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Michael Kors Holdings Limited Announces Fourth Quarter and Annual Fiscal 2012 Results

Fourth Quarter Total Revenue Increased 58.3%; Comparable Store Sales Increased 36.1%

Fourth Quarter Diluted EPS Increased 120.0% to $0.22

HONG KONG--(BUSINESS WIRE)--Jun. 12, 2012-- Michael Kors Holdings Limited (NYSE:KORS) (the “Company”) today announced its financial results for the fourth quarter and fiscal year ended March 31, 2012. The Company is a global luxury lifestyle brand with a multi-channel strategy, unique design and strong infrastructure that provides a platform for continued global growth.

John Idol, the Company’s Chairman and Chief Executive Officer, said, “We are pleased with our results for the quarter and the year, as we experienced strong growth in both total revenue and net income. This year we continued executing our key growth strategies, resulting in a 58.3% and 62.1% increase in total revenues for the quarter and year, respectively.”

For the fourth quarter ended March 31, 2012:

  • Total revenue for the fourth quarter increased 58.3% to $380.0 million from $240.0 million in the fourth quarter of fiscal 2011.
  • Retail net sales increased 80.3% to $172.2 million driven by 71 new store openings since the end of last year and a 36.1% increase in comparable store sales. Wholesale net sales increased 45.5% to $190.7 million and royalty revenue increased 26.9% to $17.1 million.
  • Gross profit for the fourth quarter increased 63.4% to $219.1 million, and as a percentage of total revenue increased to 57.7% compared to 55.9% in the fourth quarter of fiscal 2011.
  • Income from operations for the fourth quarter increased 84.9% to $78.8 million, and as a percentage of total revenue was 20.7%. Excluding a $2.0 million reimbursement of professional fees associated with the Company’s initial public offering (“IPO”) in December 2011, income from operations for the fourth quarter was $76.8 million, or 20.2% as a percentage of total revenue. This compares to income from operations for the fourth quarter of fiscal 2011 of $42.6 million, or 17.8% as a percentage of total revenue.
  • Net income for the fourth quarter was $43.6 million, or $0.22 per diluted share based on 196.9 million weighted average diluted shares outstanding. Excluding the aforementioned credit, net income was $41.6 million, or $0.21 per diluted share. Net income for the fourth quarter of fiscal 2011 was $17.4 million, or $0.10 per diluted share based on 179.2 million weighted average diluted shares outstanding.

Mr. Idol continued, “Our results for the quarter were driven by strong performance across each of our retail, wholesale and licensing segments. Our North American comparable store sales increase was 37.2%, reflecting the strong demand for the Michael Kors luxury brand, our exciting assortment of fashion merchandise and our exceptional jet-set in-store experience. We also delivered significant growth in our wholesale segment, reflecting the strength of our brand and the favorable results from our transition to shop-in-shops in department stores. In Europe, total revenue increased 122.6% for the quarter as a result of a 13.6% comparable store sales increase, in addition to strong performance in our wholesale operations. In Japan, we are cautiously encouraged by our results for this business, which is in the start-up phase. Total licensing revenue grew 26.9% in the quarter due to strong sales of our licensed products led by the Michael Kors watch and eyewear lines.

We are uniquely positioned to continue to build the Michael Kors global luxury lifestyle brand, and are pleased that our momentum has continued into the first quarter of fiscal 2013. The Company has proven retail and wholesale formats that are performing throughout the world. Michael Kors unique fashion designs continue to resonate with customers globally and we believe that our Company has tremendous opportunity for future growth.”

For the year ended March 31, 2012:

  • Total revenue for the year increased 62.1% to $1.3 billion from $803.3 million in fiscal 2011.
  • Retail net sales increased 82.1% to $626.9 million driven by 71 new store openings since the end of last year and a 39.2% increase in comparable store sales. Wholesale net sales increased 47.5% to $610.2 million and royalty revenue increased 43.1% to $65.2 million.
  • Gross profit for the year increased 68.8% to $753.1 million, and as a percentage of total revenue was 57.8% for the year as compared to 55.5% in fiscal 2011.
  • Income from operations for the year increased 81.0% to $247.7 million, or 19.0% as a percentage of total revenue, and included a $10.6 million equity compensation charge associated with equity grants for periods prior to fiscal 2012, $3.2 million in expenses associated with the Company’s IPO in December 2011 and a $10.7 million charge related to the employee share option redemption associated with our private placement. Excluding these charges, income from operations for fiscal 2012 was $272.1 million, or 20.9% as a percentage of total revenue. This compares to operating income of $136.9 million in fiscal 2011, or 17.0% as a percentage of total revenue.
  • Net income was $147.4 million, or $0.78 per diluted share based on 189.3 million weighted average diluted shares outstanding. Excluding the aforementioned equity compensation charge, IPO-related expenses and share option charge, net income was $163.1 million, or $0.86 per diluted share. This compares to $72.5 million, or $0.40 per diluted share based on 179.2 million weighted average diluted shares outstanding in fiscal 2011.
  • At March 31, 2012, the Company operated 237 retail stores, including concessions, compared to 166 retail stores, including concessions, at the end of the same prior-year period. The Company has 64 additional retail stores, including concessions, operated through licensing partners. There are 301 Michael Kors stores worldwide.

Outlook

For the first quarter of fiscal 2013, the Company expects total revenue to be in the range of $360 million to $370 million. This assumes a comparable store sales increase of approximately 35%. Diluted earnings per share are expected to be in the range of $0.18 to $0.20 for the quarter. This assumes 199.0 million diluted weighted average shares outstanding and a 38% tax rate.

For fiscal 2013, the Company expects total revenue to be in the range of $1.7 billion to $1.8 billion. This assumes a comparable store sales increase of approximately 20%. Diluted earnings per share are expected to be in the range of $1.08 to $1.12 for the year. This assumes 201.2 million diluted weighted average shares outstanding and a 38% tax rate.

Conference Call Information

A conference call to discuss fourth quarter and annual results is scheduled for today, June 12, 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 1622346. 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,” “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. 333-180022).

           
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
   
Schedule 1
 

Three Months Ended

Twelve Months Ended
March 31, April 2, March 31, April 2,
2012 2011 2012 2011
 
Net sales $ 362,905 $ 226,536 $ 1,237,100 $ 757,800
Royalty revenue   17,085   13,467   65,154     45,539
Total revenue 379,990 240,003 1,302,254 803,339
Cost of goods sold   160,868   105,882   549,158     357,274
Gross profit 219,122 134,121 753,096 446,065
Total operating expenses   140,281   91,487   505,414     309,199
Income from operations 78,841 42,634 247,682 136,866
Interest expense, net 383 163 1,495 1,861
Foreign currency (gain) loss   1,291   4,594   (2,629 )   1,786
Income before provision for income taxes 77,167 37,877 248,816 133,219
Provision for income taxes   33,555   20,504   101,452     60,713
Net income 43,612 17,373 147,364 72,506
Net income applicable to preference shareholders   -   3,745   21,227     15,629
Net income available for ordinary shareholders $ 43,612 $ 13,628 $ 126,137   $ 56,877
 
Weighted average ordinary shares outstanding:
Basic 191,184,171 140,554,377 158,258,126 140,554,377
Diluted 196,855,404 179,177,268 189,299,197 179,177,268
 
Net income per ordinary share (1):
Basic $ 0.23 $ 0.10 $ 0.80 $ 0.40
Diluted $ 0.22 $ 0.10 $ 0.78 $ 0.40
 
Statements of Comprehensive Income:
Net income $ 43,612 $ 17,373 $ 147,364 $ 72,506
Foreign currency translation adjustments   2,231   4,698   (4,768 )   3,803
Comprehensive income $ 45,843 $ 22,071 $ 142,596   $ 76,309
 
(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.
           
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
Schedule 2
 
March 31, April 2,

           Assets

2012 2011
Current assets
Cash and cash equivalents $ 106,354 $ 21,065
Receivables, net 127,226 80,081
Inventories 187,413 117,173
Deferred tax assets 11,145 7,322
Prepaid expenses and other current assets   31,925     19,757
Total current assets 464,063 245,398
Property and equipment, net 170,755 119,323
Intangible assets, net 14,146 15,796
Goodwill 14,005 14,005
Deferred tax assets 3,952 1,951
Other assets   7,504     3,022
Total assets $ 674,425   $ 399,495
 

      Liabilities and Shareholders' Equity

Current liabilities
Revolving line of credit $ 22,674 $ 12,765
Accounts payable 67,326 52,873
Accrued payroll and payroll related expenses 33,710 26,100
Accrued income taxes 8,199 18,701
Accrued expenses and other current liabilities   33,097     17,286
Total current liabilities 165,006 127,725
Note payable to parent - 101,650
Deferred rent 43,292 29,381
Deferred tax liabilities 6,300 5,495
Other long-term liabilities   3,590     3,218
Total liabilities 218,188 267,469
 
