MK First Quarter Total Revenue Increased 7.3%

“Our first quarter performance reflects better than expected results in both our top and bottom line with growth across our North America, Europe and Asia regions. In addition, on a global basis we saw solid growth in accessories and footwear as these categories performed well in our retail stores and we experienced strong sell-through in our wholesale channel. Looking ahead, we will continue to execute on our multiple growth initiatives including global expansion of our digital flagships, growing our international presence and building upon our core categories as well as further developing our men’s, women’s and footwear businesses.

While we are at different stages of development in North America, Europe and Asia, we see continued opportunity in all of these regions. Michael Kors is a powerful brand and our commitment to delivering compelling fashion product and an exceptional shopping experience will enable us to maintain our leadership position in the global luxury market«, said John D. Idol, the Company’s Chairman and Chief Executive Officer.

For the second quarter of fiscal 2016, the Company expects total revenue to be in the range of $1.06 billion to $1.08 billion. On a constant currency basis, total revenue is expected to increase in the high single digit range assuming a $60 million impact from the change in foreign currency rates. The Company expects a high single digit comparable store sales decrease on a reported basis and a low single digit decrease on a constant currency basis.

Operating expense as a percentage of total revenue is expected to increase 440 to 490 basis points primarily due to global investments in our digital flagship, corporate talent, new stores, shop-in-shops, infrastructure and distribution. Diluted earnings per share are expected to be in the range of $0.86 to $0.90 for the second quarter of fiscal 2016. This assumes 194 million weighted average diluted shares outstanding and a tax rate of approximately 29.5%. The Company expects foreign currency to impact net income by approximately $11 million and EPS by approximately $0.06.

For fiscal 2016, the Company expects total revenue of approximately $4.7 billion to $4.8 billion. On a constant currency basis total revenue is expected to increase in the low double digit range assuming a $192 million impact from the change in foreign currency rates. The Company expects a low-single digit comparable store sales decrease on a reported basis, and flat comparable store sales on a constant currency basis. Operating expense as a percentage of total revenue is expected to increase 140 to 180 basis points due to the above mentioned investments with less deleverage assumed in the second half than in the first half of fiscal 2016. Diluted earnings per share are expected to be in the range of $4.40 to $4.50 for fiscal 2016. This assumes 195 million weighted average diluted shares outstanding and a tax rate of approximately 29%. The Company expects foreign currency to impact net income by approximately $41 million and EPS by approximately $0.21.

For the first quarter ended June 27, 2015:

• Total revenue increased 7.3% to $986.0 million from $919.2 million in the first quarter of fiscal 2015. On a constant currency basis, total revenue increased 13.4%.
• Retail net sales increased 9.0% to $523.3 million driven by 107 net new store openings since the end of the first quarter of fiscal 2015 and e-commerce sales from our North American digital flagships, partially offset by a 9.5% decrease in comparable store sales. On a constant currency basis, retail net sales grew 16.0%, and comparable store sales decreased 5.0%. Wholesale net sales increased 4.2% to $424.0 million and on a constant currency basis, wholesale net sales grew 9.7%. Licensing revenue increased 20.5% to $38.7 million.
• Total revenue in North America increased 1.2% to $727.3 million on a reported basis and increased 1.9% on a constant currency basis. European revenue grew 16.9% to $216.8 million on a reported basis, and grew 42.2% on a constant currency basis. Revenue in Japan increased 32.7% to $19.6 million on a reported basis, and increased 57.4% on a constant currency basis.
• Gross profit increased 5.6% to $603.6 million, and as a percentage of total revenue was 61.2%. Gross profit margin was reduced by approximately 63 basis points due to the change in foreign currency exchange rates. This compares to 62.2% in the first quarter of fiscal 2015.

• Income from operations was $248.6 million, or 25.2% as a percentage of total revenue. This compares to $276.8 million, or 30.1% as a percentage of total revenue, for the first quarter of fiscal 2015.
• Net income was $174.4 million, or $0.87 per diluted share, based on a 29.4% tax rate and 200.1 million weighted average diluted shares outstanding, which included an unfavorable impact related to foreign currency exchange rates of approximately $0.06 per share. Net income for the first quarter of fiscal 2015 was $187.7 million, or $0.91 per diluted share, based on a 32.0% tax rate and 207.2 million weighted average diluted shares outstanding.
• At June 27, 2015, the Company operated 550 retail stores, including concessions, compared to 443 retail stores, including concessions, at the end of the same prior-year period. The Company had 224 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 774 Michael Kors stores worldwide at the end of the first quarter of fiscal 2016.

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