British Virgin Islands | N/A | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
Exhibit No. | ||
99.1 | Press release issued by Michael Kors Holdings Limited, dated February 7, 2017. |
MICHAEL KORS HOLDINGS LIMITED | |||
Date: February 7, 2017 | |||
By: | /s/ Joseph B. Parsons | ||
Name: | Joseph B. Parsons | ||
Title: | Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer | ||
• | Total revenue decreased 3.2% to $1.35 billion from $1.40 billion in the third quarter of fiscal 2016. On a constant currency basis, total revenue decreased 2.6%. |
• | Retail net sales increased 9.2% to $836.7 million driven primarily by 193 net new store openings since the end of the third quarter of fiscal 2016, including 143 stores associated with the Company's recent acquisitions of the previously licensed operations in Greater China and South Korea. Comparable sales decreased 6.9%. On a constant currency basis, retail net sales increased 10.0%, and comparable sales decreased 6.4%. Wholesale net sales decreased 17.8% to $473.1 million and on a constant currency basis, wholesale net sales decreased 17.5%. Licensing revenue decreased 22.9% to $43.0 million. |
• | Total revenue in the Americas decreased 7.4% to $983.8 million on a reported basis and decreased 7.5% on a constant currency basis. European revenue decreased 7.0% to $256.7 million on a reported basis, and decreased 2.7% on a constant currency basis. Revenue in Asia increased 89.1% to $112.3 million on a reported basis, and increased 84.0% on a constant currency basis, largely driven by the Company's recent acquisitions of the previously licensed operations in Greater China and South Korea. |
• | Gross profit decreased 3.1% to $805.7 million, and as a percentage of total revenue was 59.6%. Foreign currency translation and transaction favorably impacted gross profit margin by approximately 30 basis points. This compares to gross margin of 59.5% in the third quarter of fiscal 2016. |
• | Income from operations was $341.9 million, or 25.3% as a percentage of total revenue. This compares to $409.3 million, or 29.3% as a percentage of total revenue, for the third quarter of fiscal 2016. |
• | Net income attributable to MKHL was $271.3 million, or $1.64 per diluted share, based on a 20.6% tax rate and 165.2 million weighted average diluted shares outstanding. Net income attributable to MKHL for the third quarter of fiscal 2016 was $294.6 million, or $1.59 per diluted share, based on a 28.0% tax rate and 184.9 million weighted average diluted shares outstanding. |
• | At December 31, 2016, the Company operated 816 retail stores, including concessions, compared to 623 retail stores, including concessions, at the end of the same prior-year period. The Company had 128 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 944 Michael Kors stores worldwide at the end of the third quarter of fiscal 2017. |
• | Total revenue decreased 2.4% to $3.43 billion from $3.51 billion in the same period of fiscal 2016. On a constant currency basis, total revenue decreased 2.3%. |
• | Retail net sales increased 9.6% to $2.00 billion. Comparable store sales decreased 6.6%. On a constant currency basis, retail net sales grew 9.9%, and comparable sales decreased 6.5%. Wholesale net sales decreased 15.0% to $1.32 billion and on a constant currency basis, wholesale net sales decreased 15.0%. Licensing revenue decreased 18.4% to $112.4 million. |
• | Total revenue in the Americas decreased 7.9% to $2.42 billion on a reported and constant currency basis. European revenue decreased 1.0% to $728.7 million on a reported basis, and increased 1.0% on a constant currency basis. Revenue in Asia increased 87.4% to $280.5 million on a reported basis, and increased 80.6% on a constant currency basis, largely driven by the Company's recent acquisitions of the previously licensed operations in Greater China and South Korea. |
• | Gross profit for the first nine months decreased 2.8% to $2.04 billion, and as a percentage of total revenue was 59.5%. Foreign currency translation and transaction favorably impacted gross profit margin by approximately 40 basis points. This compares to gross margin of 59.8% in the same period in fiscal 2016. |
