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Michael Kors Holdings Limited Announces First Quarter Fiscal 2018 Results

LONDON--(BUSINESS WIRE)--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...


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