Michael Kors awaits Jimmy Coo’s arrival to embark on a new path, while it cuts store count and pulls back on wholesaling.
Michael Kors Holdings
In a Nutshell: Michael Kors is paving a new path as a global fashion luxury group with its $1.35 billion agreement to acquire Jimmy Choo. The company believes that development will increase long-term shareholder value as it creates a more diverse product portfolio, increases its exposure to international markets and avails itself of additional opportunities for growth. Kors said recently that it plans to close many stores (it has 838 units now), improve the brand’s fashion innovation and pull back on wholesale. That strategy, dubbed Runway 2020, should see the company close 100 to 125 stores globally over the next two years, eyeing units that are either unprofitable or not seen as growth vehicles because they are seeing declining revenues and slower traffic in certain malls.
[Read more on the Jimmy Choo acquisition: Michael Kors to Acquire Jimmy Choo for $1.2B]
Sales: Net income for the first quarter ended July 1 fell 14.2% to $125.5 million compared to $146.4 million in the year-ago quarter. Net sales declined 3.5% to $923.5 million from $957.3 million in the year-ago period. Retail net sales increased 10.1% to $619.9 million from $562.9 million a year earlier, 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. Wholesale net sales decreased 23 percent to $303.6 million from $394.4 million in the year-ago quarter, while licensing revenue decreased 5.6% to $28.9 million from $30.6 million last year.
Earnings: Total revenue decreased 3.6% to $952.4 million from $987.9 million in year-ago first quarter. Gross profit decreased 2.8% to $574.7 million from $$591.3 million in the 2016 period. Income from operations was $149.4 million, or 15.7% as a percentage of total revenue compared to $186.9 million, or 18.9% as a percentage of total revenue, for the year-ago period.
CEO’s Take: John D. Idol, the 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 Michael Kors 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.”
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