Michael Kors Holdings Financial Analysis

Michael Kors Holdings Limited

Michael Kors Holdings Limited is a US-based luxury fashion company. The company was founded in 1981 by his designer (Michael Kors Halme, M., & Rissanen, A, 2017).

Items for Sale

Items for sale include watches, shoes, accessories, and handbags (Seeking Alpha, 2017).

Financial Performance

On May 31, 2017, the Company reported his fourth quarter and fiscal year 2017 (Seeking Alpha, 2017). The company’s total revenue fell a whopping 11.2% in the fourth quarter from the previous period, according to data and accounting records. Diluted value per share decreased by $0.17, adjusted by $0.73 with the exclusion of the charges for impairment (Seeking Alpha, 2017).

Fiscal Year Sales

The fiscal year for the company had ended on April 1st which also marked the end of the fourth quarter. The retail sales for the period had increased by 0.5% to make 575.3 million, which could be primarily attached to 159 net sales for the new store, that had opened from the end of the 4th quarter of the fiscal year 2016 which has the inclusion of about 111 stores which the company had acquired (Seeking Alpha, 2017).

Revenue by Region

The comparable sales had reduced by 14.1% while the sales had increased by 1.1% in currency terms. The wholesale net sales had reduced by 22.8% which represented $456.1 million on a constant currency base, but the quantity basis wholesale net sales increased by 22.3% (Seeking Alpha, 2017). The revenue attached to licensing was decreased by 6.2% which ended at 33.4 million. The total revenue, in the market in America, had decreased by 18% which represented $721 million on the reported base, and reduced by 18.3% on the currency basis which is constant (Seeking Alpha, 2017). The market in Europe had decreased revenue by 15.3% which ended to 215.2 million on the reported basis and 11.5% on currency basis which is constant (Seeking Alpha, 2017). In Asia, the revenue improved by 96.3% which represented 128.6 million on the reported basis and improved by 95.1% on the currency basis which is constant (Seeking Alpha, 2017). By the close of books of the fiscal year, the company was operating 827 retail stores which included, concessions, which is compared to 668 retails stores, in the previous similar period (Seeking Alpha, 2017).

Lenders’ Perspective

Michael Kors investors who have been investing in lending have different areas which they are attracted to from the firm (Seeking Alpha, 2017). The lenders have been lending funds to the company in the form of bonds or other forms which the company uses for expansion purposes.

Profitability and Asset Value

The lenders are more interested in the profits of the firm and the value of assets at the close of the fiscal year. The company had a loss of 26.8 million as which is not an attractive message to the lenders who expect the company to make profits to create confidence that the company is still a going concern and can pay them Penman, (S. H., & Penman, S. H. (2017). The lenders are also interested in the asset value which it could be sold to clear the debts the company may have in case the company suffers a liquidity problem. From the asset value, the lenders would be interested in the current ratio which guarantees the ability of the company’s assets to settle the debts (Seeking Alpha, 2017).

Press Release Analysis

Balance Sheet

3a. i. Yes, the Company had a press release which contained a well-structured balance sheet. ii. The company has used the terms, Consolidated Balance Sheets to show the balance sheet for the group of companies (Seeking Alpha, 2017).

Income Statement

3b. i. Yes, the company has an income statement in its press release. ii. No, the company’s press release has used the terms, “condensed consolidated statements of operations,” in place of the income statement (Seeking Alpha, 2017). iii. The information in the document proved that it was an income statement, which ranges from sales, cost of goods sold, expenses, and net income/loss which are features of an income statement (Seeking Alpha, 2017).

Financial Reporting Currency

3C. The company has used the dollar amounts for reporting its financial statements, which is represented by the sign ($) to show the currency represented in dollars (Seeking Alpha, 2017). The company has used the USD signs before any figures in the financial statements. The statements are there regarding dollar denominations.

Analysis of Resources

Assets

4. a. the company has reported the resources which include, property and equipment, intangible assets, goodwill, deferred tax, and current assets. The resources owned by a company are represented by the assets (Seeking Alpha, 2017). The data of assets is found in the consolidated balance sheet of the company.

Common Stock Shareholders’ Claims

b. The common stock shareholders have no claim to the company for the year. The company pays from the amounts earned in the form of income which is distributed to the shareholders. The company has not received any profit, and therefore the common stock shareholders have no legal claims to the company (Seeking Alpha, 2017).

Total Shareholders’ Claims

c. The total claims for the shareholders are 814.6 million dollars. The owings to the shareholders are represented by the liabilities it in the company. They are current liabilities, deferred rent, long-term debt, and deferred tax liabilities which are all found in the liability party of the balance sheet (Seeking Alpha, 2017).

Sales on Credit Basis

5. The company sells some of its products on a credit basis. It is proved by the amounts in the account receivable for the company which amounts to $265.8 (Seeking Alpha, 2017). Account receivables are mainly based on the amount which the customers owe to the company for goods sold on credit.

Effects of Technological Change

6. The company has been affected by the change in the technology of production. The company has had high losses over the other past periods which is way too reducing over the period. The losses have been reducing from the past fiscal period all the way to the current quarter results. The change in profit has been for a long period been attached to the changes in production, which it is recovering from (Seeking Alpha, 2017). The change in technology leads to losses in the first instance, but the losses have been reducing from one period to the other due to changes in production. The company CEO has also acknowledged that the company has been facing different issues in the environment on the retail market. The matter has mostly affected the promotional levels (Seeking Alpha, 2017).

Risks and Challenges

Risks Identified by the Chairman and CEO

7. a. John D. Idol, who is the chairman of the company and the CEO, quoted some of the risks the company has been operating in for the year to be difficulty in operating in the retail market environment which is associated with promotional levels (Seeking Alpha, 2017). The product stores failed to have enough engagement and make the consumers excited. Fashion and innovations have been a challenge to the company on the accessories. The firm has also been opening different outlets which have been bringing the cost of operations high (Seeking Alpha, 2017).

Fashion Innovations and Market Competition

B. The fashion innovations have been a challenge for the company. Different companies have been coming up from one year to the other. It has therefore left a loss for all the companies which have not taken into consideration the fashion innovations (Seeking Alpha, 2017). If the company doesn’t put forth the act of developing different innovations in producing, then the company may be at risk of losing in the market. If the consumers run from the company’s old fashions to adopt other companies’ fashions, then the amount of profit will be reduced or even leading to losses for the company (Seeking Alpha, 2017). The company’s profit base is only increased or maintained high when the company sells more.

References

Seeking Alpha (2017). Michael Kors Holdings Limited Announces Fourth Quarter and

Annual Fiscal 2017 Results. Retrieved from:https://seekingalpha.com/pr/16847406-michael-kors-holdings-limited-announces-fourth-quarter-annual-fiscal-2017-results. Accessed on 24th Oct 2017.

Halme, M., & Rissanen, A. (2017). The Influence of Finnish Culture on the Success of

Luxury Brands: Case Michael Kors.

Penman, S. H., & Penman, S. H. (2017). Financial statement analysis and security

valuation (p. 476). New York: McGraw-Hill.