2013.11.19 ms conference v2
TRANSCRIPT
-
8/9/2019 2013.11.19 MS Conference V2
1/27
November 2013
-
8/9/2019 2013.11.19 MS Conference V2
2/27
DISCLAIMER
2
Certain information contained in this presentation, particularly information regarding future economic performance, finances, andexpectations and objectives of management, constitutes forward-looking statements. Forward-looking statements can be identifiedby the fact that they do not relate strictly to historical or current facts and generally contain words such as “believes,” “expects,”“may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or similar expressions. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected orimplied by the forward-looking statement. For discussion of some of the important factors that could cause these variations, pleaseread the "Risk Factors" section and elsewhere in the Company’s Annual Report on Form 10-K (File No. 001-35308), filed on May 29,2013 with the U.S. Securities and Exchange Commission.
Forward-looking statements contained in this presentation are based on assumptions that we have made in light of ourmanagement’s experience in the industry as well as our perceptions of historical trends, current conditions, expected future
developments and other factors that we believe are appropriate under the circumstances. You should not place undue reliance onforward-looking statements, which speak only as of the date hereof. We do not undertake to update or revise any forward-lookingstatements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicablelaw.
This presentation includes certain measures presented on a basis other than in accordance with generally accepted accountingprinciples (GAAP), including Income from Operations, as adjusted and Net Income, as adjusted. These amounts are not analternative to GAAP. Management believes that these measures provide investors with transparency by helping to illustrate theunderlying financial and business trends relating to the Company's results of operations and financial condition and comparabilitybetween current and prior periods. Investors are encouraged to review the reconciliation of such measures to the most directly
comparable GAAP term, included as an Appendix to this presentation.
FORWARD LOOKING STATEMENTS
USE OF NON-GAAP FINANCIAL MEASURES
-
8/9/2019 2013.11.19 MS Conference V2
3/27
JET SET LUXURY
-
8/9/2019 2013.11.19 MS Conference V2
4/27
Global luxury lifestyle brand with compelling growth metrics
Design vision led by world-renowned, award-winning designer
Poised to take share in growing global accessories product category
Proven retail format offers jet-set in-store experience
Strong relationships with premier wholesale customers
Growing licensing business
Experienced management team
INVESTMENT HIGHLIGHTS
4
-
8/9/2019 2013.11.19 MS Conference V2
5/27
GROWING GLOBAL LUXURY MARKET
The global luxury goods market is estimatedto grow from $283 billion in 2012 tobetween $320 billion and $333 billion in2015E (1)
― Growth fueled by emerging markets andaccessories
Accessories were 27% of total sector sales in
2012― Grew by 14% in 2012
Worldwide Luxury Goods Market (1)
($ Billions)
Source: Bain & Company Luxury Goods Worldwide Market Study, 11th Edition, October 2012
Asia Pacific
(Excl. Japan)
2012 Revenue Spli t by Geography
35%
31%
20%
9%
5%
Europe
Americas
Japan
Rest of World
2012 Revenue Split by Category
Perfume
and Cosmetics
Apparel
Accessories
Hard Luxury
Other Art
27%
26%
27%20%
22%
3%2%
0
100
200
300
1995 2000 2005 2010 2012 2015E
102
170196
230
320 - 333
