Michael Kors to Close Up to 125 Stores Amid Sales, Revenue Declines

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In a nutshell:

Michael Kors plans to cut up to 125 stores over the next two years. The news comes as the company reports plummeting revenue and sales for the fourth quarter and full 2017 fiscal year, ended April 1. As a result, the brand is officially in transition mode. The company, which had been rumored to be in hot pursuit of Kate Spade, had been going strong, gaining momentum during the recession by outplaying rival Coach with its own accessories game. Now, like Coach, the brand is in need of a product, store and distribution overhaul. It has already starting pulling back from department stores, and the heavy promotions found there, and looking to online for a lifeline.

Revenue:

Revenue decreased by 11.2% to $1.06 billion in the fourth quarter (including activity in the 53rd week) from $1.20 billion during the prior year period.

Total revenue in the Americas plummeted by 18 percent to $721.0 million while European sales didn’t fare much better with a 15.3% drop to $215.2 million. Asia, on the other hand, was up 96.3% to $128.6 million.

Total revenue for the year decreased by 4.6% to $4.49 billion to $4.71 billion for the previous year.

Profit:

Gross profit was down by 11.1% to $619.7 million and gross margin was flat year on year at 58.2%.

Sales:

Comparable sales dropped by 14.1%, while analysts had comp stores pegged at a 13.4% decline, according to Reuters.

Retail net sales increased 0.5% to $575.3 million, a boost attributed to 159 store openings since the prior year period, including bringing 111 stores in house which had previously been licensed in China. Wholesale net sales dove by 22.8% to $456.1 million. Licensing dipped by 6.2% to $33.4 million.

CEO’s Take:

Chairman and CEO John D. Idol acknowledged to the company’s missteps in a statement, saying “our product and store experience did not sufficiently engage and excite consumers. We acknowledge that we need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience in order to deepen consumer desire and demand for our products.” He called FY2018 “a transition year.”

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