Michael Kors Holdings Limited Announces Third Quarter Fiscal 2013 Results
Michael Kors Holdings Limited Announces Third Quarter Fiscal 2013 Results
Total Revenue Increased 70.4%; Comparable Store Sales Increased 41.4%
Reported Diluted EPS Increased 220% to $0.64
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 third quarter ended December 29, 2012.
John D. Idol, the Company's Chairman and Chief Executive Officer, said, "Our strong third quarter performance reflects sustained brand momentum as the global recognition and appeal for the Michael Kors luxury brand continued to expand. Moreover, we were extremely pleased with the holiday season as Michael Kors' brand strength, innovative fashion design and jet-set in-store experience drove strong sales and earnings."
For the third quarter ended December 29, 2012:
Total revenue increased 70.4% to $636.8 million from $373.6 million in the third quarter of fiscal 2012.
Retail net sales increased 66.8% to $332.6 million driven by a 41.4% increase in comparable store sales and 66 net new store openings since the end of the third quarter of fiscal 2012. Wholesale net sales increased 77.4% to $274.3 million and licensing revenue increased 52.1% to $29.8 million.
Gross profit increased 72.8% to $383.5 million, and as a percentage of total revenue increased to 60.2% compared to 59.4% in the third quarter of fiscal 2012.
Income from operations was $204.8 million and as a percentage of total revenue was 32.2%. For the third quarter of fiscal 2012, income from operations was $64.6 million and included a $15.9 million equity compensation charge associated with equity grants for periods prior to the third quarter and $5.2 million in expenses associated with the Company's initial public offering ("IPO"). Excluding these charges, operating income for the third quarter of fiscal 2012 was $85.7 million and as a percentage of total revenue was 22.9%.
Net income was $130.0 million, or $0.64 per diluted share, based on 202.8 million weighted average diluted shares outstanding. Net income for the third quarter of fiscal 2012 was $39.0 million, or $0.20 per diluted share, based on 193.6 million weighted average diluted shares outstanding. Excluding the aforementioned charges, net income for the third quarter of fiscal 2012 was $53.6 million, or $0.28 per diluted share.
At December 29, 2012, the Company operated 297 retail stores, including concessions, compared to 231 retail stores, including concessions, at the end of the same prior-year period. The Company had 91 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 388 Michael Kors stores worldwide at the end of the third quarter of fiscal 2013.
Mr. Idol continued, "Our exceptional third quarter results were driven by continued strength across our business segments and geographies. In North America, comparable store sales increased 41% due to the growing demand for Michael Kors merchandise, which we attribute to our compelling luxury product assortment and exceptional jet-set in-store experience. The 75% sales increase in the North America wholesale segment reflects comparable stores sales growth as well as the continued conversion to shop-in-shops in department stores. In Europe, the 58% comparable store sales growth, which reflected continued brand acceptance, combined with the expansion of our retail and wholesale doors, led to 112% sales growth in the quarter. Finally, in our licensing segment, revenue increased 52%, driven primarily by the ongoing strength in watches. Overall, we believe that the Michael Kors brand is ideally positioned within the global luxury lifestyle market and we look forward to delivering on our long-term objectives."
For the first nine months ended December 29, 2012:
Total revenue for the first nine months increased 71.8% to $1,584.6 million from $922.3 million in the same period of fiscal 2012.
Retail net sales increased 73.6% to $789.9 million. Comparable store sales increased 41.4%. Wholesale net sales also increased 73.6% to $727.5 million and licensing revenue increased 39.8% to $67.2 million.
Gross profit for the first nine months increased 78.0% to $950.4 million, and as a percentage of total revenue increased to 60.0% as compared to 57.9% in the same period of fiscal 2012.
Income from operations for the first nine months was $474.7 million and as a percentage of total revenue was 30.0%. For the same period of fiscal 2012, income from operations was $168.8 million and included a $10.6 million equity compensation charge associated with equity grants for periods prior to the nine month period, $5.2 million in expenses associated with the Company's IPO, and a $10.7 million charge related to the employee stock option redemption associated with the private placement. Excluding these amounts, income from operations was $195.3 million, or 21.2% as a percentage of total revenue in fiscal 2012.
