Michael Kors Holdings Limited announced its financial results for the fiscal 2018 third quarter ended December 30, 2017.
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Earnings per diluted share were $1.42 on a reported basis. On an adjusted basis, earnings per diluted share were $1.77, an increase of 7.9% compared to the prior year.
Results exceeded guidance, with better than expected performance from both the Michael Kors and Jimmy Choo brands.
Comparable store sales exceeded expectations and favorable response to new product innovation combined with reduced promotional activity drove higher average unit retails in North America digital flagships and lifestyle stores.
Total revenue increased 6.5% to $1.44 billion, including a $114.7 million contribution from Jimmy Choo, which the Company owned for two months of the quarter. On a constant currency basis, total revenue increased 4.6%.
MK Retail revenue increased 1.1% to $846.3 million driven in large part by 32 net new store openings since the end of the third quarter of fiscal 2017. Comparable sales decreased 3.2%, with better than anticipated performance in the Americas and Europe during the Holiday season.
On a constant currency basis, retail net sales decreased 1.0%, and comparable sales decreased 5.2%.
MK Wholesale revenue decreased 8.9% to $430.8 million and on a constant currency basis decreased 10.5%, driven by a strategic reduction in inventory levels in the channel.
MK Licensing revenue increased 12.3% to $48.3 million.
Gross profit increased 9.7% to $884.0 million, and as a percentage of total revenue was 61.4%. Adjusted gross profit increased 9.9% to $885.6 million, and as a percentage of total revenue was 61.5%. This compares to 59.6% in the third quarter of fiscal 2017.
The year-over-year growth was largely driven by improved MK Retail gross margin, favorable Michael Kors channel mix and the inclusion of the higher margin Jimmy Choo business, which contributed 20 basis points, partially offset by the expected decline in MK Wholesale gross margin.
Foreign currency translation and transaction favorably impacted gross profit margin by approximately 10 basis points.
Income from operations was $313.5 million, or 21.8% as a percentage of total revenue, including a $5.7 million contribution from Jimmy Choo after amortization of non-cash purchase accounting adjustments and transaction and transition related costs.
Income from operations was $341.9 million, or 25.3% as a percentage of total revenue, for the third quarter of fiscal 2017.
Adjusted income from operations was $345.7 million, or 24.0% as a percentage of total revenue, reflecting a $15.7 million contribution from Jimmy Choo. This compares to $342.4 million, or 25.3% as a percentage of total revenue, for the same period in fiscal 2017.
Net income attributable to MKHL was $219.4 million, or $1.42 per diluted share, based on a 21.2% tax rate and 154.6 million weighted average diluted shares outstanding.
Net income attributable to MKHL for the third quarter of fiscal 2017 was $271.3 million, or $1.64 per diluted share, based on a 20.6% tax rate and 165.2 million weighted average diluted shares outstanding.
Adjusted net income attributable to MKHL was $273.4 million, or $1.77 per diluted share. This compares to $271.6 million, or $1.64 per diluted share, for the third quarter of fiscal 2017.
At December 30, 2017, Michael Kors operated 848 retail stores, including concessions, and an additional 150 retail stores, including concessions, were operated through licensing partners.
Including licensed locations, there were 998 Michael Kors stores worldwide at the end of the third quarter of fiscal 2018.
At December 30, 2017, Jimmy Choo operated 179 retail stores, including concessions, and an additional 55 retail stores, including concessions, were operated through licensing partners.
Including licensed locations, there were 234 Jimmy Choo stores worldwide at the end of the third quarter of fiscal 2018. ■