Michael Kors Holdings Limited Announces First Quarter Fiscal 2013 Results

August 14, 2012

Total Revenue Increased 71%; Comparable Store Sales Increased 37.3%

Diluted EPS Increased 162% to $0.34

HONG KONG--(BUSINESS WIRE)--Aug. 14, 2012-- Michael Kors Holdings Limited (NYSE:KORS) (the “Company”), a global luxury lifestyle brand with a multi-channel strategy, unique design and strong infrastructure, today announced its financial results for the first quarter ended June 30, 2012.

John Idol, the Company’s Chairman and Chief Executive Officer, said, “We are pleased with the strong start to our fiscal year with a 71% increase in total revenue and 185% growth in net income. Our results demonstrate the strong momentum of the Michael Kors brand and the continued execution of our key growth strategies. Michael Kors’ luxury fashion designs are resonating globally with our customers.”

For the first quarter ended June 30, 2012:

  • Total revenue increased 71% to $414.9 million from $243.1 million in the first quarter of fiscal 2012.
  • Retail net sales increased 76% to $215.0 million driven by a 37.3% increase in comparable store sales and 76 new store openings since the end of the first quarter last year. Wholesale net sales increased 66% to $182.4 million and licensing revenue increased 61% to $17.5 million.
  • Gross profit increased 83% to $251.0 million, and as a percentage of total revenue increased to 60.5% compared to 56.3% in the first quarter of fiscal 2012.
  • Income from operations increased 149% to $111.9 million, and as a percentage of total revenue was 27.0%. This compares to income from operations for the first quarter of fiscal 2012 of $45.0 million, or 18.5% as a percentage of total revenue.
  • Net income was $68.6 million, or $0.34 per diluted share, based on 199.4 million weighted average diluted shares outstanding. Net income for the first quarter of fiscal 2012 was $24.1 million, or $0.13 per diluted share, based on 179.2 million weighted average diluted shares outstanding.
  • At June 30, 2012, the Company operated 253 retail stores, including concessions, compared to 177 retail stores, including concessions, at the end of the same prior-year period. The Company had 68 additional retail stores, including concessions, operated through licensing partners. Including these, there were 321 Michael Kors stores worldwide at the end of the second quarter.

Mr. Idol continued, “During the first quarter we saw continued strength in each of our retail, wholesale and licensing segments and across geographies. In North America, our comparable store sales rose 38.4% reflecting the strong appeal of the Michael Kors brand, our consistent delivery of a compelling assortment of luxury products, and our exciting jet-set in-store experience. The 66% growth in our wholesale segment is the result of the continued conversions to shop-in-shops in department stores. Our strong revenue growth in Europe demonstrates the growing momentum of the Michael Kors brand which led to a 24.2% increase in comparable store sales and strong performance in our wholesale operations. The 61% growth in our licensing revenue was led by strong sales in the Michael Kors watch line. Overall, we are extremely excited about the long term growth potential of our Company as we continue to build upon the success we achieved in establishing Michael Kors as a global luxury lifestyle brand.”

Outlook

For the second quarter of fiscal 2013, the Company expects total revenue to be in the range of $490 million to $500 million. This assumes a comparable store sales increase of approximately 30%. Diluted earnings per share are expected to be in the range of $0.33 to $0.35 for the quarter. This assumes 201.0 million diluted weighted average shares outstanding and a 38% tax rate.

For fiscal 2013, the Company now expects total revenue to be in the range of $1.8 billion to $1.9 billion. This assumes a comparable store sales increase in the mid- to high-twenty percent range. Diluted earnings per share are expected to be in the range of $1.32 to $1.34 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 first quarter results is scheduled for today, August 14, 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 1463201. 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,” “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 20-F for the fiscal year ended March 31, 2012 (File No. 001-35368), filed on June 12, 2012 with the U.S. Securities and Exchange Commission.

