Total revenue for Q1 increased by 71 percent and net income grew by 185 percent.
Michael Kors Holdings opened 13 new stores in North America in Q1 and opened 76 stores since Q1/2011. It opened one new store in Europe and 2 in Japan. Michael Kors Holdings currently has 253 company-owned retail stores, including concessions. It is on track to open 40 to 50 stores in North America in fiscal year 2013 and believes it can ultimately have 400 locations in North America. It believes it will ultimately have 100 retails stores in Europe.
In North America, Michael Kors Holdings also converted wholesale department store doors into branded shop-in-shops. It expects to increase the pace of conversions. The performance of the shop-in-shops has been "fantastic." The company will be adding jewelry and watch shop-in-shops.
Overseas, Michael Kors continued to expand its retail and wholesale doors in Europe. It believes it will ultimately have 100 retails stores and 2000 wholesale doors in Europe. The company has also started up business in Japan and is laying the foundation for growth in other areas of the Far East through regional licenses. It expects to ultimately have 100 retail stores in Japan.
The luxury segment continues to grow globally. So far, the environment in Europe has not impacted the company's operations. Michael Kors Holdings expects to be in a better position for the fall season than it was last year because it has its inventories in a better position heading into the holiday season. The company hopes to have its e-commerce business operating globally by 2014.
Financials.
In North America, Michael Kors Holdings had its 25th consecutive quarter of same stores sales growth. Same store growth for Q1in North America was 37 percent, 24 percent in Europe, and 21 percent in Japan. The company expects same store sales to increase by 30 percent in Q2 and by the mid to high 20 percent range for fiscal year 2013.
Retail segment sales grew by 76 percent. Wholesale segment sales increased by 66 percent. Licensing revenue grew 61 percent, mostly due to strength in watches.
Gross margins increased 420 basis points to 60.5 percent as a result of fewer markdowns due to exceptional sell-throughs. Michael Kors Holdings expects margins to expand mostly in Q2, but to be reduced slightly in the second half of fiscal year 2013.
As a percentage of total revenue, total operating expenses were 33.5 percent versus 37.8 percent last year. Licensing segment revenues increased by 61 percent
Q1 diluted EPS was $.34 versus $.13 a year ago. In Q2, Michael Kors Holdings expects earnings per share to be $.33 to $.35/diluted share.
Inventories at June 30, 2012 were $246.6 million versus $122.0 million at July 2, 2011. The higher inventory levels are due to (1) an increase in replenishment programs to be better positioned to fulfill replenishment retail sales and wholesale reorders, (2) the company broadening its production schedules, resulting in earlier production and receipt of certain merchandise, and (3) a reflection of merchandise for new store openings in Q2 and Q3.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/805901-michael-kors-holdings-management-discusses-q1-2013-results-earnings-call-transcript?part=single
Copyright 2012 Jaygo's Earnings Conference Call Summaries
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