Contingently redeemable ordinary shares - 6,706
 
Shareholders' equity
Convertible preference shares, no par value; 10,163,920 shares issued and outstanding at April 2, 2011. - -
Ordinary shares, no par value; 650,000,000 shares authorized, and 192,731,390 shares issued and
outstanding at March 31, 2012, and 140,554,377 shares issued and outstanding at April 2, 2011. - -
Additional paid-in capital 228,321 40,000
Accumulated other comprehensive (loss) income (735 ) 4,033
Retained earnings   228,651     81,287
Total shareholders' equity   456,237     125,320
Total liabilities and shareholders' equity $ 674,425   $ 399,495
 
           
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)
     
Schedule 3
 
Reconciliation of income from operations, as reported, to income from operations, as adjusted
 
Three Months Ended Twelve Months Ended
March 31, April 2, March 31, April 2,
2012 2011 2012 2011
 
Income from operations, as reported $ 78,841 $ 42,634 $ 247,682 $ 136,866
Add back adjustments for one time charges:
Stock option expense - - 10,600 -
IPO fees (2,000 ) - 3,170 -
Employee share option redemption - private placement   -     -   10,690     -
Income from operations, as adjusted $ 76,841   $ 42,634 $ 272,142   $ 136,866
 
 
Reconciliation of net income, as reported, to net income, as adjusted
 
Three Months Ended Twelve Months Ended
March 31, April 2, March 31, April 2,
2012 2011 2012 2011
 
Net income, as reported $ 43,612 $ 17,373 $ 147,364 $ 72,506
Add back adjustments for one time charges:
Stock option expense - - 10,600 -
IPO fees (2,000 ) - 3,170 -
Employee share option redemption - private placement - - 10,690 -
Less tax benefit on above   -     -   (8,686 )   -
Net income, as adjusted $ 41,612   $ 17,373 $ 163,138   $ 72,506
 
Weighted average ordinary shares outstanding:
Diluted 196,855,404 179,177,268 189,299,197 179,177,268
 
Net income per ordinary share, as adjusted:
Diluted $ 0.21 $ 0.10 $ 0.86 $ 0.40

 

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude certain charges or credits such as transaction expenses related to the Company's IPO, Stock option expense and other offering fees. These amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company.

           
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
 
CONSOLIDATED SEGMENT DATA
(In thousands)
(Unaudited)
         
Schedule 4
Three Months Ended Twelve Months Ended
March 31, April 2, March 31, April 2,
2012 2011 2012 2011
Revenue by Region:
North America (U.S. and Canada) $ 339,332 $ 222,927 $ 1,183,234 $ 763,819
Europe 36,627 16,451 108,790 38,502
Other Regions   4,031   625   10,230   1,018
Total Revenue: $ 379,990 $ 240,003 $ 1,302,254 $ 803,339
 
Revenue by Segment:

Net sales: Retail

$ 172,187 $ 95,489 $ 626,940 $ 344,195

Wholesale

190,718 131,047 610,160 413,605
Licensing   17,085   13,467   65,154   45,539
Total Revenue: $ 379,990 $ 240,003 $ 1,302,254 $ 803,339
 
Income from Operations:
Retail $ 33,959 $ 14,707 $ 121,851 $ 61,194
Wholesale 34,477 16,386 85,000 48,241
Licensing   10,405   11,541   40,831     27,431
Total Income from Operations $ 78,841 $ 42,634 $ 247,682   $ 136,866
 
Income from Operations, as adjusted*:
Retail $ 33,105 $ 14,707 $ 129,230 $ 61,194
Wholesale 33,448 16,386 100,759 48,241
Licensing   10,288   11,541   42,153   27,431
Total Income from Operations, as adjusted $ 76,841 $ 42,634 $ 272,142 $ 136,866
 
*Adjusted results reflect one-time items shown in Schedule 3.
 

Source: Michael Kors Holdings Limited

Investor Relations:
ICR, Inc.
Jean Fontana/Joseph Teklits, 203-682-8200
jean.fontana@icrinc.com
or
Media:
Michael Kors Holdings Limited
Lisa Pomerantz, 212-201-8128
lisa.pomerantz@michaelkors.com