Michael Kors Holdings Limited Announces First Quarter Fiscal 2018 Results: Exceeds First Quarter Guidance; Raises Full Year Outlook

Michael Kors Holdings Limited (NYSE: KORS) today announced its financial results for the fiscal 2018 first quarter ended July 1, 2017.

About Michael Kors

Michael Kors Holdings Limited, established in 1981, is a designer and marketer of a range of luxury accessories and ready-to-wear products including footwear, wearable technology, watches, and a full line of fragrance products. The Company operates 838 company owned retail stores plus an additional 141 stores operated by licensing partners for a total of 979 Michael Kors stores worldwide.

Q1 2018 Financial Report

• Total revenue: DOWN 3.6% to $952.4 million from $987.9 million in the first quarter of fiscal 2017.
  • Total revenue in the Americas: DOWN 8.2% to $634.1 million
  • European revenue: DOWN 10.2% to $201.2 million
  • Revenue in Asia: UP 60.2% to $117.1 million
• Retail net sales: UP 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: DOWN 5.9%.
• Wholesale net sales: DOWN 23.0% to $303.6 million 
• Gross profit: DOWN 2.8% to $574.7 million
• Gross Margin: UP to 60.3% compared to gross margin of 59.9% in the first quarter of fiscal 2017
• Net income attributable to MKHL: $125.5 million, or $0.80 per diluted share, exceeding the Company's prior expectations of $0.60 to $0.64. 

Operational Results

• Company operated  retail stores, including concessions: UP 8.7% to 838 retail stores compared to the end of the same prior-year period

2018 Outlook For Q2 of Fiscal 2018

The Company expects:

• total revenue to be $1.035 billion to $1.055 billion
• comparable sales to decrease to the mid-single digits range
• operating margin to be approximately 14.3%.
• diluted earnings per share to be $0.80 to $0.84 (assuming 154 million weighted average diluted shares outstanding & a 15.0% tax rate)

2018 Fiscal Year Outlook

The Company expects:

• total revenue of $4.275 billion
• comparable sales to decrease in the mid-single digits range
• operating margin of 16.0%
• diluted earnings per share to be $3.62 to $3.72 (assuming 156 million weighted average diluted shares outstanding and a 17.0% tax rate)

The Company’s outlook excludes:

• $40 million to $60 million in one-time costs associated with 20 to 40 store closures in Fiscal 2018
• any expectations related to Jimmy Choo as the transaction has not yet been completed.

Jimmy Choo Acquisition Implications

Based on the Company’s internal forecasts for Jimmy Choo and assuming a close early in the Company’s third fiscal quarter the Company expects:

• incremental revenue to be approximately $275 million for the second half of fiscal 2018
• incremental revenues to be $570 million to $580 million for fiscal 2019
• 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 acquisition

John D. Idol, Chairman and Chief Executive Officer, said in today's press release that:

“...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.

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...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."