Michael Kors Holdings Limited Announces Second Quarter Fiscal 2013 Results

Michael Kors Holdings Limited Announces Second Quarter Fiscal 2013 Results

Total Revenue Increased 74%; Comparable Store Sales Increased 45.1%

Reported Diluted EPS Increased 123% to $0.49


HONG KONG--(BUSINESS WIRE)-- Michael Kors Holdings Limited (NYS: KORS) (the "Company"), a global luxury lifestyle brand with a multi-channel strategy, unique design and strong infrastructure, today announced its financial results for the second quarter ended September 29, 2012.

John D. Idol, the Company's Chairman and Chief Executive Officer, said, "We were pleased to have delivered record results in the second quarter. Our performance is a reflection of Michael Kors' brand strength, innovative fashion design and the successful execution of our growth strategies. We are excited to see the growing global recognition and appeal for the Michael Kors luxury brand."

For the second quarter ended September 29, 2012:

  • Total revenue increased 74% to $532.9 million from $305.5 million in the second quarter of fiscal 2012.

  • Retail net sales increased 82% to $242.3 million driven by a 45.1% increase in comparable store sales and 66 new store openings since the end of the second quarter last year. Wholesale net sales increased 75% to $270.8 million and licensing revenue increased 13% to $19.9 million.

  • Gross profit increased 80% to $315.9 million, and as a percentage of total revenue increased to 59.3% compared to 57.3% in the second quarter of fiscal 2012.

  • Income from operations was $157.9 million and as a percentage of total revenue was 29.6%. For the second quarter of fiscal 2012, income from operations was $59.3 million and included a $10.7 million charge related to the employee share option redemption associated with our private placement. Excluding this amount, income from operations was $70.0 million, or 22.9% as a percentage of total revenue.

  • Net income was $97.8 million, or $0.49 per diluted share, based on 200.2 million weighted average diluted shares outstanding. Net income for the second quarter of fiscal 2012 was $40.6 million, or $0.22 per diluted share, based on 187.6 million weighted average diluted shares outstanding. Excluding the aforementioned charge, net income for the second quarter of fiscal 2012 was $47.5 million, or $0.25 per diluted share.

  • At September 29, 2012, the Company operated 269 retail stores, including concessions, compared to 203 retail stores, including concessions, at the end of the same prior-year period. The Company had 80 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 349 Michael Kors stores worldwide at the end of the second quarter.

Mr. Idol continued, "Michael Kors delivered another outstanding quarter with exceptional sales growth across our business segments and geographies. Our North America comparable store sales growth of 45.1% demonstrates the strong demand for Michael Kors products as we continue to offer a compelling assortment of luxury merchandise and exceptional service in a jet set store environment. The net sales growth of 76% in our North America wholesale segment reflects the continued successful conversion to shop-in-shops in department stores as well as exceptional comparable store sales. We continue to gain brand acceptance in Europe as evidenced by the 97% sales growth we achieved in this region. Finally, in our licensing segment, we achieved 13% growth, which was driven primarily by ongoing strength in watches. We remain very excited about the long term growth prospects for our company as a global luxury lifestyle brand."

For the first six months ended September 29, 2012:

  • Total revenue for the first six months increased 73% to $947.8 million from $548.7 million in the same period of fiscal 2012.

  • Retail net sales increased 79% to $457.3 million driven by a 41.3% increase in comparable store sales and 66 new store openings since the end of the second quarter last year. Wholesale net sales increased 71% to $453.2 million and licensing revenue increased 31% to $37.4 million.

  • Gross profit for the first six months increased 82% to $566.9 million, and as a percentage of total revenue increased to 59.8% as compared to 56.9% in the same period of fiscal 2012.

  • Income from operations for the first six months was $269.9 million and as a percentage of total revenue was 28.5%. For the same period of fiscal 2012, income from operations was $104.3 million and included a $10.7 million charge related to the employee share option redemption associated with our private placement. Excluding this amount, income from operations was $114.9 million, or 21.0% as a percentage of total revenue in fiscal 2012.

  • Net income for the first six months was $166.5 million, or $0.83 per diluted share, based on 199.8 million weighted average diluted shares outstanding. Net income for the first six months of fiscal 2012 was $64.7 million, or $0.35 per diluted share, based on 183.4 million weighted average diluted shares outstanding. Excluding the aforementioned charge, net income for the first six months of fiscal 2012 was $71.3 million, or $0.39 per diluted share.

Outlook

For the third quarter of fiscal 2013, the Company expects total revenue to be in the range of $525 million to $535 million. This assumes a mid-twenty percent comparable store sales increase. Diluted earnings per share are expected to be in the range of $0.37 to $0.39 for the third quarter of fiscal 2013. This assumes 202 million diluted weighted average shares outstanding and a 38% tax rate.

For fiscal 2013, the Company now expects total revenue to be in the range of $1.86 billion to $1.96 billion. This assumes a comparable store sales increase of approximately 30%. Diluted earnings per share are now expected to be in the range of $1.48 to $1.50 for fiscal 2013. This assumes 201.2 million diluted weighted average shares outstanding and a 38% tax rate.

Conference Call Information

A conference call to discuss second quarter results is scheduled for today, November 13, 2012 at 8:00 a.m. EDT. A replay of the call will be available today at 11:00 a.m. EDT; to access the replay, dial 1-877-870-5176 for domestic callers or dial 1-858-384-5517 for international callers and enter access code 3420252. The conference call will also be webcast live in the investor relations section of www.michaelkors.com. The webcast will be accessible on the website for approximately 90 days after the call.

