Michael Kors Holdings Ltd reported Tuesday better-than-expected profit for the fiscal 2018 first quarter ended July 1, 2017. The company said net income for the latest period was $125.5 million, or 80 cents per share. CNBC reported that Thomson Reuters consensus estimate was 62 cents.
Michael Kors total Q1 2018 revenue decreased 3.6% to $952.4 million from $987.9 million the same period one year ago. Retail net sales increased 10.1% to $619.9 million driven in large part by 67 new store openings since the end of the first quarter of fiscal 2017 and the impact of the acquisition of the Greater China license.
Comparable sales decreased 5.9%. On a constant currency basis, retail net sales increased 11.6%, and comparable sales decreased 4.9%. Wholesale net sales decreased 23 percent to $303.6 million and on a constant currency basis, wholesale net sales decreased 22.7%. Licensing revenue decreased 5.6% to $28.9 million.
Revenue for the Americas decreased 8.2% to $634.1 million and decreased 7.9% on a constant currency basis. European revenue decreased 10.2% to $201.2 million on a reported basis, and decreased 7.5% on a constant currency basis. Revenue in Asia increased 60.2% to $117.1 million on a reported basis, and increased 61.9% on a constant currency basis.
What the execs says
“Our first quarter performance exceeded our expectations, driven largely by better than anticipated retail comparable sales results in both North America and Europe. We are encouraged by our first quarter performance, although we continue to believe that fiscal 2018 will be a transition year for our company, as we focus on laying the foundation for the future by executing on our strategic plan, Runway 2020,” said John Idol, Michael Kors chairman and CEO. “While it is still early in the process, we are making meaningful progress enhancing our assortments, deepening our connection with consumers, and elevating our jet set luxury experience in our stores and digital flagships.”
For the second quarter of fiscal 2018, Michael Kors 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 percent.
For fiscal 2018, Michael Kors expects total revenue to be approximately $4.275 billion and for comparable sales to decrease in the mid-single digits range.
The 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 third fiscal quarter, incremental revenue is expected to be approximately $275 million for the second half of fiscal 2018. For fiscal 2019, Michael Kors expects incremental revenues of $570 million to $580 million.