Form 8-K Michael Kors Holdings For: May 27

 

 

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): May 27, 2015

 

 

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))

 

 

 

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ITEM 2.02

RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On May 27, 2015, Michael Kors Holdings Limited (the “Company”) issued a press release containing its unaudited financial results for its fourth fiscal quarter and fiscal year ended March 28, 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 May 27, 2015.

This Form 8-K and the attached Exhibit are furnished to comply with Item 2.02, and Item 9.01 of Form 8-K. Neither this Form 8-K nor the attached Exhibit are to be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall this Form 8-K nor 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).

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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:		May 27, 2015				By:		/s/ Joseph B. Parsons
								Name:		Joseph B. Parsons
								Title:		Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer

Exhibit 99.1

MICHAEL KORS

Michael Kors Holdings Limited Announces Fourth Quarter and Annual Fiscal 2015 Results

Fourth Quarter Total Revenue Increased 17.8% (Increased 23.3% on a Constant Currency Basis)

Fourth Quarter Diluted EPS increased 15.4% to $0.90 (Increased 23.1% on a Constant Currency Basis)

London — May 27, 2015 — Michael Kors Holdings Limited (NYSE: KORS) (the “Company”), a global luxury lifestyle brand, today announced its financial results for the fourth quarter and fiscal year ended March 28, 2015.

For the fourth quarter ended March 28, 2015:

 

•

Total revenue increased 17.8% to $1.1 billion from $917.5 million in the fourth quarter of fiscal 2014. On a constant currency basis, total revenue increased 23.3%.

 

•

Retail net sales increased 14.9% to $469.4 million driven by 121 net new store openings since the end of the fourth quarter of fiscal 2014 and e-commerce sales from the recently launched U.S. e-commerce site, partially offset by a 5.8% decrease in comparable store sales. On a constant currency basis, retail net sales grew 21.1%, and comparable store sales decreased 1.7%. Wholesale net sales increased 20.4% to $570.4 million and on a constant currency basis, wholesale net sales grew 25.8%. Licensing revenue increased 16.5% to $41.3 million.

 

•

Total revenue in North America increased 13.7% to $840.5 million, with a 6.7% decrease in comparable store sales. On a constant currency basis, revenue in North America grew 14.3%, with a 5.8% decrease in comparable store sales. European revenue grew 33.5% to $219.8 million, with comparable store sales decreasing 5.6%. On a constant currency basis, revenue in Europe grew 59.5%, with an 11.0% increase in comparable store sales. Revenue in Japan increased 42.7% to $19.2 million, with comparable store sales growth of 12.4%. On a constant currency basis, revenue in Japan grew 65.0%, with a 30.0% increase in comparable store sales.

 

•

Gross profit increased 14.8% to $630.8 million, and as a percentage of total revenue was 58.4%. Gross profit margin was reduced by approximately 30 basis points due to the change in foreign currency exchange rates. This compares to 59.9% in the fourth quarter of fiscal 2014.

 

•

Income from operations was $256.2 million, or 23.7% as a percentage of total revenue. This compares to $245.9 million, or 26.8% as a percentage of total revenue, for the fourth quarter of fiscal 2014.

 

•

Net income was $182.6 million, or $0.90 per diluted share, based on a 29.4% tax rate and 203.2 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 fourth quarter of fiscal 2014 was $161.0 million, or $0.78 per diluted share, based on a 34.6% tax rate and 207.0 million weighted average diluted shares outstanding.

 

•

At March 28, 2015, the Company operated 526 retail stores, including concessions, compared to 405 retail stores, including concessions, at the end of the same prior-year period. The Company had 202 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 728 Michael Kors stores worldwide at the end of the fourth quarter of fiscal 2015.

