Michael Kors Delivers Better than Anticipated Revenue and Gross Margin

11:28 08/10/2018

Michael Kors Holdings Limited KORS , a global fashion luxury group, announced its financial results for the fiscal 2019 first quarter ended June 30, 2018. Earnings per diluted share were $1.22 on a reported basis, an increase of 52.5% compared to the prior year. On an adjusted basis, earnings per diluted share were $1.32, an increase of 65.0% compared to the prior year.

Michael Kors KORS  brand revenues grew 8%, with performance above expectations. The Company delivered better than anticipated revenue, gross margin, operating margin and earnings per share growth.

John D. Idol, the Company's Chairman and Chief Executive Officer, said, "We are encouraged by our first quarter performance, with growth in revenues, gross margin, operating margin as well as earnings per share all exceeding our expectations. Our fashion leadership remains strong, which drove consumers to respond favorably to both new fashion introductions and core products. Our global fashion luxury group continues to see the benefits of our long term growth strategy which is driven by both the Michael Kors and Jimmy Choo brands. Looking ahead we remain optimistic about our business for the remainder of fiscal 2019 and beyond.”

For the first quarter ended June 30, 2018, total revenue increased 26.3% to $1.20 billion, including a $172.7 million contribution from Jimmy Choo, which was consolidated into results effective November 1, 2017.

MK Wholesale revenue increased 19.5% to $362.8 million, driven by improvements in the underlying business, as well as a shift in timing of certain wholesale shipments from second quarter into first quarter.

MK Retail KORS  revenue increased 3.2% to $639.5 million driven in large part by 9 net new store openings since the end of the first quarter of fiscal 2018. Comparable sales increased 0.2%, with positive performance in the Americas and Asia, partially offset by declines in Europe, as expected. Revenue included a net favorable foreign currency impact of $15.0 million and comparable store sales decreased 2.1% on a constant currency basis.

MK Licensing revenue decreased 4.8% to $27.5 million. Continued positive growth of Michael Kors ACCESS smart watches was not enough to offset the continued decline of fashion watches.

Gross profit increased 30.6% to $750.8 million, and as a percentage of total revenue was 62.4%. Adjusted gross profit increased 31.1% to $753.2 million, and as a percentage of total revenue was 62.6%. This compares to 60.3% in the first quarter of fiscal 2018. The year-over-year growth was largely driven by improved MK Wholesale gross margins due to lower promotional activity and favorable product mix as well as the inclusion of the higher margin Jimmy Choo business, which contributed 40 basis points. MK Retail margins also improved during the quarter.

Net income attributable to KORS  was $186.4 million, or $1.22 per diluted share, based on a 9.4% tax rate and 152.4 million weighted average diluted shares outstanding. Net income attributable to MKHL for the first quarter of fiscal 2018 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.

At June 30, 2018, Michael Kors KORS  operated 847 retail stores, including concessions, and an additional 153 retail stores, including concessions, were operated through licensing partners. Including licensed locations, there were 1,000 Michael Kors stores worldwide at the end of the first quarter of fiscal 2019.

During the first quarter, the Company repurchased approximately 1.7 million of the Company's ordinary shares for approximately $100.0 million in open market transactions. As of June 30, 2018 the remaining availability under the Company's share repurchase program was $542.0 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.

The Company is raising full year adjusted earnings per share guidance by $0.25 to $4.90 to $5.00, reflecting better than expected first quarter performance for both the Michael Kors and Jimmy Choo brands.

For the full year, the Company now expects total revenue to be approximately $5.125 billion, including between $580 million and $590 million of incremental Jimmy Choo revenue. Reported comparable sales for Michael Kors is expected to be approximately flat, in line with prior guidance. The Company has raised guidance for operating margin to approximately 18.0%. Diluted earnings per share are expected to be in the range of $4.90 to $5.00. The Company now expects lower EPS dilution from Jimmy Choo of $0.05 to flat, which is a $0.05 cent improvement from prior guidance. Earnings per share guidance assumes approximately 152 million weighted average diluted shares outstanding and a tax rate of approximately 15.5%.

Michael Kors Holdings Limited (NYSE:KORS) KORS  goal is to continue to extend the global reach of its brands while ensuring that they maintain their independence and exclusive DNA.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
Most Read