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
June 30, July 2,
2012 2011
Net sales $ 397,370 $ 232,282
Licensing revenue 17,495 10,844
Total revenue 414,865 243,126
Cost of goods sold 163,865 106,157
Gross profit 251,000 136,969
Total operating expenses 139,057 91,993
Income from operations 111,943 44,976
Interest expense, net 435 671
Foreign currency (gain) loss (375 ) 1,507
Income before provision for income taxes 111,883 42,798
Provision for income taxes 43,238 18,683
Net income 68,645 24,115
Net income applicable to preference shareholders - 5,198
Net income available for ordinary shareholders $ 68,645 $ 18,917
Weighted average ordinary shares outstanding:
Basic 192,790,454 140,554,377
Diluted 199,391,127 179,177,268
Net income per ordinary share (1) :
Basic $ 0.36 $ 0.13
Diluted $ 0.34 $ 0.13
Statements of Comprehensive Income:
Net income $ 68,645 $ 24,115
Foreign currency translation adjustments (3,278 ) 1,979
Comprehensive income $ 65,367 $ 26,094

(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.

SCHEDULE 2
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
June 30, March 31, July 2,
Assets 2012 2012 2011
Current assets
Cash and cash equivalents $ 162,075 $ 106,354 $ 58,198
Receivables, net 104,700 127,226 47,986
Inventories 246,601 187,413 122,015
Deferred tax assets 15,518 11,145 7,925
Prepaid expenses and other current assets 40,298 31,925 20,129
Total current assets 569,192 464,063 256,253
Property and equipment, net 180,317 170,755 120,731
Intangible assets, net 13,684 14,146 15,449
Goodwill 14,005 14,005 14,005
Deferred tax assets 3,942 3,952 1,357
Other assets 6,780 7,504 3,827
Total assets $ 787,920 $ 674,425 $ 411,622
Liabilities and Shareholders' Equity
Current liabilities
Revolving line of credit $ 27,667 $ 22,674 $ 13,238
Accounts payable 82,464 67,326 50,989
Accrued payroll and payroll related expenses 17,270 33,710 9,615
Accrued income taxes 40,342 8,199 16,646
Accrued expenses and other current liabilities 28,505 33,097 20,653
Total current liabilities 196,248 165,006 111,141
Note payable to parent - - 101,650
Deferred rent 46,137 43,292 31,999
Deferred tax liabilities 6,816 6,300 5,495
Other long-term liabilities 3,069 3,590 3,218
Total liabilities 252,270 218,188 253,503
Commitments and contingencies
Contingently redeemable ordinary shares - - 6,706
Shareholders' equity *
Ordinary shares, no par value; 650,000,000 shares authorized, and 193,226,091 shares issued and
outstanding at June 30, 2012, and 192,731,390 shares issued and outstanding at March 31, 2012. - - -
Additional paid-in capital 242,367 228,321 39,999
Accumulated other comprehensive loss (4,013 ) (735 ) 6,012
Retained earnings 297,296 228,651 105,402
Total shareholders' equity 535,650 456,237 151,413
Total liabilities and shareholders' equity $ 787,920 $ 674,425 $ 411,622

* Share amounts applicable to July 2, 2011 were omitted as they reflect our equity structure prior to our restructuring and initial public offering.

SCHEDULE 3
MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED SEGMENT DATA
(In thousands)
(Unaudited)
Three Months Ended
June 30, July 2,
2012 2011
Revenue by Region:
North America (U.S. and Canada) $ 377,149 $ 225,768
Europe 33,387 15,864
Other Regions 4,329 1,494
Total Revenue: $ 414,865 $ 243,126
Revenue by Segment:
Net sales: Retail $ 215,004 $ 122,344
Wholesale 182,366 109,938
Licensing 17,495 10,844
Total Revenue: $ 414,865 $ 243,126
Income from Operations:
Retail $ 59,879 $ 27,922
Wholesale 40,718 10,868
Licensing 11,346 6,186
Total Income from Operations $ 111,943 $ 44,976

Source: Michael Kors Holdings Limited

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

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ICR, Inc.
Jean Fontana
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