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Michael Kors Q3 revenues rise 6.5 percent

By Prachi Singh

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Management

For the third quarter ended December 30, 2017, total revenue at Michael Kors Holdings Limited increased 6.5 percent to 1.44 billion dollars, including a 114.7 million dollars contribution from Jimmy Choo, which the company owned for two months of the quarter. On a constant currency basis, total revenue increased 4.6 percent.

Commenting on the third quarter results, John D. Idol, the company’s Chairman and Chief Executive Officer, said in a statement: “We delivered better than expected results and saw the successful integration of Jimmy Choo into our luxury group. The Michael Kors brand continued to make progress on Runway 2020 initiatives across product innovation, brand engagement and customer experience.”

Highlights of the third quarter trading

Michael Kors retail revenue increased 1.1 percent to 846.3 million dollars driven in large part by 32 net new store openings since the end of the third quarter of fiscal 2017. The company said, comparable sales decreased 3.2 percent, with better than anticipated performance in the Americas and Europe during the holiday season. On a constant currency basis, retail net sales decreased 1 percent and comparable sales decreased 5.2 percent.

Michael Kors wholesale revenue decreased 8.9 percent to 430.8 million dollars and on a constant currency basis decreased 10.5 percent, driven by a strategic reduction in inventory levels in the channel. Licensing revenue increased 12.3 percent to 48.3 million dollars.

Gross profit for the quarter increased 9.7 percent to 884 million dollars and as a percentage of total revenue was 61.4 percent, while adjusted gross profit increased 9.9 percent to 885.6 million dollars and as a percentage of total revenue was 61.5 percent. This compares to 59.6 percent in the third quarter of fiscal 2017.

Net income attributable to MKHL was 219.4 million dollars or 1.42 dollars per diluted share compared to 271.3 million dollars or 1.64 dollars per diluted share. Adjusted net income attributable to MKHL was 273.4 million dollars or 1.77 dollars per diluted share compared to 271.6 million dollars or 1.64 dollars per diluted share, for the third quarter of fiscal 2017.

At December 30, 2017, Michael Kors operated 848 retail stores, including concessions, and an additional 150 retail stores, including concessions, were operated through licensing partners. Including licensed locations, there were 998 Michael Kors stores worldwide at the end of the third quarter of fiscal 2018. At December 30, 2017, Jimmy Choo operated 179 retail stores, including concessions, and an additional 55 retail stores, including concessions, were operated through licensing partners. Including licensed locations, there were 234 Jimmy Choo stores worldwide at the end of the third quarter of fiscal 2018.

Michael Kors expects decline in Q4 comparable sales

For the fourth quarter of fiscal 2018, the company expects total revenue to be between 1.11 billion dollars and 1.13 billion dollars, including between 110 million dollars and 115 million dollars of incremental Jimmy Choo revenue. Comparable sales for Michael Kors are expected to decline in the low-single digits.

The company expects operating margin to be approximately 10 percent. Diluted earnings per share are expected to be in the range of 0.50 dollar to 0.55 dollar, including the dilution from Jimmy Choo of approximately 0.07 dollar.

For fiscal 2018, the company expects total revenue to be approximately 4.66 billion dollars, including between 225 million dollars and 230 million dollars of incremental Jimmy Choo revenue. Comparable sales for Michael Kors are expected to decline in the mid-single digits. The company expects operating margin to be approximately 18 percent. Diluted earnings per share are expected to be in the range of 4.40 dollars to 4.45 dollars, with no incremental impact from Jimmy Choo.

Picture:Michael Kors website

Michael Kors
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