(1) All figures derived from the Luxury Goods Worldwide Market Study are based on an exchange rate of $1.33 to €1.00
283
5
-
8/9/2019 2013.11.19 MS Conference V2
6/27
REVENUE BY PRODUCT
Accessories and related merchandise accounted for 83% of total net sales during the second
quarter of FY 2014, compared to 79% during the same period last year
We expect these products to continue to grow and become an increasingly important driver ofglobal comparable store sales growth
6
Product Mix
FY 2014 Q2
83%
17%
Women’s Apparel,Men’s Apparel
Accessories andRelated Merchandise (1)
(1) Includes handbags, small leather goods, footwear, watches, jewelry, eyewear and fragrances
-
8/9/2019 2013.11.19 MS Conference V2
7/27
MICHAEL KORS COLLECTIONS
Introduced in 1981
Reflects the pinnacle of luxury in
accessories, womenswear andmenswear
Cornerstone of Michael Kors semi-annual runway shows
Establishes the aesthetic authority of theentire brand
Introduced in 2004
Positioned to address a younger
demographic in the accessible luxurysegment
Focuses on the accessories market
7
-
8/9/2019 2013.11.19 MS Conference V2
8/27
DESIGN PROCESS
Michael Kors leads the overall designdirection of the Company
He is actively involved in the design
process and personally reviews the
majority of the Company’s designs
A team of 60 designers supportsMichael Kors
The Company’s global reputation
enables it to attract and retain top
design talent
Product is designed to support retailmerchandising
Four collections are produced annually
Collections are delivered 12 times per
year
8
-
8/9/2019 2013.11.19 MS Conference V2
9/27
GROWTH STRATEGIES
Expand North American retail presence
Increase global comparable store sales
Continue conversion of department store doors into branded shop-in-shops
globally
Develop European retail and wholesale businesses
Build out Japanese business
Grow other regions in the Far East through regional licenses
Establish global ecommerce business to provide true omni channel customerexperience
Key Initiatives Underway
9
-
8/9/2019 2013.11.19 MS Conference V2
10/27
RETAIL STORE GROWTH
Michael Kors Retail Store Count (1) by Region
FYE March
North America Europe Japan
New store growth strategy:
– Open new stores predominantly in high-traffic areas and mall locations in high-incomedemographic areas
– Adhere to already successful retail store format, which reinforces brand image and generatesstrong sales per square foot
10(1) Includes concessions
2009A 2010A 2011A 2012A 2013A 2Q14A Long-Term Goal
74 104144
191 231264
400
2 17
2944
57
200
5
1729
31
100
74106
166237
304352
700
-
8/9/2019 2013.11.19 MS Conference V2
11/27
SELECT RETAIL LOCATIONS
MADISON AVENUE, NEW YORK REGENT STREET, LONDON
-
8/9/2019 2013.11.19 MS Conference V2
12/27
Small leather goods should
continue to represent ~15% of
retail store sales over the long-
term
Small Leather Goods
Logo handbags, small leather
goods and active footwear
should continue to represent
~30% of retail sales
Logo Products
Launched in retail stores in Fall
2011, this new product
category is expected to
represent ~5% of retail sales in
the long-term
Fashion Jewelry
COMPARABLE STORE GROWTH DRIVERS
12
FY07 FY08 FY09 FY10 FY11 FY12 FY13
16 18
6
19
48
39 40
FYE March
Positive Comparable Store Sales Growth for 30 Consecutive Quarters
4639 38 36 37
4541
37
2723
(%) (%)
Annual Comparable Store Sales Growth Quarter ly Comparable Store Sales Growth
FYE March
Comparable store sales growth driven by increased traffic as brand awareness continues to grow and our
expanded product of fering attracts a broader customer base.