John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “Fiscal 2015 marked another year of sales and earnings growth in excess of 30%. While we were faced with a number of headwinds in the fourth quarter, we were pleased with the strong performance across our segments and geographies. We believe that our results demonstrate the strength of the Michael Kors brand as

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MICHAEL KORS

 

our luxury products continue to resonate with consumers worldwide. Looking at Fiscal 2016, this will be a year of strategic investments as we continue to develop our powerful platform to support the numerous growth initiatives that are now underway. We see multiple top line growth opportunities through international expansion, digital e-commerce flagships, new store openings and additional shop-in-shop conversions in our wholesale channel. We plan to expand upon our ready-to-wear and footwear categories and fully develop our global men’s business. In addition, we plan to capitalize on wearable technology in watches and other categories, as innovation and demand in this area continue to advance. Longer term, as we execute on these growth strategies and begin to cycle our strategic investments, we expect to deliver accelerated and sustainable earnings growth and continue to return value to our shareholders.”

For the fiscal year ended March 28, 2015:

 

•

Total revenue for the year increased 32.0% to $4.4 billion from $3.3 billion in fiscal 2014. On a constant currency basis, total revenue increased 34.3%.

 

•

Retail net sales increased 34.0% to $2.1 billion. Comparable store sales increased 10.3%. On a constant currency basis, retail net sales grew 36.7%, and comparable store sales increased 11.9%. Wholesale net sales increased 30.9% to $2.1 billion and on a constant currency basis, wholesale net sales grew 33.0%. Licensing revenue increased 22.4% to $171.8 million.

 

•

Gross profit for the year increased 31.3% to $2.6 billion, and as a percentage of total revenue was 60.6% This compares to 60.9% in fiscal 2014.

 

•

Income from operations for the year was $1.3 billion and as a percentage of total revenue was 28.8%. For fiscal 2014, income from operations was $1.0 billion, or 30.5% as a percentage of total revenue.

 

•

Net income for the year was $881.0 million, or $4.28 per diluted share, based on 205.9 million weighted average diluted shares outstanding, which included an unfavorable impact related to foreign currency exchange rates of approximately $0.10 per share. Net income for fiscal 2014 was $661.5 million, or $3.22 per diluted share, based on 205.6 million weighted average diluted shares outstanding.

Share Repurchase Program

During the quarter, the Company repurchased 1,409,682 shares of the Company’s ordinary shares for approximately $92.0 million in open market transactions. In addition, in connection with the November 14, 2014 accelerated share repurchase program, 280,819 additional shares were delivered to the Company in January 2015. The Company also announced today that the Board of Directors approved an amendment to its share repurchase program on May 20, 2015, at its regularly scheduled Board meeting, authorizing the repurchase of up to an additional $500 million of the Company’s ordinary shares and extending the program through May 2017. This increases the initial repurchase authorization previously announced in November 2014 to $1.5 billion, of which approximately $1.0 billion is available for future repurchases over the next two years. 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 first quarter of fiscal 2016, the Company expects total revenue to be in the range of $930 million to $950 million. On a constant currency basis, total revenue is expected to increase in the high single digit range assuming a $60 million impact from the change in foreign currency rates. The Company expects a low double digit comparable store sales decrease on a reported basis and a mid-single digit decrease on a constant currency basis. Operating expense as a percentage of total revenue is expected to increase

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MICHAEL KORS

 

550 to 600 basis points primarily due to global investments in our digital flagship, corporate talent, new stores, shop-in-shops, infrastructure and distribution. Diluted earnings per share are expected to be in the range of $0.74 to $0.78 for the first quarter of fiscal 2016. This assumes 202.5 million weighted average diluted shares outstanding and a tax rate of approximately 29%. The Company expects foreign currency to impact net income by approximately $14.0 million and EPS by approximately $0.07.

