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Form 8-K Michael Kors Holdings For: Feb 02

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February 2, 2016 7:07 AM EST


 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
Form 8-K 
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 2, 2016
  
 
 
 
MICHAEL KORS HOLDINGS LIMITED
(Exact name of Registrant as Specified in its Charter)
 
 
 
 
001-35368
(Commission File Number)
British Virgin Islands
 
N/A
(State or other jurisdiction
of incorporation)
 
(I.R.S. Employer
Identification No.)
33 Kingsway
London, United Kingdom
WC2B 6UF
(Address of Principal Executive Offices)
44 207 632 8600
(Registrant’s telephone number, including area code)
 
 
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨
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.
On February 2, 2016, the Company issued a press release containing its unaudited financial results for its third fiscal quarter ended December 26, 2015. A copy of the press release is attached hereto as Exhibit 99.1.
 
ITEM 9.01
FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
 
Exhibit
No.
  
 
99.1
  
Press release issued by Michael Kors Holdings Limited, dated February 2, 2016.
This Exhibit is furnished to comply with Item 2.02 and Item 9.01 of Form 8-K. The attached Exhibit is not to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall the attached Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933 (except as shall be expressly set forth by specific reference in such filing).




































SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


 
 
 
MICHAEL KORS HOLDINGS LIMITED

Date: February 2, 2016
 
 
 
 
 
By:
/s/ Joseph B. Parsons
 
 
Name: 
Joseph B. Parsons
 
 
Title:
Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



MICHAEL KORS



Exhibit 99.1
Michael Kors Holdings Limited Announces Third Quarter Fiscal 2016 Results
Third Quarter Total Revenue Increased 6.3% (Increased 9.9% on a Constant Currency Basis)
Third Quarter Reported Diluted EPS was $1.59 ($1.65 on a Constant Currency Basis)
London — February 2, 2016 — Michael Kors Holdings Limited (NYSE: KORS) (the “Company”), a global luxury lifestyle brand, today announced its financial results for the fiscal 2016 third quarter ended December 26, 2015.
For the third quarter ended December 26, 2015:
•
Total revenue increased 6.3% to $1.40 billion from $1.31 billion in the third quarter of fiscal 2015. On a constant currency basis, total revenue increased 9.9%.
•
Retail net sales increased 11.1% to $766.2 million 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%. On a constant currency basis, retail net sales grew 15.7%, and comparable store sales increased 2.0%. Wholesale net sales increased 0.3% to $575.5 million and on a constant currency basis, wholesale net sales grew 3.0%. Licensing revenue increased 8.4% to $55.8 million.
•
Total revenue in the Americas increased 0.4% to $1.06 billion on a reported basis and increased 1.4% on a constant currency basis. European revenue grew 14.3% to $276.0 million on a reported basis, and grew 29.1% on a constant currency basis. Revenue in Japan increased 59.1% to $25.5 million on a reported basis, and increased 68.0% on a constant currency basis.
•
Gross profit increased 4.0% to $832.0 million, and as a percentage of total revenue was 59.5%. Foreign currency translation and transaction negatively impacted gross profit margin by approximately 95 basis points. This compares to gross margin of 60.9% in the third quarter of fiscal 2015.
•
Income from operations was $409.3 million, or 29.3% as a percentage of total revenue. This compares to $418.5 million, or 31.8% as a percentage of total revenue, for the third quarter of fiscal 2015.
•
Net income 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, which included an unfavorable impact related to foreign currency exchange rates of approximately $0.06 per share. Net income for the third quarter of fiscal 2015 was $303.7 million, or $1.48 per diluted share, based on a 27.2% tax rate and 205.6 million weighted average diluted shares outstanding.
•
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 857 Michael Kors stores worldwide at the end of the third quarter of fiscal 2016.
 
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. As we look ahead, we are excited about our upcoming Spring collections that embody design innovation and underscore Michael Kors fashion leadership. In addition, we remain focused on further developing our digital flagship strategy as we offer our customers a seamless omni-channel experience, the build-out of our men’s business, and leveraging our strong brand awareness to expand our business globally. We believe that the continued execution of these strategic initiatives positions us well to deliver long term growth.”



