London – Michael Kors is set to close between 100 and 125 full-price stores over the next two years following a bleak full-year forecast for fiscal 2018. The US premium label announced its impending store closure on Wednesday morning amid disappointing financial results for the fiscal fourth quarter and fiscal year ended April 1, 2017.
Shares in Michael Kors fell 8 percent to 33.38 USD a share during trading this morning, after its sales guidance for the fiscal year 2018 fell short of previous analyst estimates. Analysts previously estimated revenue of 4.37 billion USD for FY2018, but Michael Kors reported its expected revenue of 4.525 billion USD according to Thomson Reuters. Michael Kors also predicted total revenue of between 910 million USD and 930 million USD for the Q1 of the fiscal year 2018 in addition to a high single-digit decrease in same store sales for FY2018.
Michael Kors sees total revenue for Q4 drop 11.2 percent
Total revenue for Michael Kors decreased 11.2 percent, from 1.20 billion USD to 1.06 billion USD in Q4 of fiscal 2017. Total revenue decreased 10.6 percent on a constant currency basis during the same period. Retail net sales increased 0.5 percent to 575.3 million USD during Q4, which was primarily driven by 159 net new store openings since the end of the Q4 FY2016.
However, comparable sales decreased 14.1 percent in Q4. Wholesale net sales decreased 22.8 percent to 456.1 million USD and licensing revenue declined 6.2 percent in the same period to 33.4 million USD. Gross profit decreased 11.1 percent to 619.7 million USD, accounting for 58.2 percent of Michael Kors total revenue and loss from operations was 42.6 million USD or 4 percent of the total revenue.
“Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels,” said John D. Idol, Chairman and Chief Executive Officer at Michael Kors. “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.”
Michael Kors reports a 4.6 percent decrease in revenue for FY2017
Michael Kors struggled to keep sales momentum going this year, as total revenue for the fashion company fell 4.6 percent to 4.49 billion USD for the fiscal year ended April 1, 2017, in comparison to 4.71 billion USD in fiscal 2016. On a constant currency basis, total revenue declined 4.4 percent. Retail net sales increased 7.4 percent to 2.57 billion USD in FY2017.
However, comparable sales decreased 8.3 percent. Wholesale net sales decreased 17.2 percent to 1.78 billion USD and licensing revenue decreased 15.9 percent to 145.8 million USD. Gross profit dropped 4.9 percent to 2.66 billion USD or 59.2 percent of total revenue. Income from operations was 689.9 million USD or 15.4 percent of total revenue. In the fourth quarter of fiscal 2017, Michael Kors also noted impairment charges of 193.8 million USD, which have been linked to underperforming lifestyle stores. Which is partly why Michael Kors is shuttering between 100 and 125 stores, to help improve the profitability of its store fleet.
Michael Kors aims to close 100-125 stores following weak sales for FY2017
“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,” continued Idol. “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.”
Photos: Michael Kors SS17
Source: Fashion United