Net income for the first nine months was $296.5 million, or $1.48 per diluted share, based on 200.8 million weighted average diluted shares outstanding. Net income for the first nine months of fiscal 2012 was $103.8 million, or $0.56 per diluted share, based on 186.8 million weighted average diluted shares outstanding. Excluding the aforementioned charges, net income for the first nine months of fiscal 2012 was $121.8 million, or $0.65 per diluted share.
Outlook
For the fourth quarter of fiscal 2013, the Company expects total revenue to be in the range of $515 million to $525 million. This assumes a low to mid-twenty percent comparable store sales increase. Diluted earnings per share are expected to be in the range of $0.32 to $0.34 for the fourth quarter of fiscal 2013. This assumes 203.5 million diluted weighted average shares outstanding and a 38% tax rate.
For fiscal 2013, the Company now expects total revenue to be approximately $2.1 billion. This assumes a mid-thirty percent comparable store sales increase. Diluted earnings per share are now expected to be in the range of $1.80 to $1.82 for fiscal 2013. This assumes 201.5 million diluted weighted average shares outstanding and a 38% tax rate.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, February 12, 2013 at 8:00 a.m. EST. A replay of the call will be available today at 11:00 a.m. EST; 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 4547793. 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 7, 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 | Nine Months Ended | |||||||||||||||
December 29, | December 31, | December 29, | December 31, | |||||||||||||
Net sales | $ | 606,943 | $ | 353,988 | $ | 1,517,378 | $ | 874,195 | ||||||||
Licensing revenue | 29,835 | 19,618 | 67,200 | 48,069 | ||||||||||||
Total revenue | 636,778 | 373,606 | 1,584,578 | 922,264 | ||||||||||||
Cost of goods sold | 253,327 | 151,701 | 634,227 | 388,290 | ||||||||||||
Gross profit | 383,451 | 221,905 | 950,351 | 533,974 | ||||||||||||
Total operating expenses | 178,612 | 157,318 | 475,641 | 365,133 | ||||||||||||
Income from operations | 204,839 | 64,587 | 474,710 | 168,841 | ||||||||||||
Interest expense, net | 311 | 452 | 1,301 | 1,112 | ||||||||||||
Foreign currency loss (gain) | 1,487 | (2,191 | ) | 837 | (3,920 | ) | ||||||||||
Income before provision for income taxes | 203,041 | 66,326 | 472,572 | 171,649 | ||||||||||||
Provision for income taxes | 73,013 | 27,295 | 176,071 | 67,897 | ||||||||||||
Net income | 130,028 | 39,031 | 296,501 | 103,752 | ||||||||||||
Net income applicable to preference shareholders | - | 7,032 | - | 21,227 | ||||||||||||
Net income available for ordinary shareholders | $ | 130,028 | $ | 31,999 | $ | 296,501 | $ | 82,525 | ||||||||
Weighted average ordinary shares outstanding: | ||||||||||||||||
Basic | 199,291,480 | 154,738,356 | 195,468,623 | 147,282,778 | ||||||||||||
Diluted | 202,817,811 | 193,583,954 | 200,800,410 | 186,780,461 | ||||||||||||
Net income per ordinary share (1): | ||||||||||||||||
Basic | $ | 0.65 | $ | 0.21 | $ | 1.52 | $ | 0.56 | ||||||||
Diluted | $ | 0.64 | $ | 0.20 | $ | 1.48 | $ | 0.56 | ||||||||
Statements of Comprehensive Income: | ||||||||||||||||
Net income | $ | 130,028 | $ | 39,031 | $ | 296,501 | $ | 103,752 | ||||||||
Foreign currency translation adjustments | 191 | (1,345 | ) | 1,657 | (6,999 | ) | ||||||||||