MICHAEL KORS



For the first nine months ended December 26, 2015:
•
Total revenue increased 6.8% to $3.51 billion from $3.29 billion in the same period of fiscal 2015. On a constant currency basis, total revenue increased 11.6%.
•
Retail net sales increased 9.4% to $1.82 billion. Comparable store sales decreased 5.6%. On a constant currency basis, retail net sales grew 15.5% and comparable store sales declined 1.6%. Wholesale net sales increased 3.9% to $1.55 billion and on a constant currency basis, wholesale net sales grew 7.9%. Licensing revenue increased 5.5% to $137.7 million.
•
Gross profit for the first nine months increased 4.1% to $2.10 billion, and as a percentage of total revenue, was 59.8%. This compares to gross margin of 61.3% in the same period of fiscal 2015.
•
Income from operations for the first nine months was $931.0 million and as a percentage of total revenue was 26.5%. For the same period of fiscal 2015, income from operations was $1,000.8 million, or 30.4% as a percentage of total revenue.
•
Net income for the first nine months was $662.1 million, or $3.45 per diluted share, based on 192.1 million weighted average diluted shares outstanding, which included an unfavorable impact related to foreign currency exchange rates of approximately $0.18 per share. Net income for the same period of fiscal 2015 was $698.4 million, or $3.38 per diluted share, based on 206.8 million weighted average diluted shares outstanding.
 
Share Repurchase Program
During the third quarter, the Company repurchased 4,682,121 of the Company's ordinary shares for approximately $200.0 million in open market transactions. As of December 26, 2015, the remaining availability under the Company’s share repurchase program was $558.1 million. Share repurchases may be made in open market or privately negotiated transactions, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy, and other relevant factors. The program may be suspended or discontinued at any time.
Outlook
For the fourth quarter of fiscal 2016, the Company expects total revenue to be in the range of $1.13 billion to $1.15 billion, which includes approximately $36 million 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 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. Operating expense as a percentage of total revenue is expected to increase 190 to 220 basis points, primarily due to global investments in digital flagships, corporate talent, new stores, shop-in-shops, infrastructure and distribution. Diluted earnings per share are expected to be in the range of $0.93 to $0.97 for the fourth quarter of fiscal 2016. This assumes 182.5 million weighted average diluted shares outstanding and a tax rate of approximately 27.5%. The Company expects foreign currency to impact net income by approximately $3 million and EPS by approximately $0.02.
For fiscal 2016, the Company expects total revenue to be approximately $4.65 billion. On a constant currency basis, total revenue is expected to increase in the low-double digit range assuming an impact of approximately $180 million 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. Operating expense as a percentage of total revenue is expected to increase approximately 230 basis points, due to the above mentioned investments. Diluted earnings per share are expected to be in the range of $4.38 to $4.42 for fiscal 2016. This assumes 190 million weighted average diluted shares outstanding and a tax rate of approximately 28.5%. The Company expects foreign currency to impact net income by approximately $38 million and EPS by approximately $0.20.
Conference Call Information
A conference call to discuss third quarter results is scheduled for today, February 2, 2016 at 8:00 a.m. ET. A replay of the call will be available today at 11:00 a.m. ET; 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 9289594. 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.


MICHAEL KORS



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 Collection 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 Annual Report on Form 10-K for the fiscal year ended March 28, 2015 (File No. 001-35368), filed on May 27, 2015 with the U.S. Securities and Exchange Commission.
Use of Non-GAAP Constant Currency Financial Measures
Constant currency effects are non-GAAP financial measures, which are provided to supplement our reported operating results to facilitate comparisons of our operating results and trends in our business, excluding the effects of foreign currency rate fluctuations. Because we are a global Company, foreign currency exchange rates may have a significant effect on our reported results. We calculate constant currency measures and the related foreign currency impacts by translating the current-year’s reported amounts into comparable amounts using prior year’s foreign exchange rates for each currency. All constant currency performance measures discussed below should be considered a supplement to and not in lieu of our operating performance measures calculated in accordance with accounting principles generally accepted in the United States (“U.S. GAAP.”)
CONTACTS:
Investor Relations:
Michael Kors Holdings Limited
Krystyna Lack - VP, Treasurer
201-691-6133 [email protected]
Or
ICR, Inc.
Jean Fontana
203-682-1214 [email protected]
Media:
ICR, Inc.
Alecia Pulman
646-277-1231 [email protected] 


MICHAEL KORS



SCHEDULE 1
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
December 26,
2015
 
