CG Stocks Analysis= Michael Kors Holdings Ltd (NYSE:KORS), Fiat Chrysler Automobiles NV (NYSE:FCAU)

Michael Kors Holdings Ltd (KORS) recently declared its financial results for the fiscal 2017 third quarter ended December 31, 2016.

For the third quarter ended December 31, 2016:

  • Total revenue reduced 3.2% to $1.35 billion from $1.40 billion in the third quarter of fiscal 2016. On a constant currency basis, total revenue reduced 2.6%.
  • Retail net sales raised 9.2% to $836.7 million driven mainly by 193 net new store openings since the end of the third quarter of fiscal 2016, counting 143 stores associated with the Company’s recent acquisitions of the formerly licensed operations in Greater China and South Korea. Comparable sales reduced 6.9%. On a constant currency basis, retail net sales raised 10.0%, and comparable sales reduced 6.4%. Wholesale net sales reduced 17.8% to $473.1 million and on a constant currency basis, wholesale net sales reduced 17.5%. Licensing revenue reduced 22.9% to $43.0 million.
  • Total revenue in the Americas reduced 7.4% to $983.8 million on a stated basis and reduced 7.5% on a constant currency basis. European revenue reduced 7.0% to $256.7 million on a stated basis, and reduced 2.7% on a constant currency basis. Revenue in Asia raised 89.1% to $112.3 million on a stated basis, and raised 84.0% on a constant currency basis, mostly driven by the Company’s recent acquisitions of the formerly licensed operations in Greater China and South Korea.
  • Gross profit reduced 3.1% to $805.7 million, and as a percentage of total revenue was 59.6%. Foreign currency translation and transaction favorably influenced gross profit margin by about 30 basis points. This compares to gross margin of 59.5% in the third quarter of fiscal 2016.
  • Income from operations was $341.9 million, or 25.3% as a percentage of total revenue. This compares to $409.3 million, or 29.3% as a percentage of total revenue, for the third quarter of fiscal 2016.
  • Net income attributable to MKHL was $271.3 million, or $1.64 per diluted share, based on a 20.6% tax rate and 165.2 million weighted average diluted shares outstanding. Net income attributable to MKHL for the third quarter of fiscal 2016 was $294.6 million, or $1.59 per diluted share, based on a 28.0% tax rate and 184.9 million weighted average diluted shares outstanding.
  • At December 31, 2016, the Company operated 816 retail stores, counting concessions, contrast to 623 retail stores, counting concessions, at the end of the same prior-year period. The Company had 128 additional retail stores, counting concessions, operated through licensing partners. Counting licensed locations, there were 944 Michael Kors stores worldwide at the end of the third quarter of fiscal 2017.

John D. Idol, the Company’s Chairman and Chief Executive Officer, said, “During the quarter, we delivered earnings per share results that were in line with our expectations and we continued to focus on our growth pillars, which are centered on consistently delivering innovative fashion products for our customers and enhancing consumer engagement with the Michael Kors brand worldwide. We were happy with the response to our new Fall and holiday handbag collections in addition to the launches of our Michael Kors ACCESS line of wearable technology and our new Wonderlust fragrance. We also saw great consumer response to our new digital flagships in Europe, and are excited to further expand our omni-channel presence as we deepen our relationship with consumers globally. In addition, we continued our expansion in Asia, which we believe represents a $1 billion opportunity over the long term. Overall, we were disdesignated with our North American and European comparable store sales performance during the quarter. We believe that headwinds in these markets will continue throughout the Spring season as we face reduced traffic trends in shopping malls, currency fluctuation, uncertainty surrounding certain political changes in European countries and the implementation of our reduced promotional cadence in North America. While we face certain challenges in the short term, we continue to believe that there is meaningful long-term growth ahead for the company as we focus on maintaining our luxury leadership position while expanding the Michael Kors brand internationally.”

For the first nine months ended December 31, 2016:

  • Total revenue reduced 2.4% to $3.43 billion from $3.51 billion in the same period of fiscal 2016. On a constant currency basis, total revenue reduced 2.3%.
  • Retail net sales raised 9.6% to $2.00 billion. Comparable store sales reduced 6.6%. On a constant currency basis, retail net sales grew 9.9%, and comparable sales reduced 6.5%. Wholesale net sales reduced 15.0% to $1.32 billion and on a constant currency basis, wholesale net sales reduced 15.0%. Licensing revenue reduced 18.4% to $112.4 million.
  • Total revenue in the Americas reduced 7.9% to $2.42 billion on a stated and constant currency basis. European revenue reduced 1.0% to $728.7 million on a stated basis, and raised 1.0% on a constant currency basis. Revenue in Asia raised 87.4% to $280.5 million on a stated basis, and raised 80.6% on a constant currency basis, mostly driven by the Company’s recent acquisitions of the formerly licensed operations in Greater China and South Korea.
  • Gross profit for the first nine months reduced 2.8% to $2.04 billion, and as a percentage of total revenue was 59.5%. Foreign currency translation and transaction favorably influenced gross profit margin by about 40 basis points. This compares to gross margin of 59.8% in the same period in fiscal 2016.
  • Income from operations for the first nine months was $732.5 million, or 21.4% as a percentage of total revenue. For the same period of fiscal 2016, income from operations was $931.0 million, or 26.5% as a percentage of total revenue.
  • Net income attributable to MKHL for the first nine months was $579.3 million, or $3.40 per diluted share, based on a 20.8% tax rate and 170.2 million weighted average diluted shares outstanding. Apart From $8.9 million after-tax, or $0.06 per diluted share, of one-time costs related to the acquisition of the Company’s Greater China licensee, net income attributable to MKHL for the first nine months of fiscal 2017 was $588.2 million, or $3.46 per diluted share. Net income attributable to MKHL for the same period in fiscal 2016 was $662.1 million, or $3.45 per diluted share, based on a 28.6% tax rate and 192.1 million weighted average diluted shares outstanding.

Fiat Chrysler Automobiles NV (FCAU) designs, engineers, manufactures, distributes, and sells vehicles, components, and production systems. The company operates through six segments: NAFTA, LATAM, APAC, EMEA, Maserati, and Components. It provides passenger cars, light trucks, and light commercial vehicles under the Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, and Ram brand names; and luxury vehicles under the Maserati brand, in addition to after-sales services and parts under the Mopar brand. The company also produces and sells lighting components, body control units, suspensions, shock absorbers, electronic systems, exhaust systems, powertrain components, engine control units, plastic molding components, and after-market under the Magneti Marelli brand name. In addition, it offers cast iron components for engines, gearboxes, transmissions and suspension systems, and aluminum cylinder heads under the Teksid brand; and designs and produces industrial automation systems and related products for the automotive industry under the Comau brand name. Further, the company is involved in media and publishing businesses. It sells its products directly, or through distributors and dealers in about 150 countries. Fiat Chrysler Automobiles N.V. was founded in 1899 and is based in London, the United Kingdom.

 

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