About Michael Kors

Michael Kors is a world-renowned, award-winning designer of luxury accessories and ready to wear. His namesake company, established in 1981, currently produces a range of products through his Michael Kors, KORS Michael Kors and MICHAEL Michael Kors labels, including accessories, footwear, watches, jewelry, men's and women's ready to wear, and a full line of fragrance products. Michael Kors stores are operated, either directly or through licensing partners, in some of the most prestigious cities in the world, including New York, Beverly Hills, Chicago, London, Milan, Paris, Munich, Istanbul, Dubai, Seoul, Tokyo and Hong Kong.

Forward Looking Statements

This press release contains forward-looking statements. You should not place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed future results of operations, including descriptions of its business strategy. These statements often include words such as "may," "will," "should," "believe," "expect," "seek," "anticipate," "intend," "plan," "estimate" or similar expressions. The forward-looking statements contained in this press release are based on assumptions that the Company has made in light of management's experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors that it believes are appropriate under the circumstances. You should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual financial results or results of operations and could cause actual results to differ materially from those in these forward-looking statements. These factors are more fully discussed in the "Risk Factors" section and elsewhere in the Company's Registration Statement on Form F-1 , as amended(File No. 333-183778), filed on September 21, 2012 with the U.S. Securities and Exchange Commission.

SCHEDULE 1

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except share and per share data)

(Unaudited)

Three Months Ended

Six Months Ended

September 29,

October 1,

September 29,

October 1,

2012

2011

2012

2011

Net sales

$

513,065

$

287,925

$

910,435

$

520,207

Licensing revenue

19,870

17,607

37,365

28,451

Total revenue

532,935

305,532

947,800

548,658

Cost of goods sold

217,035

130,432

380,900

236,589

Gross profit

315,900

175,100

566,900

312,069

Total operating expenses

157,972

115,822

297,029

207,815

Income from operations

157,928

59,278

269,871

104,254

Interest expense, net

555

(11

)

990

660

Foreign currency gain

(275

)

(3,236

)

(650

)

(1,729

)

Income before provision for income taxes

157,648

62,525

269,531

105,323

Provision for income taxes

59,820

21,919

103,058

40,602

Net income

97,828

40,606

166,473

64,721

Net income applicable to preference shareholders

-

8,975

-

14,173

Net income available for ordinary shareholders

$

97,828

$

31,631

$

166,473

$

50,548

Weighted average ordinary shares outstanding:

Basic

194,323,935

146,555,601

193,557,194

143,554,974

Diluted

200,192,291

187,580,153

199,791,708

183,378,696

Net income per ordinary share (1):

Basic

$

0.50

$

0.22

$

0.86

$

0.35

Diluted

$

0.49

$

0.22

$

0.83

$

0.35

Statements of Comprehensive Income:

Net income

$

97,828

$

40,606

$

166,473

$

64,721

Foreign currency translation adjustments

4,744

(7,633

)

1,466

(5,654

)

Comprehensive income

$

102,572

$

32,973

$

167,939

$

59,067

(1) The calculation for basic earnings per ordinary share is based on net income available for ordinary shareholders divided by basic ordinary shares. The calculation for diluted earnings per share is based on net income divided by diluted shares.

SCHEDULE 2

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

September 29,

March 31,

October 1,

Assets

2012

2012

2011

Current assets

Cash and cash equivalents

$

312,244

$

106,354

$

19,300

Receivables, net

185,700

127,226

104,104

Inventories

278,368

187,413

146,744

Deferred tax assets

11,833

11,145

8,795

Prepaid expenses and other current assets

99,163

31,925

26,449

Total current assets

887,308

464,063

305,392

Property and equipment, net

194,114

170,755

134,746

Intangible assets, net

13,533

14,146

14,969

Goodwill

14,005

14,005

14,005

Deferred tax assets

3,158

3,952

3,918

Other assets

7,366

7,504

6,186

Total assets

$

1,119,484

$

674,425

$

479,216

Liabilities and Shareholders' Equity

Current liabilities

Revolving line of credit

$

11,616

$

22,674

$

16,218

Accounts payable

87,410

67,326

66,179

Accrued payroll and payroll related expenses

141,981

33,710

16,066

Accrued income taxes

3,801

8,199

4,653

Accrued expenses and other current liabilities

32,281

33,097

20,476

Total current liabilities

277,089

165,006

123,592

Deferred rent

49,583

43,292

37,539

Deferred tax liabilities

8,872

6,300

11,352

Other long-term liabilities

5,962

3,590

4,440

Total liabilities

341,506

218,188

176,923

Shareholders' equity

Convertible preference shares, no par value; no shares authorized, issued and outstanding

at September 29, 2012 and March 31, 2012 and 10,856,853 shares authorized, issued and

outstanding at October 1, 2011.

-

-

-

Ordinary shares, no par value; 650,000,000 shares authorized, and 199,746,220 shares issued

and outstanding at September 29, 2012 and 192,731,390 shares issued and outstanding at

March 31, 2012 and 147,134,033 shares issued and outstanding at October 1, 2011.

-

-

-

Additional paid-in capital

382,123

228,321

157,906

Accumulated other comprehensive gain (loss)

731

(735

)

(1,621

)

Retained earnings

395,124

228,651

146,008

Total shareholders' equity

777,978

456,237

302,293

Total liabilities and shareholders' equity

$

1,119,484

$

674,425

$

479,216