 112.4 million dollars.

Total revenue in the Americas decreased 7.9 percent to 2.42 billion dollars on a reported and constant currency basis. European revenue decreased 1 percent to 728.7 million dollars on a reported basis, and increased 1 percent on a constant currency basis. Revenue in Asia increased 87.4 percent to 280.5 million dollars on a reported basis, and increased 80.6 percent on a constant currency basis.

Gross profit for the first nine months decreased 2.8 percent to 2.04 billion dollars, and as a percentage of total revenue was 59.5 percent. Net income attributable to MKHL for the first nine months was $79.3 million dollars, or 3.40 dollars per diluted share. Net income attributable to MKHL for the same period in fiscal 2016 was 662.1 million dollars, or 3.45 dollars per diluted share.

FY17 comparable sales expected to decrease in high-single digit

For fiscal 2017, the company now expects total revenue to be approximately 4.48 billion dollars and for comparable sales to decrease in the high-single digit range. Diluted earnings per share are now expected to be in the range of 4.15 dollars to 4.19 dollars on a non-GAAP basis, excluding the one-time costs, and 4.09 dollars to 4.13 dollars on a GAAP basis, including the one-time costs.

For the fourth quarter of fiscal 2017, the company expects total revenue to be between 1.035 billion dollars and 1.055 billion dollars, which includes a planned reduction in wholesale shipments, and a comparable sales decrease in the low-teens range. The company expects diluted earnings per share to be in the range of 0.68 dollar to 0.72 dollar.

Picture:Michael Kors

Michael Kors