Michael Kors announces store closures as sales dip

Worldwide
Published:  01 June, 2017

The New York based affordable luxury brand has reported a -11.2% total revenue decrease in the fourth quarter ended April 1, 2017.

Michael Kors’ total revenue decreased to US$1.06 billion from US$1.20 billion in the fourth quarter of fiscal 2016, with total revenue declining -18% in the Americas to US$721 million on a reported basis, and -15.3% in Europe to US$215.2 million, while in Asia revenue increased 96.3% to US$128.6 million. Gross profit decreased -11.1% to US$619.7 million, and loss from operations was US$42.6 million in the quarter, or 4% of total revenue.

For the fiscal year ended April 1, 2017, total revenue decreased 4.6% to US$4.49 billion from US$4.71 billion in fiscal 2016. On a constant currency basis, total revenue decreased 4.4%. Gross profit dropped 4.9% to US$2.66 billion, and as a percentage of total revenue was 59.2%.

On May 31, the Company announced that it intends to improve the profitability of its store fleet by closing between 100 and 125 of its full-price retail stores over the next two years. Over this time period, it expects to incur approximately US$100 - US$125 million of one-time costs associated with store closures. Collectively, it anticipates ongoing annual savings of US$60 million as a result of store closures and the lower depreciation and amortisation associated with these impairment charges.

At April 1, 2017, Michael Kors operated 827 retail stores, including concessions, compared with 668 retail stores, including concessions, at the end of the same prior-year period. It also had 133 additional retail stores, including concessions, operated through licensing partners.

“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”, said John D. Idol, Chairman and CEO, Michael Kors.

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