• | Income from operations for the first nine months was $732.5 million, or 21.4% as a percentage of total revenue. For the same period of fiscal 2016, income from operations was $931.0 million, or 26.5% as a percentage of total revenue. |
• | Net income attributable to MKHL for the first nine months was $579.3 million, or $3.40 per diluted share, based on a 20.8% tax rate and 170.2 million weighted average diluted shares outstanding. Excluding $8.9 million after-tax, or $0.06 per diluted share, of one-time costs related to the acquisition of the Company's Greater China licensee, net income attributable to MKHL for the first nine months of fiscal 2017 was $588.2 million, or $3.46 per diluted share. Net income attributable to MKHL for the same period in fiscal 2016 was $662.1 million, or $3.45 per diluted share, based on a 28.6% tax rate and 192.1 million weighted average diluted shares outstanding. |
Three Months Ended | Nine Months Ended | |||||||||||||||
December 31, 2016 | December 26, 2015 | December 31, 2016 | December 26, 2015 | |||||||||||||
Net sales | $ | 1,309.8 | $ | 1,341.6 | $ | 3,316.5 | $ | 3,375.7 | ||||||||
Licensing revenue | 43.0 | 55.8 | 112.4 | 137.7 | ||||||||||||
Total revenue | 1,352.8 | 1,397.4 | 3,428.9 | 3,513.4 | ||||||||||||
Cost of goods sold | 547.1 | 565.5 | 1,387.2 | 1,413.4 | ||||||||||||
Gross profit | 805.7 | 831.9 | 2,041.7 | 2,100.0 | ||||||||||||
Total operating expenses | 463.8 | 422.6 | 1,309.2 | 1,169.0 | ||||||||||||
Income from operations | 341.9 | 409.3 | 732.5 | 931.0 | ||||||||||||
Other (income) expense, net | (4.1 | ) | (0.1 | ) | (4.7 | ) | 0.8 | |||||||||
Interest expense, net | 3.4 | 0.6 | 5.1 | 1.1 | ||||||||||||
Foreign currency losses | 0.9 | 0.2 | 2.2 | 2.3 | ||||||||||||
Income before provision for income taxes | 341.7 | 408.6 | 729.9 | 926.8 | ||||||||||||
Provision for income taxes | 70.4 | 114.4 | 151.6 | 265.4 | ||||||||||||
Net income | 271.3 | 294.2 | 578.3 | 661.4 | ||||||||||||
Less: Net loss attributable to noncontrolling interest | — | (0.4 | ) | (1.0 | ) | (0.7 | ) | |||||||||
Net income attributable to MKHL | $ | 271.3 | $ | 294.6 | $ | 579.3 | $ | 662.1 | ||||||||
Weighted average ordinary shares outstanding: | ||||||||||||||||
Basic | 163,148,597 | 182,176,452 | 168,000,933 | 189,336,957 | ||||||||||||
Diluted | 165,214,045 | 184,851,616 | 170,222,588 | 192,143,422 | ||||||||||||
Net income per ordinary share: | ||||||||||||||||
Basic | $ | 1.66 | $ | 1.62 | $ | 3.45 | $ | 3.50 | ||||||||
Diluted | $ | 1.64 | $ | 1.59 | $ | 3.40 | $ | 3.45 |
December 31, 2016 | April 2, 2016 | December 26, 2015 | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 368.8 | $ | 702.0 | $ | 696.8 | ||||||
Receivables, net | 252.4 | 307.9 | 301.6 | |||||||||
Inventories | 586.2 | 546.8 | 588.3 | |||||||||
Prepaid expenses and other current assets | 160.3 | 113.1 | 74.9 | |||||||||
Total current assets | 1,367.7 | 1,669.8 | 1,661.6 | |||||||||
Property and equipment, net | 771.0 | 758.2 | 739.9 | |||||||||
Intangible assets, net | 453.7 | 67.4 | 66.4 | |||||||||
Goodwill | 119.7 | 23.2 | 23.2 | |||||||||
Deferred tax assets | 20.8 | 24.5 | 24.0 | |||||||||
Other assets | 38.1 | 23.7 | 19.1 | |||||||||
Total assets | $ | 2,771.0 | $ | 2,566.8 | $ | 2,534.2 | ||||||
Liabilities and Shareholders’ Equity | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 214.0 | $ | 131.4 | $ | 190.7 | ||||||
Accrued payroll and payroll related expenses | 60.7 | 59.7 | 49.2 | |||||||||
Accrued income taxes | 47.3 | 51.6 | 33.3 | |||||||||
Short-term debt | 147.8 | — | — | |||||||||
Accrued expenses and other current liabilities | 202.0 | 192.8 | 149.8 | |||||||||
Total current liabilities | 671.8 | 435.5 | 423.0 | |||||||||
Deferred rent | 128.1 | 106.4 | 104.4 | |||||||||
Deferred tax liabilities | 89.0 | 3.5 | 4.3 | |||||||||
Long-term debt | — | 2.3 | 4.0 | |||||||||
Other long-term liabilities | 27.6 | 19.6 | 18.6 | |||||||||
Total liabilities | 916.5 | 567.3 | 554.3 | |||||||||
Commitments and contingencies | ||||||||||||
Shareholders’ equity | ||||||||||||
Ordinary shares, no par value; 650,000,000 shares authorized; 209,293,238 shares issued and 162,435,864 outstanding at December 31, 2016; 208,084,175 shares issued and 176,441,891 outstanding at April 2, 2016, and 207,358,367 shares issued and 179,406,768 outstanding at December 26, 2015 | — | — | — | |||||||||
