MK: E-commerce sales increased 73% in Q3 2015
The concern arose due to the fact that Michael Kors discounted very heavily in January, with 65% of its handbags on discount.
Michael Kors announced its third quarter earnings for fiscal year 2015. The company was able to report top and bottom line growth on the back of new store openings, launch of its e-commerce website and better comparable sales. The margins were lower for the quarter and the company issued a weak guidance for the current quarter, which sent shares down by nearly 11% in pre-market trading following the announcement.
Michael Kors reported third quarter financial results for the quarter ended 27 December, 2014. Quarterly revenue grew by 30%, up from $1 billion in the year ago quarter to $1.26 billion in the third quarter of 2014. Retail sales revenue increased by 37% during the quarter, amounting of $689.4 million. The company was able to deliver growth in retail sales revenue due to the launch of its new e-commerce website, increase in store openings and also due to an increase in comparable sales. The company’s retail store count was up from 395 a year ago to 509 by the end of this quarter. Comparable sales were up by 8% during the quarter. Wholesale revenue increased by 24.4% during the quarter and amounted to $573.8 million.
The company reported its gross profit at $800.14 million, up by 29% during the quarter. While this was favorable, the company’s margins were down from 61.2% in the corresponding period last year to 60.9% in the recently concluded quarter. The company’s income from operations totaled to $418.47 million, which grew by 34% over last year’s results. The results revealed a decline in the company’s operating margin during the quarter. Margins were down from 33.9% last year to 31.8% in the third quarter. Retail margins were down by 2.8%, while those of wholesale and licensing were down by 0.8% and 1.7%, respectively.
Net income was reported at $303.67 million up by 32.3% year on year. On a per share basis, net income amounted to $1.48, up from $1.11 per share recorded in the third quarter last year. The company was able to deliver an earnings beat, reporting earnings of $0.15 higher than analysts had targeted for the quarter.
John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “Our third quarter marked the 13th consecutive period of growth in revenue, comparable store sales and earnings, since our initial public offering. We had a strong holiday season, with comparable stores sales performance led by double digit growth in our accessories category, both in our retail and wholesale channels. We also saw continued momentum across our operating segments and geographies driven by our compelling fashion product offering and jet-set luxury experience that resonated well with customers. In addition, we continued to advance on our multiple growth strategies and in particular, we saw exceptional performance from our recently launched Company-owned U.S. e-commerce site, which exceeded our expectations.
E-commerce sales increased 73% in the quarter, as compared to sales at the previous outsourced site. Had we included e-commerce in our comparable store base, North America comparable store sales results would have been 380 basis points higher, which we believe is a more accurate reflection of our performance. It is clear that Michael Kors remains a leader within the global fashion luxury market and our brand continues to resonate with consumers around the world. Overall, we see continued momentum in our business, remain confident in our long-term potential and are committed to enhancing value for our shareholders.
For the fourth quarter of fiscal 2015, the Company expects total revenue to be in the range of $1.05 billion to $1.08 billion. This assumes a comparable store sales increase of mid-single digits on a reported basis and an increase of high single digits on a constant currency basis. Diluted earnings per share are expected to be in the range of $0.89 to $0.92 for the fourth quarter of fiscal 2015. This assumes 203.0 million weighted average diluted shares outstanding and a tax rate of approximately 30.0%.
For fiscal 2015, the Company now expects total revenue to be approximately $4.4 billion. This assumes a comparable store sales increase of low double digits on a reported basis, and an increase of low to mid-teens on a constant currency basis. Diluted earnings per share are now expected to be in the range of $4.27 to $4.30 for fiscal 2015. This assumes 205.8 million weighted average diluted shares outstanding and a tax rate of approximately 30.0%.
