The woes of retail can’t elude Michael Kors. The purveyor of luxury handbags and clothing reported sales down 11% in the fiscal fourth quarter for 2017 and plans to close as many as 125 of its boutiques in the next two years.
For the fourth quarter ended April 1, 2017, Kors Inc. reported:
- Total revenue decreased 11.2% to $1.06 billion from $1.20 billion in the fourth quarter of fiscal 2016. On a constant currency basis, total revenue decreased 10.6%. Fiscal year 2017 had 52 weeks versus 53 weeks in fiscal year 2016. As a result, the Company’s results for the fiscal 2016 fourth quarter and fiscal year ended April 2, 2016, include approximately $34 million in retail sales related to the 53rd week. Comparable sales calculations exclude the 53rd week.
- Retail net sales increased 0.5% to $575.3 million, driven primarily by 159 net new store openings since the end of the fourth quarter of fiscal 2016, including 111 stores associated with the Company’s acquisition of the previously licensed operation in Greater China. Comparable sales decreased 14.1%. On a constant currency basis, retail net sales grew 1.1%, and comparable sales decreased 13.6%. Wholesale net sales decreased 22.8% to $456.1 million and on a constant currency basis, wholesale net sales decreased 22.3%. Licensing revenue decreased 6.2% to $33.4 million.
- Total revenue in the Americas decreased 18.0% to $721.0 million on a reported basis, and decreased 18.3% on a constant currency basis. European revenue decreased 15.3% to $215.2 million on a reported basis, and declined 11.5% on a constant currency basis. Revenue in Asia increased 96.3% to $128.6 million on a reported basis, and increased 95.1% on a constant currency basis.
- Gross profit decreased 11.1% to $619.7 million, and as a percentage of total revenue was 58.2%. Foreign currency translation and transaction unfavorably impacted gross profit margin by approximately 20 basis points. This compares to gross margin of 58.2% in the fourth quarter of fiscal 2016.
- Loss from operations was $42.6 million, or (4.0)% of total revenue. Excluding $193.8 million of non-cash impairment charges primarily associated with underperforming full-price retail stores, income from operations was $151.2 million, or 14.2% as a percentage of total revenue. For the fourth quarter of fiscal 2016, operating income was $244.1 million, or 20.4% as a percentage of total revenue, and excluding $10.9 million of impairment charges was $255.0 million, or 21.3% as a percentage of total revenue.
John Idol, the Company’s Chairman and Chief Executive Officer, said, “Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels. In addition, our product and store experience did not sufficiently engage and excite consumers. We acknowledge that we need to take further steps to elevate the level of fashion innovation in our accessories assortments and enhance our store experience in order to deepen consumer desire and demand for our products. Looking ahead, as we expand the fashion innovation in our accessories assortments, right-size our store fleet and elevate our store experience, fiscal 2018 will be a transition year in which we establish a new baseline before returning to long-term growth. We have a strong brand, led by Michael Kors, with a history of fashion innovation and leadership, a global footprint with stores positioned in the best locations around the world and the marketing expertise to effectively convey our fashion stories.”
The company said it will close between 100 and 125 of its full-price retail stores over the next 2 years. Over this time period, the Company expects to incur approximately $100 – $125 million of one-time costs associated with store closures.
Based in London, Michael Kors Inc. has U.S. headquarters in NY.