Treasury shares, at cost (46,857,374 shares at December 31, 2016; 31,642,284 shares at April 2, 2016; and 27,951,599 shares at December 26, 2015) | (2,404.9 | ) | (1,650.1 | ) | (1,450.1 | ) | ||||||
Additional paid-in capital | 760.0 | 718.9 | 692.7 | |||||||||
Accumulated other comprehensive loss | (90.1 | ) | (80.9 | ) | (97.9 | ) | ||||||
Retained earnings | 3,587.1 | 3,007.8 | 2,830.8 | |||||||||
Total shareholders’ equity of MKHL | 1,852.1 | 1,995.7 | 1,975.5 | |||||||||
Noncontrolling interest | 2.4 | 3.8 | 4.4 | |||||||||
Total shareholders’ equity | 1,854.5 | 1,999.5 | 1,979.9 | |||||||||
Total liabilities and shareholders’ equity | $ | 2,771.0 | $ | 2,566.8 | $ | 2,534.2 |
Three Months Ended | Nine Months Ended | |||||||||||||||||
December 31, 2016 | December 26, 2015 | December 31, 2016 | December 26, 2015 | |||||||||||||||
Revenue by Segment and Region: | ||||||||||||||||||
Retail net sales: | The Americas | $ | 584.2 | $ | 589.6 | $ | 1,362.0 | $ | 1,371.1 | |||||||||
Europe | 150.9 | 151.1 | 401.2 | 383.7 | ||||||||||||||
Asia | 101.6 | 25.5 | 233.6 | 67.5 | ||||||||||||||
Total Retail Net Sales | 836.7 | 766.2 | 1,996.8 | 1,822.3 | ||||||||||||||
Wholesale net sales: | The Americas | 372.9 | 440.0 | 987.6 | 1,175.3 | |||||||||||||
Europe | 89.5 | 101.5 | 285.2 | 295.9 | ||||||||||||||
Asia | 10.7 | 33.9 | 46.9 | 82.2 | ||||||||||||||
Total Wholesale Net Sales | 473.1 | 575.4 | 1,319.7 | 1,553.4 | ||||||||||||||
Licensing revenue: | The Americas | 26.7 | 32.4 | 70.1 | 81.1 | |||||||||||||
Europe | 16.3 | 23.4 | 42.3 | 56.6 | ||||||||||||||
Total Licensing Revenue | 43.0 | 55.8 | 112.4 | 137.7 | ||||||||||||||
Total Revenue | $ | 1,352.8 | $ | 1,397.4 | $ | 3,428.9 | $ | 3,513.4 | ||||||||||
Income from Operations: | ||||||||||||||||||
Retail | $ | 178.2 | $ | 212.9 | $ | 314.4 | $ | 433.7 | ||||||||||
Wholesale | 140.2 | 160.2 | 367.2 | 423.4 | ||||||||||||||
Licensing | 23.5 | 36.2 | 50.9 | 73.9 | ||||||||||||||
Total Income from Operations | $ | 341.9 | $ | 409.3 | $ | 732.5 | $ | 931.0 | ||||||||||
Operating Margin: | ||||||||||||||||||
Retail | 21.3 | % | 27.8 | % | 15.7 | % | 23.8 | % | ||||||||||
Wholesale | 29.6 | % | 27.9 | % | 27.8 | % | 27.3 | % | ||||||||||
Licensing | 54.7 | % | 64.8 | % | 45.3 | % | 53.7 | % | ||||||||||
Total Operating Margin | 25.3 | % | 29.3 | % | 21.4 | % | 26.5 | % | ||||||||||
December 31, 2016 | ||||||||||||||||||
Store Count and Square Footage by Region: | Store Count | Square Footage | ||||||||||||||||
The Americas (U.S., Canada and Latin America) | 397 | 1,274,268 | ||||||||||||||||
Europe | 199 | 534,255 | ||||||||||||||||
Asia | 220 | 420,304 | ||||||||||||||||
Total | 816 | 2,228,827 |
Three Months Ended | % Change | |||||||||||||
December 31, 2016 | December 26, 2015 | As Reported | Constant Currency | |||||||||||
Retail net sales | $ | 836.7 | $ | 766.2 | 9.2 | % | 10.0 | % | ||||||
Wholesale net sales | 473.1 | 575.4 | (17.8 | )% | (17.5 | )% | ||||||||
Licensing revenue | 43.0 | 55.8 | (22.9 | )% | (22.9 | )% | ||||||||
Total revenue | $ | 1,352.8 | $ | 1,397.4 | (3.2 | )% | (2.6 | )% |
Nine Months Ended | % Change | |||||||||||||
December 31, 2016 | December 26, 2015 | As Reported | Constant Currency | |||||||||||
Retail net sales | $ | 1,996.8 | $ | 1,822.3 | 9.6 | % | 9.9 | % | ||||||
Wholesale net sales | 1,319.7 | 1,553.4 | (15.0 | )% | (15.0 | )% | ||||||||
Licensing revenue | 112.4 | 137.7 | (18.4 | )% | (18.4 | )% | ||||||||
Total revenue | $ | 3,428.9 | $ | 3,513.4 | (2.4 | )% | (2.3 | )% |
Nine Months Ended | ||||
December 31, 2016 | ||||
Net income attributable to MKHL, as reported | $ | 579.3 | ||
Transaction costs related to acquisition of Greater China, net of taxes of $2.4 million | 8.9 | |||
Net income, as adjusted | $ | 588.2 | ||
Weighted average diluted ordinary shares outstanding | 170,222,588 | |||
Diluted net income per ordinary share attributable to MKHL, as reported | $ | 3.40 | ||
Impact of transaction costs, per share | 0.06 | |||
Adjusted diluted net income per ordinary share attributable to MKHL | $ | 3.46 |