For fiscal 2016, the Company expects total revenue of approximately $4.7 billion to $4.8 billion. On a constant currency basis total revenue is expected to increase in the low to mid-teens range assuming a $200 million impact from the change in foreign currency rates. The Company expects flat comparable store sales on a reported basis, and a low single digit comparable store sales increase on a constant currency basis. Operating expense as a percentage of total revenue is expected to increase 110 to 140 basis points due to the above mentioned investments with less deleverage assumed in the second half than in the first half of fiscal 2016. Diluted earnings per share are expected to be in the range of $4.40 to $4.50 for fiscal 2016. This assumes 200.0 million weighted average diluted shares outstanding and a tax rate of approximately 29%. The Company expects foreign currency to impact net income by approximately $39.0 million and EPS by approximately $0.20.

Conference Call Information

A conference call to discuss fourth quarter results is scheduled for today, May 27, 2015 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 5969710. 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 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 29, 2014 (File No. 001-35368), filed on May 28, 2014 with the U.S. Securities and Exchange Commission.

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MICHAEL KORS

 

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]

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MICHAEL KORS

 

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								Fiscal Years Ended
		March 28,				March 29,				March 28,				March 29,
		2015				2014				2015				2014
Net sales		$	1,039,734			$	882,043			$	4,199,666			$	3,170,522
Licensing revenue			41,250				35,409				171,803				140,321
Total revenue			1,080,984				917,452				4,371,469				3,310,843
Cost of goods sold			450,136				368,026				1,723,818				1,294,773
Gross profit			630,848				549,426				2,647,651				2,016,070
Total operating expenses			374,681				303,517				1,390,678				1,007,899
Income from operations			256,167				245,909				1,256,973				1,008,171
Other income			(1,721	)			—				(3,117	)			—
Interest expense, net			68				(16	)			215				393
Foreign currency (gain) loss			(894	)			(148	)			4,052				131
Income before provision for income taxes			258,714				246,073				1,255,823				1,007,647
Provision for income taxes			76,072				85,035				374,800				346,162
Net income		$	182,642			$	161,038			$	881,023			$	661,485
Weighted average ordinary shares outstanding:
Basic			199,828,293				203,387,343				202,680,572				202,582,945
Diluted			203,195,838				206,973,550				205,865,769				205,638,107
Net income per ordinary share:
Basic		$	0.91			$	0.79			$	4.35			$	3.27
Diluted		$	0.90			$	0.78			$	4.28			$	3.22
Statements of Comprehensive Income:
Net income		$	182,642			$	161,038			$	881,023			$	661,485
Foreign currency translation adjustments			(44,469	)			(3,262	)			(91,293	)			(34	)
Net gains (losses) on derivatives			17,535				831				30,862				(2,878	)
Comprehensive income		$	155,708			$	158,607			$	820,592			$	658,573

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MICHAEL KORS

 

SCHEDULE 2

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

		March 28,				March 29,
		2015				2014
Assets
Current assets
Cash and cash equivalents		$	978,922			$	971,194
Receivables, net			363,419				298,006
Inventories			519,908				426,938
Deferred tax assets			27,739				30,539
Prepaid expenses and other current assets			127,443				50,492
Total current assets			2,017,431				1,777,169
Property and equipment, net			562,934				350,678
Intangible assets, net			61,541				48,034
Goodwill			14,005				14,005
Deferred tax assets			2,484				3,662
Other assets			33,498				23,425
Total assets		$	2,691,893			$	2,216,973
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$	142,818			$	143,563
Accrued payroll and payroll related expenses			62,869				54,703
Accrued income taxes			25,507				47,385
Deferred tax liabilities			3,741				—
Accrued expenses and other current liabilities			95,146				62,719
Total current liabilities			330,081				308,370
Deferred rent			88,320				76,785
Deferred tax liabilities			10,490				5,887
Other long-term liabilities			22,037				19,800
Total liabilities			450,928				410,842
Commitments and contingencies
Shareholders’ equity
Ordinary shares, no par value; 650,000,000 shares authorized, and 206,486,699 shares issued and 199,656,833 outstanding at March 28, 2015; 204,291,345 shares issued and 204,261,580 outstanding at March 29, 2014			—				—
Treasury shares, at cost (6,829,866 shares at March 28, 2015, and 29,765 at March 29, 2014)			(497,724	)			(2,447	)
Additional paid-in capital			636,732				527,213
Accumulated other comprehensive loss			(66,804	)			(6,373	)
Retained earnings			2,168,761				1,287,738
Total shareholders’ equity			2,240,965				1,806,131
Total liabilities and shareholders’ equity		$	2,691,893			$	2,216,973