December 27,
2014
 
December 26,
2015
 
December 27,
2014
Net sales
 
$
1,341,678

 
$
1,263,226

 
$
3,375,766

 
$
3,159,932

Licensing revenue
 
55,801

 
51,500

 
137,669

 
130,553

Total revenue
 
1,397,479

 
1,314,726

 
3,513,435

 
3,290,485

Cost of goods sold
 
565,509

 
514,583

 
1,413,401

 
1,273,682

Gross profit
 
831,970

 
800,143

 
2,100,034

 
2,016,803

Total operating expenses
 
422,662

 
381,666

 
1,169,017

 
1,015,997

Income from operations
 
409,308

 
418,477

 
931,017

 
1,000,806

Other (income) expense, net
 
(54
)
 
188

 
840

 
(1,161
)
Interest expense, net
 
632

 
116

 
1,116

 
147

Foreign currency losses
 
136

 
1,163

 
2,255

 
4,711

Income before provision for income taxes
 
408,594

 
417,010

 
926,806

 
997,109

Provision for income taxes
 
114,398

 
113,335

 
265,437

 
298,728

Net income
 
$
294,196

 
$
303,675

 
$
661,369

 
$
698,381

Less: Net loss attributable to noncontrolling interest
 
(390
)
 
—

 
(708
)
 
—

Net income attributable to MKHL
 
$
294,586

 
$
303,675

 
$
662,077

 
$
698,381

Weighted average ordinary shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
182,176,452

 
202,668,541

 
189,336,957

 
203,627,688

Diluted
 
184,851,616

 
205,647,816

 
192,143,422

 
206,752,103

Net income per ordinary share:
 
 
 
 
 
 
 
 
Basic
 
$
1.62

 
$
1.50

 
$
3.50

 
$
3.43

Diluted
 
$
1.59

 
$
1.48

 
$
3.45

 
$
3.38


 
















MICHAEL KORS



SCHEDULE 2
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
 
 
December 26,
2015
 
March 28,
2015
 
December 27,
2014
Assets
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
Cash and cash equivalents
 
$
696,823

 
$
978,922

 
$
1,002,830

Receivables, net
 
301,632

 
363,419

 
311,086

Inventories
 
588,295

 
519,908

 
537,501

Prepaid expenses and other current assets
 
74,921

 
127,443

 
110,347

Total current assets
 
1,661,671

 
1,989,692

 
1,961,764

Property and equipment, net
 
739,863

 
562,934

 
532,304

Intangible assets, net
 
66,363

 
61,541

 
63,644

Goodwill
 
23,215

 
14,005

 
14,005

Deferred tax assets
 
24,019

 
22,958

 
26,730

Other assets
 
19,086

 
33,498

 
33,576

Total assets
 
$
2,534,217

 
$
2,684,628

 
$
2,632,023

Liabilities and Shareholders’ Equity
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
Accounts payable
 
$
190,740

 
$
142,818

 
$
175,197

Accrued payroll and payroll related expenses
 
49,236

 
62,869

 
50,642

Accrued income taxes
 
33,306

 
25,507

 
29,757

Accrued expenses and other current liabilities
 
149,788

 
95,146

 
105,726

Total current liabilities
 
423,070

 
326,340

 
361,322

Deferred rent
 
104,407

 
88,320

 
94,926

Deferred tax liabilities
 
4,269

 
6,966

 
1,580

Long-term debt
 
3,977

 
—

 
—

Other long-term liabilities
 
18,571

 
22,037

 
22,710

Total liabilities
 
554,294

 
443,663

 
480,538

Commitments and contingencies
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
 
Ordinary shares, no par value; 650,000,000 shares authorized; 207,358,367 shares issued and 179,406,768 outstanding at December 26, 2015; 206,486,699 shares issued and 199,656,833 outstanding at March 28, 2015, and 201,029,249 shares issued and 195,889,884 outstanding at December 27, 2014
 
—

 
—

 
—

Treasury shares, at cost (27,951,599 shares at December 26, 2015; 6,829,866 shares at March 28, 2015; and 5,139,365 shares at December 27, 2014)
 
(1,450,114
)
 
(497,724
)
 
(405,702
)
Additional paid-in capital
 
692,758

 
636,732

 
610,938

Accumulated other comprehensive loss
 
(97,915
)
 
(66,804
)
 
