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Michael Kors Q2 revenues down 3.7 percent

By Prachi Singh

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Business

Michael Kors revenue decreased 3.7 percent to 1.09 billion dollars from 1.13 billion dollars in the second quarter of fiscal 2016. On a constant currency basis, total revenue decreased 3.7 percent percent. Retail net sales increased 12.1 percent to 597.2 million dollars driven by 198 net new store openings since the end of the second quarter of fiscal 2016, including 137 stores associated with the company's recent acquisitions of Greater China and South Korea. Comparable sales decreased 5.4 percent. On a constant currency basis, retail net sales increased 12.1 percent, and comparable sales decreased 5.6 percent.

“Our second quarter revenue and earnings results were above our expectations, as we continued to deliver innovative luxury fashion product and further expand our footprint worldwide. We also expanded our online presence, with the launch of digital flagships in several countries in Europe. That said, our results continued to be impacted by the declines in mall traffic and tourism in certain major cities, as well as our strategic decision to reduce sell-in of inventory to the US wholesale channel," said John D. Idol, the company’s Chairman and Chief Executive Officer.

Michael Kors revenue declines in Americas, up in Europe, Asia

Wholesale net sales decreased 18.4 percent to 452.2 million dollars and on a constant currency basis, wholesale net sales decreased 18.5 percent, while licensing revenue decreased 10.2 percent to 38.8 million dollars.

Total revenue in the Americas decreased 11.1 percent to 745.1 million dollars on a reported basis and decreased 11.1 percent on a constant currency basis. European revenue grew 1.9 percent to 248 million dollars on a reported basis, and grew 3.5 percent on a constant currency basis. Revenue in Asia increased 96.5 percent to 95.1 million dollars on a reported basis, and increased 87.5 percent on a constant currency basis.

Gross profit decreased 3 percent to 644.7 million dollars and as a percentage of total revenue was 59.2 percent. The company said, foreign currency translation and transaction favourably impacted gross profit margin by approximately 80 basis points. This compares to gross margin of 58.8 percent in the second quarter of fiscal 2016.

Net income attributable to MKHL was 160.9 million dollars or 0.95 dollar per diluted share against net income of 193.1 million dollars or 1.01 dollars per diluted share. At October 1, 2016, the company operated 787 retail stores, including concessions, compared to 589 retail stores, including concessions, at the end of the same prior-year period. The Company had 118 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 905 Michael Kors stores worldwide at the end of the second quarter of fiscal 2017.

For the first six months revenues decrease 1.7 percent

Total revenue decreased 1.9 percent to 2.08 billion dollars from 2.12 billion dollars in the same period of fiscal 2016. On a constant currency basis, total revenue decreased 2 percent.

Retail net sales increased 9.8 percent to 1.16 billion dollars and comparable store sales decreased 6.4 percent. On a constant currency basis, retail net sales grew 9.8 percent and comparable sales decreased 6.6 percent. Wholesale net sales decreased 13.4 percent to 846.6 million dollars and on a constant currency basis, wholesale net sales decreased 13.6 percent. Licensing revenue decreased 15.3 percent to 69.4 million dollars.

Gross profit for the period decreased 2.5 percent to 1.24 billion dollars and as a percentage of total revenue was 59.5 percent. Net income attributable to MKHL for the first six months was 308 million dollars or 1.78 dollars per diluted share against 367.5 million dollars or 1.88 dollars per diluted share.

Expects FY17 comparable sales to decrease mid-single digit

For fiscal 2017, the company now expects total revenue to be approximately 4.55 billion dollars and for comparable sales to decrease in the mid-single digit range. Diluted earnings per share are now expected to be in the range of 4.37 dollars to 4.43 dollars on a non-GAAP basis, excluding the one-time costs, and 4.32 dollars to 4.38 dollars on a GAAP basis, including the one-time costs. This assumes 169.5 million weighted average diluted shares outstanding and a tax rate of approximately 21 percent.

For the third quarter, the company expects total revenue to be between 1.365 billion dollars and 1.380 billion dollars, which the company said, includes a planned reduction in wholesale shipments, and a comparable sales decrease in the mid-single digit range. The company expects operating margin to be approximately 25 percent. Diluted earnings per share are expected to be in the range of 1.61 dollars to 1.65 dollars for the third quarter of fiscal 2017. This assumes 166.5 million weighted average diluted shares outstanding and a tax rate of approximately 21 percent.

Picture:Michael Kors

Michael Kors