- Prachi Singh |
Michael Kors revenues for the three months ended July 1, 2017 decreased 3.6 percent to 952.4 million dollars from 987.9 million dollars in the first quarter of fiscal 2017. On a constant currency basis, the company said, total revenue decreased 2.6 percent. Gross profit for the quarter decreased 2.8 percent to 574.7 million dollars and as a percentage of total revenue was 60.3 percent.
“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,” said John D. Idol, the company’s Chairman and CEO in a press statement, adding, "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."
Financial highlights of the first quarter
Retail net sales increased 10.1percent to 619.9 million dollars, which the company said were driven 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 percent. On a constant currency basis, retail net sales increased 11.6 percent, and comparable sales decreased 4.9 percent. Wholesale net sales decreased 23 percent to 303.6 million dollars and on a constant currency basis, wholesale net sales decreased 22.7 percent. Licensing revenue decreased 5.6 percent to 28.9 million dollars.
Total revenue in the Americas decreased 8.2 percent to 634.1 million dollars on a reported basis and 7.9 percent on a constant currency basis. European revenue decreased 10.2 percent to 201.2 million dollars on a reported basis and 7.5 percent on a constant currency basis. Revenue in Asia increased 60.2 percent to 117.1 million dollars on a reported basis and 61.9 percent on a constant currency basis.
Michael Kors added that foreign currency translation and transaction favourably impacted gross profit margin by approximately 10 basis points. This compares to gross margin of 59.9 percent in the first quarter of fiscal 2017. Net income attributable to MKHL was 125.5 million dollars or 0.80 dollar per diluted share. Earnings per diluted share exceeded the company's prior expectations of 0.60 dollar to 0.64 dollar. Net income attributable to MKHL was 147.1 million dollars or 0.83 dollar.
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.
Michael Kors expects Q2 comparable sales to decline
For the second quarter of fiscal 2018, the company expects total revenue to be between 1.035 billion dollars and 1.055 billion dollars, which includes a comparable sales decrease in the mid-single digits range. The company expects operating margin to be approximately 14.3 percent and diluted earnings per share are expected to be in the range of 0.80 dollar to 0.84 dollar.
For fiscal 2018, the company expects total revenue to be approximately 4.275 billion dollars and for comparable sales to decrease in the mid-single digits range. Operating margin is expected to be approximately 16 percent and diluted earnings per share are expected to be in the range of 3.62 dollars to 3.72 dollars. The company said, this guidance excludes 40 million dollars to 60 million dollars in one-time costs associated with 20 to 40 store closures in Fiscal 2018.
The company further added that this outlook does not include any expectations related to Jimmy Choo but based on the company’s internal forecasts for Jimmy Choo and assuming a close early in the company’s third fiscal quarter, incremental revenue is expected to be approximately 275 million dollars for the second half of fiscal 2018. For fiscal 2019, the company expects incremental revenues of 570 million dollars to 580 million dollars.
Picture:Michael Kors website