(39,870
)
Retained earnings
 
2,830,810

 
2,168,761

 
1,986,119

Total shareholders’ equity of MKHL
 
1,975,539

 
2,240,965

 
2,151,485

Noncontrolling interest
 
4,384

 
—

 
—

Total shareholders’ equity
 
1,979,923

 
2,240,965

 
2,151,485

Total liabilities and shareholders’ equity
 
$
2,534,217

 
$
2,684,628

 
$
2,632,023



MICHAEL KORS



SCHEDULE 3
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED SEGMENT DATA
($ in thousands)
(Unaudited)
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
December 26,
2015
 
December 27,
2014
 
December 26,
2015
 
December 27,
2014
Revenue by Segment and Region:
 
 
 
 
 
 
 
 
Retail net sales:
 
The Americas
 
$
589,551

 
$
551,840

 
$
1,371,114

 
$
1,296,398

 
 
Europe
 
151,173

 
121,518

 
383,741

 
321,558

 
 
Japan
 
25,501

 
16,030

 
67,485

 
47,253

Total Retail Net Sales
 
766,225

 
689,388

 
1,822,340

 
1,665,209

Wholesale net sales:
 
The Americas
 
440,051

 
476,239

 
1,175,316

 
1,203,960

 
 
Europe
 
101,432

 
97,599

 
295,862

 
290,763

 
 
Asia
 
33,970

 
—

 
82,248

 
—

Total Wholesale Net Sales
 
575,453

 
573,838

 
1,553,426

 
1,494,723

Licensing revenue:
 
The Americas
 
32,414

 
29,201

 
81,096

 
78,037

 
 
Europe
 
23,387

 
22,299

 
56,573

 
52,516

Total Licensing Revenue
 
55,801

 
51,500

 
137,669

 
130,553

Total Revenue
 
$
1,397,479

 
$
1,314,726

 
$
3,513,435

 
$
3,290,485

 
 
 
 
 
 
 
 
 
Income from Operations:
 
 
 
 
 
 
 
 
Retail
 
 
 
$
212,856

 
$
214,928

 
$
433,689

 
$
484,951

Wholesale
 
 
 
160,269

 
170,487

 
423,459

 
444,811

Licensing
 
 
 
36,183

 
33,062

 
73,869

 
71,044

Total Income from Operations
 
$
409,308

 
$
418,477

 
$
931,017

 
$
1,000,806

 
 
 
 
 
 
 
 
 
 
 
Operating Margin:
 
 
 
 
 
 
 
 
 
 
Retail
 
 
 
27.8
%
 
31.2
%
 
23.8
%
 
29.1
%
Wholesale
 
 
 
27.9
%
 
29.7
%
 
27.3
%
 
29.8
%
Licensing
 
 
 
64.8
%
 
64.2
%
 
53.7
%
 
54.4
%
Total Operating Margin
 
 
 
29.3
%
 
31.8
%
 
26.5
%
 
30.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 26, 2015
Store Count and Square Footage by Region:
 
 
 
 
 
Store Count
 
Square Footage
The Americas
 
 
 
 
 
392

 
1,179,818

Europe
 
 
 
 
 
171

 
448,725

Japan
 
 
 
 
 
60

 
88,625

Total
 
 
 
 
 
623

 
1,717,168


 




MICHAEL KORS



SCHEDULE 4
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSTANT CURRENCY DATA
(In thousands)
(Unaudited)
 
 
 
Three Months Ended
 
% Change
 
 
December 26,
2015
 
December 27,
2014
 
As
Reported
 
Constant
Currency
Retail net sales
 
$
766,225

 
$
689,388

 
11.1
%
 
15.7
%
Wholesale net sales
 
575,453

 
573,838

 
0.3
%
 
3.0
%
Licensing revenue
 
55,801

 
51,500

 
8.4
%
 
8.4
%
Total revenue
 
$
1,397,479

 
$
1,314,726

 
6.3
%
 
9.9
%

 
 
Nine Months Ended
 
% Change
 
 
December 26,
2015
 
December 27,
2014
 
As
Reported
 
Constant
Currency
Retail net sales
 
$
1,822,340

 
$
1,665,209

 
9.4
%
 
15.5
%
Wholesale net sales
 
1,553,426

 
1,494,723

 
3.9
%
 
7.9
%
Licensing revenue
 
137,669

 
130,553

 
5.5
%
 
5.5
%
Total revenue
 
$
3,513,435

 
$
3,290,485

 
6.8
%
 
11.6
%




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