Net realized and unrealized losses on derivatives | (367 | ) | - | (367 | ) | - | ||||||||||
Comprehensive Income | $ | 129,852 | $ | 37,686 | $ | 297,791 | $ | 96,753 | ||||||||
(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) | ||||||||||||
Assets | December 29, | March 31, | December 31, | |||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 405,776 | $ | 106,354 | $ | 105,668 | ||||||
Receivables, net | 172,658 | 127,226 | 88,762 | |||||||||
Inventories | 290,154 | 187,413 | 160,800 | |||||||||
Deferred tax assets | 13,852 | 11,145 | 11,589 | |||||||||
Prepaid expenses and other current assets | 44,021 | 31,925 | 29,509 | |||||||||
Total current assets | 926,461 | 464,063 | 396,328 | |||||||||
Property and equipment, net | 217,549 | 170,755 | 155,728 | |||||||||
Intangible assets, net | 16,788 | 14,146 | 14,552 | |||||||||
Goodwill | 14,005 | 14,005 | 14,005 | |||||||||
Deferred tax assets | 1,432 | 3,952 | 2,416 | |||||||||
Other assets | 11,420 | 7,504 | 7,330 | |||||||||
Total assets | $ | 1,187,655 | $ | 674,425 | $ | 590,359 | ||||||
Liabilities and Shareholders' Equity | ||||||||||||
Current liabilities | ||||||||||||
Revolving line of credit | $ | - | $ | 22,674 | $ | 15,539 | ||||||
Accounts payable | 105,445 | 67,326 | 79,203 | |||||||||
Accrued payroll and payroll related expenses | 33,121 | 33,710 | 22,098 | |||||||||
Accrued income taxes | 6,344 | 8,199 | 10,338 | |||||||||
Accrued expenses and other current liabilities | 47,869 | 33,097 | 38,062 | |||||||||
Total current liabilities | 192,779 | 165,006 | 165,240 | |||||||||
Deferred rent | 51,303 | 43,292 | 39,123 | |||||||||
Deferred tax liabilities | 11,871 | 6,300 | 6,748 | |||||||||
Other long-term liabilities | 7,499 | 3,590 | 3,987 | |||||||||
Total liabilities | 263,452 | 218,188 | 215,098 | |||||||||
Commitments and contingencies | ||||||||||||
Shareholders' equity | ||||||||||||
Ordinary shares, no par value; 650,000,000 shares authorized, and 200,274,090 shares issued | ||||||||||||
and outstanding at December 29, 2012 and 192,731,390 shares issued and outstanding at | ||||||||||||
March 31, 2012 and 191,049,948 shares issued and outstanding at December 31, 2011. | - | - | - | |||||||||
Additional paid-in capital | 398,496 | 228,321 | 193,188 | |||||||||
Accumulated other comprehensive gain (loss) | 555 | (735 | ) | (2,966 | ) | |||||||
Retained earnings | 525,152 | 228,651 | 185,039 | |||||||||
Total shareholders' equity | 924,203 | 456,237 | 375,261 | |||||||||
Total liabilities and shareholders' equity | $ | 1,187,655 | $ | 674,425 | $ | 590,359 | ||||||
SCHEDULE 3 | ||||||||||||||||
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES | ||||||||||||||||
SUPPLEMENTAL INFORMATION FOR NON-GAAP MEASURES- CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Reconciliation of income from operations, as reported, to income from operations, as adjusted | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
December 29, | December 31, | December 29, | December 31, | |||||||||||||
Income from operations, as reported | $ | 204,839 | $ | 64,587 | $ | 474,710 | $ | 168,841 | ||||||||
Add back adjustments for one time charges: | ||||||||||||||||
Stock option expense | - | 15,900 | - | 10,600 | ||||||||||||
IPO fees | - | 5,170 | - | 5,170 | ||||||||||||
Employee share option redemption - private placement | - | - | - | 10,690 | ||||||||||||
Income from operations, as adjusted | $ | 204,839 | $ | 85,657 | ||||||||||||
