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Michael Kors Q1 revenue improves marginally

By Prachi Singh

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Business

Michael Kors Holdings’ first quarter revenue increased 0.2 percent to 987.9 million dollars from 986 million dollars in the same quarter of fiscal 2016. On a constant currency basis, total revenue was flat.

Commenting on the first quarter trading, John D. Idol, the company’s Chairman and CEO, said, “We are pleased to have once again exceeded our first quarter revenue and earnings per share expectations. We delivered another quarter of strong growth in our North American digital flagships, further expanded our presence globally, particularly in Asia, and expanded our fashion product offerings. However, this progress was muted by the continued decline in mall traffic trends as well as a decrease in tourism in certain major cities which negatively impacted our comparable sales performance during the quarter.”

New store openings boost retail sales

Retail net sales increased 7.6 percent to 562.9 million dollars driven primarily by 221 net new store openings since the end of the first quarter of fiscal 2016, including 145 stores associated with the company's recent acquisitions of Greater China and South Korea and the consolidation of the Latin American operations. Comparable sales, however, decreased 7.4 percent. On a constant currency basis, retail net sales grew 7.4 percent and comparable sales decreased 7.6 percent. Wholesale net sales decreased 7 percent to 394.4 million dollars and on a constant currency basis, wholesale net sales decreased 7.2 percent. Licensing revenue decreased 20.9 percent to 30.6 million dollars.

Total revenue in the Americas decreased 5 percent to 690.8 million dollars on a reported basis and decreased 4.8 percent on a constant currency basis. European revenue grew 3.3 percent to 224 million dollars on a reported basis, and grew 2.9 percent on a constant currency basis. Revenue in Asia increased 74.5 percent to 73.1 million dollars on a reported basis, and increased 67.7 percent on a constant currency basis.

Q1 gross profit decline 2 percent

Gross profit decreased 2 percent to 591.3 million dollars, and as a percentage of total revenue was 59.9 percent. Income from operations was 186.9 million dollars, or 18.9 percent as a percentage of total revenue against 248.6 million dollars, or 25.2 percent as a percentage of total revenue, for the first quarter of fiscal 2016. Net income attributable to MKHL was 147.1 million dollars, or 0.83 dollar per diluted share compared to 174.4 million dollars or 0.87 dollars per share in the first quarter of 2016. Excluding 8.9 million dollars after-tax or 0.05 dollar per diluted share, of one-time costs related to the acquisition of the Company's Greater China licensee, net income was 156 million dollars or 0.88 dollar per diluted share.

At July 2, 2016, the company operated 771 retail stores, including concessions, compared to 550 retail stores, including concessions, at the end of the same prior-year period. The company had 110 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 881 Michael Kors stores worldwide at the end of the first quarter of fiscal 2017.

Expects FY17 revenue to be flat on last year

For the second quarter of fiscal 2017, the company expects total revenue to be between 1.07 billion dollars and 1.085 billion dollars, which includes a planned reduction in wholesale shipments, and comparable sales to decrease in the mid-single digit range. The company expects an increase in gross margin of approximately 100 to 130 basis points, driven by favorable geographic and channel mix shift. The Company expects an increase in operating expense primarily due to continued investments in international expansion, digital flagships, and global infrastructure. Diluted earnings per share are expected to be in the range of 0.84 dollar to 0.88 dollar.

For fiscal 2017, the company expects total revenue to be flat versus the prior year and comparable sales to decrease in the mid-single digit range. Operating margin is expected to be approximately 21.5 percent on a non-GAAP basis, excluding the one-time acquisition related costs, and approximately 21.3 percent on a GAAP basis, including the one-time costs. Diluted earnings per share are expected to be in the range of 4.56 dollars to 4.64 dollar on a non-GAAP basis, excluding the one-time costs, and 4.51 dollars to 4.59 dollars on a GAAP basis, including the one-time costs.

Picture:Michael Kors

Michael Kors