Michael Kors (KORS) Tops Q1 EPS by 18c; Raises Outlook
Michael Kors (NYSE: KORS) reported Q1 EPS of $0.80, $0.18 better than the analyst estimate of $0.62. Revenue for the quarter came in at $952.4 million versus the consensus estimate of $918.57 million.
GUIDANCE:
Michael Kors sees Q2 2018 EPS of $0.80-$0.84, versus the consensus of $0.78.
Michael Kors sees FY2018 EPS of $3.62-$3.72, versus the consensus of $3.54.
For the second quarter of fiscal 2018, the Company expects total revenue to be between $1.035 billion and $1.055 billion, which includes a comparable sales decrease in the mid-single digits range. The Company expects operating margin to be approximately 14.3%. Diluted earnings per share are expected to be in the range of $0.80 to $0.84. This assumes 154 million weighted average diluted shares outstanding and a tax rate of approximately 15.0%.
For fiscal 2018, the Company expects total revenue to be approximately $4.275 billion and for comparable sales to decrease in the mid-single digits range. Operating margin is expected to be approximately 16.0%. Diluted earnings per share are expected to be in the range of $3.62 to $3.72. This assumes 156 million weighted average diluted shares outstanding and a tax rate of approximately 17.0%. This guidance excludes $40 million to $60 million in one-time costs associated with 20 to 40 store closures in Fiscal 2018.
The Company’s outlook does not include any expectations related to Jimmy Choo as the transaction has not yet been completed. Based on the Company’s internal forecasts for Jimmy Choo and assuming a close early in the Company’s third fiscal quarter, incremental revenue is expected to be approximately $275 million for the second half of fiscal 2018. For fiscal 2019, the Company expects incremental revenues of $570 million to $580 million1.
The Company expects this acquisition to be immediately accretive on a cash basis. The Company believes the acquisition will be dilutive to EPS in the low single digit percentage range in both Fiscal 2018 and 2019 and accretive in the low single digits in Fiscal 2020, excluding one-time transaction and transition costs related to the acquisition2.
Transaction costs related to the acquisition are expected to be between $40 million and $50 million, and transition costs to be between $20 million to $30 million over the next two years. In addition, to mitigate foreign exchange risk related to the British pound purchase price, the Company has entered into a foreign exchange hedge. This type of position is not expected to receive hedge accounting treatment, and the Company expects to record mark-to-market gains and losses through its income statement until the completion of the transaction.
With respect to financing, the acquisition is ultimately expected to be financed through a combination of a term loan and a longer term bond. The Company anticipates a weighted average interest rate of 4.25% to 4.75%.
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