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MICHAEL KORS

 

SCHEDULE 3

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED SEGMENT DATA

($ in thousands)

(Unaudited)

 

				Three Months Ended								Fiscal Years Ended
				March 28,				March 29,				March 28,				March 29,
				2015				2014				2015				2014
Revenue by Segment and Region:
Retail net sales:		North America		$	359,697			$	325,425			$	1,656,095			$	1,318,887
		Europe			90,505				69,527				412,063				235,571
		Japan			19,167				13,428				66,420				38,547
Total Retail Net Sales					469,369				408,380				2,134,578				1,593,005
Wholesale net sales:		North America			458,580				395,323				1,662,540				1,335,545
		Europe			110,305				78,340				401,068				241,972
		Asia			1,480				—				1,480				—
Total Wholesale Net Sales					570,365				473,663				2,065,088				1,577,517
Licensing revenue:		North America			22,251				18,620				100,289				117,386
		Europe			18,999				16,789				71,514				22,935
Total Licensing Revenue					41,250				35,409				171,803				140,321
Total Revenue				$	1,080,984			$	917,452			$	4,371,469			$	3,310,843
Income from Operations:
Retail				$	72,211			$	89,720			$	557,162			$	467,248
Wholesale					166,075				139,512				610,886				459,774
Licensing					17,881				16,677				88,925				81,149
Total Income from Operations				$	256,167			$	245,909			$	1,256,973			$	1,008,171
Operating Margin:
Retail					15.4	%			22.0	%			26.1	%			29.3	%
Wholesale					29.1	%			29.5	%			29.6	%			29.1	%
Licensing					43.3	%			47.1	%			51.8	%			57.8	%
Total Operating Margin					23.7	%			26.8	%			28.8	%			30.5	%

 

		As of
		March 28, 2015								March 29, 2014
Store Count and Square Footage by Region:		Store Count				Square Footage				Store Count				Square Footage
North America			343				984,095				288				739,844
Europe			133				329,903				80				159,254
Japan			50				62,662				37				45,242
Total			526				1,376,660				405				944,340

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MICHAEL KORS

 

SCHEDULE 4

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONSTANT CURRENCY DATA

(In thousands)

(Unaudited)

Total Revenue

 

		Three Months Ended								% Change
		March 28,				March 29,				As				Constant
		2015				2014				Reported				Currency
Retail net sales		$	469,369			$	408,380				14.9	%			21.1	%
Wholesale net sales			570,365				473,663				20.4	%			25.8	%
Licensing revenue			41,250				35,409				16.5	%			16.5	%
Total revenue		$	1,080,984			$	917,452				17.8	%			23.3	%

 

		Fiscal Years Ended								% Change
		March 28,				March 29,				As				Constant
		2015				2014				Reported				Currency
Retail net sales		$	2,134,578			$	1,593,005				34.0	%			36.7	%
Wholesale net sales			2,065,088				1,577,517				30.9	%			33.0	%
Licensing revenue			171,803				140,321				22.4	%			22.4	%
Total revenue		$	4,371,469			$	3,310,843				32.0	%			34.3	%

Comparable Store Sales Data

 

		Three Months Ended								Fiscal Year Ended
		March 28, 2015								March 28, 2015
		As Reported				Constant Currency				As Reported				Constant Currency
North America			-6.7	%			-5.8	%			6.9	%			7.7	%
Europe			-5.6	%			11.0	%			25.1	%			29.4	%
Japan			12.4	%			30.0	%			33.9	%			47.0	%
Global			-5.8	%			-1.7	%			10.3	%			11.9	%

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