Michael Kors Q3 revenues up, currency headwinds to impact annual results

Michael Kors Holdings for the third quarter ended December 26, 2015 registered total revenue increase of 6.3 percent to 1.40 billion dollars from 1.31 billion dollars in the third quarter of fiscal 2015. On a constant currency basis, total revenue increased 9.9 percent.

Commenting on the development, John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “We are pleased with our third quarter results, as we delivered revenue, comparable store sales and earnings growth ahead of our expectations. Our performance was driven primarily by strong consumer response to our luxury fashion product offering, particularly in our accessories and footwear categories, the continued momentum in our digital flagship business and outstanding growth in our international markets.”

Retail sales and profit rise in Q3

Retail net sales increased 11.1 percent to 766.2 million dollars driven primarily by e-commerce sales from the company's digital flagships and 114 net new store openings since the end of the third quarter of fiscal 2015. Comparable store sales decreased 0.9 percent. On a constant currency basis, retail net sales grew 15.7 percent, and comparable store sales increased 2 percent. Wholesale net sales increased 0.3 percent to 575.5 million dollars and on a constant currency basis, wholesale net sales grew 3 percent. Licensing revenue increased 8.4 percent to 55.8 million dollars.

Total revenue in the Americas increased 0.4 percent to 1.06 billion dollars on a reported basis and 1.4 percent on a constant currency basis. European revenue grew 14.3 percent to 276 million dollars on a reported basis, and 29.1 percent on a constant currency basis. Revenue in Japan increased 59.1 percent to 25.5 million dollars on a reported basis, and 68 percent on a constant currency basis.

Gross profit increased 4 percent to 832 million dollars, and as a percentage of total revenue was 59.5 percent. The company said, foreign currency translation and transaction negatively impacted gross profit margin by approximately 95 basis points compared to gross margin of 60.9 percent in the third quarter of fiscal 2015.

At December 26, 2015, the company operated 623 retail stores, including concessions, compared to 509 retail stores, including concessions, at the end of the same prior-year period. The company had 234 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 857Michael Kors stores worldwide at the end of the third quarter of fiscal 2016.

Revenue up 6.8 percent for nine months

For the first nine months ended December 26, 2015 total revenue increased 6.8 percent to 3.51 billion dollars. On a constant currency basis, total revenue increased 11.6 percent.

Retail net sales increased 9.4 percent to 1.82 billion dollars but comparable store sales decreased 5.6 percent. On a constant currency basis, retail net sales grew 15.5 percent and comparable store sales declined 1.6 percent. Wholesale net sales increased 3.9 percent to 1.55 billion dollars and on a constant currency basis, wholesale net sales grew 7.9 percent. Licensing revenue increased 5.5 percent to 137.7 million dollars. Gross profit increased 4.1 percent to 2.10 billion dollars, and as a percentage of total revenue, was 59.8 percent compared to gross margin of 61.3 percent in the same period of fiscal 2015.

Revenue expected to increase in Q4 and FY16

For the fourth quarter of fiscal 2016, the company expects total revenue to be in the range of 1.13 billion dollars to 1.15 billion dollars, which includes approximately 36 million dollars of additional sales due to the 53rd week. On a constant currency basis, total revenue is expected to increase in the high-single digit range assuming an impact of approximately 20 million dollars from the change in foreign currency rates.

The company expects comparable store sales to be flat on a reported basis and to increase in the low single digits on a constant currency basis. Diluted earnings per share are expected to be in the range of 0.93 dollar to 0.97 dollar for the fourth quarter of fiscal 2016.

For fiscal 2016, the company expects total revenue to be approximately 4.65 billion dollars. On a constant currency basis, total revenue is expected to increase in the low-double digit range assuming an impact of approximately 180 million dollars from the change in foreign currency rates. The company expects a mid-single digit comparable store sales decrease on a reported basis and a low-single digit decrease on a constant currency basis. Diluted earnings per share are expected to be in the range of 4.38 dollars to 4.42 dollars for fiscal 2016.