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NEW YORK — The momentum continues at Michael Kors Holdings Ltd., with shares of the firm spiking up 16.5 percent after the fashion brand posted first-quarter results that saw profits more than triple on a revenue gain of 70.6 percent.
This story first appeared in the August 15, 2012 issue of WWD. Subscribe Today.
For the three months ended June 30, income attributable to common shareholders was $68.6 million, or 34 cents a diluted share, from $18.9 million, or 13 cents, last year. Total revenues rose to $414.9 million from $243.1 million, which included a total sales gain of 71.1 percent to $397.4 million. The balance of the revenue included a 61.3 percent jump in licensing income to $17.5 million, boosted in part by strong watch sales.
John Idol, chairman and chief executive officer, in a conference call to Wall Street analysts, spelled out a string of initiatives the brand is taking to maintain its momentum, including an aggressive expansion of its store network.
Among those, Idol said the company has “begun to lay the foundation for growth in other areas of the Far East through regional licenses.” The company has already started developing its business in Japan, although that is currently in the start-up phase, the ceo said.
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He said that the company at the end of the first quarter had 19 retail sites in Japan and that Kors is “on track to open 10 locations this fiscal year.” It already opened two during the quarter ended June 30. Revenues for the Japanese operation rose 190 percent to $4 million, with comps up 21 percent.
As for the other Asian territories via licensing, its most established market is Korea, with 36 Michael Kors stores and concessions. Other licensees are for the Southeast Asia region, primarily Singapore, Malaysia and the Philippines. There are seven Michael Kors stores and concessions in Greater China, where the company is just starting to build brand awareness.
In North America, the company currently has 204 retail locations and plans to open 40 to 50 stores during the fiscal year. Idol said the company should be able to ultimately have a total of 400 stores in North America.
Other growth strategies that are more developed include the expansion of the brand’s European presence through retail- and wholesale-door openings, as well as the conversion of wholesale department-store doors into branded shops-in-shop in North America.
Joseph B. Parsons, who is both chief financial officer and chief operating officer, as well as treasurer, said the 66 percent growth in wholesale sales to $182.4 million was driven in part by the “continued conversion of North American department-store doors to shops-in-shop.”
The company said retail net sales rose 76 percent to $215 million, driven by a 37.3 percent increase in comparable-store sales and the opening of 76 stores since the end of the first quarter a year ago. Wholesale sales jumped 66 percent to $182.4 million.
Idol said, “In our wholesale business, we’ll drive sales through ongoing conversions to shops-in-shop at department stores, and we expect the pace of shop-in-shop conversions to increase. Consistent with our retail segment, we’ve experienced strong double-digit comp increases and we believe that we can continue at a double-digit sales pace in our North American wholesale channel.”
Of the shops-in-shop, Idol added, “The performance of the shop-in-shops…has been just fantastic. And we are seeing similar to, and in many cases greater than, comp-store performance to what we see in our own freestanding stores.”
As for its European operation, Idol said revenues rose by 110 percent and comps gained 24 percent. The company has invested in inventory infrastructure and in other working capital needs to support growth plans for ultimately 100 stores including concessions, as well as 2,000 wholesale doors.
The company is projecting second-quarter diluted earnings per share of between 33 cents to 35 cents, on a revenue range of $490 million to $500 million. Comps are expected to be around 30 percent for the quarter.
For fiscal 2013, the company’s guidance is diluted EPS of between $1.32 to $1.34, with total revenues expected in the range of $1.8 billion to $1.9 billion. The company is predicting a comps gain in the mid- to high-20-percent range for the year.
Shares of Michael Kors Holdings Ltd. closed at $49.33 on the New York Stock Exchange Tuesday. More than 18.5 million shares traded Tuesday compared with an average three-month trading volume of 3.2 million shares.