-
8/9/2019 2013.11.19 MS Conference V2
13/27
E-COMMERCE
Communicate brand image via full product assortment displayed on website
– Reinforce the luxury image of Michael Kors
– Communicate directly with customers and drive store traffic
Transition of e-commerce in-house underway
– Current website operated in partnership with Neiman Marcus (launched in 2007)
13
-
8/9/2019 2013.11.19 MS Conference V2
14/27
WHOLESALE GROWTH INITIATIVES
Continue to transform North American department store locations into branded shop-
in-shops with custom fixtures
Expand size of existing department store shop-in-shops
Grow wholesale distribution in Europe to 2,000 specialty shop and department store
doors in the long term
Expand shop-in-shop footprint at select department stores throughout Europe
14
-
8/9/2019 2013.11.19 MS Conference V2
15/27
GLOBAL WHOLESALE CUSTOMERS
North America Europe Asia
International Wholesale Doors: 1,197 (1)Total N.A. Doors: 2,294 (1)
(1) Represents full-price department stores and specialty retailers as of September 28, 201315
-
8/9/2019 2013.11.19 MS Conference V2
16/27
Opportunity to grow through a select number of licensees who produce brand-enhancing productsacross categories that require specialized expertise
F r a g r a n c e s
Estee Lauder has been the exclusive women’s and men’s fragrance licensee since May 2003
Launched new Michael Kors Fragrance and Beauty Collection in August 2013
Price points range from $20 to $115
E y e w e a r Marchon has been the exclusive eyewear licensee since January 2004
Focus on logo / status eyewear
Price points range from $85 to $285
Fossil has been the exclusive watch licensee since April 2004
Watches are “must-have" status item among young fashion consumers
Brand loyalty among younger customers creates opportunity to leverage success across otherdemographics
Price points range from $150 to $500
W a t c h e s
J e w e l r y
Fossil has been the exclusive fashion jewelry licensee since December 2010
Jewelry line consists of bracelets, necklaces, rings and earrings that complement watch andaccessory lines
Price points range from $45 to $400
LICENSING PARTNERS
16
-
8/9/2019 2013.11.19 MS Conference V2
17/27
Seasoned management team in the luxury and branded lifestyle sectors with an
average of over 25 years experience in the retail industry
MANAGEMENT
Name Title Years in Indust ry Years at MK
Michael Kors Honorary Chairman, Chief Creative Officer &Director
34 32
John Idol Chairman, Chief Executive Officer & Director 31 10
Joe Parsons Executive Vice President, Chief Financial Officer,Chief Operating Officer & Treasurer
24 9
Anna Bakst Group President – Accessories & Footwear 23 9
Jaryn Bloom Group President – Retail 27 8
Gia Castrogiovanni Group President – Women’s Better & Collection 27 9
Debra Margles President – Canada 28 8
Toshi Tashiro President – Japan 42 3
Cedric Wilmotte President – EMEA 15 5
Jill Fishman SVP – Global Licensing 19 8
Lee Sporn SVP – Business Affairs, General Counsel &Secretary
24 9
Britton Russell SVP – Global Operations 25 1
17
-
8/9/2019 2013.11.19 MS Conference V2
18/27
FINANCIAL OVERVIEW
-
8/9/2019 2013.11.19 MS Conference V2
19/27
FY 2010 FY 2011 FY 2012 FY 2013 1H FY13 1H FY14
56137
272
630
270
419
HISTORICAL FINANCIAL SUMMARY
19
28.920.917.011.1Margin (%) 28.5 30.3
FYE March
Adjusted Income from Operations (1)
($ Millions)
FY 2010 FY 2011 FY 2012 FY 2013 1H FY13 1H FY14
3973
163
398
166
271
18.212.59.07.7Margin (%) 17.6 19.6
FYE March
Adjusted Net Income (1)
($ Millions)
FY 2010 FY 2011 FY 2012 FY 2013 1H FY13 1H FY14
508
803
1,3022,182
948
1,381
FYE March
Total Revenue
($ Millions)
FY 2010 FY 2011 FY 2012 FY 2013 1H FY13 1H FY14
267
446
7531,307
567
847
59.957.855.552.5Margin (%) 59.8 61.3
FYE March
Gross Profit
($ Millions)
(1) For Fiscal 2012, amounts are adjusted for certain one-time charges. Please refer to Appendix fornon-GAAP reconciliation.
-
8/9/2019 2013.11.19 MS Conference V2
20/27
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
FY10 FY11 FY12 FY13 1H FY13 1H FY14
297414
610
1,032
453642
187
344
627
1,063
457
681
25
46
65
87
37
57
508
803
1,302
2,182
948
1,381
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
FY10 FY11 FY12 FY13 1H FY13 1H FY14
497
764
1,183
1,939
849
1,17011
39
109
221
90
196
1
10
22
9
16
508
803
1,302
2,182
948
1,381
REVENUE BY SEGMENT AND REGION
By Segment
Wholesale Retail Licensing North America Europe Japan and Other Regions
(1) Total revenue as recognized based on country of origin
($ Millions)
FYE March
20
By Region (1)
($ Millions)
FYE March
-
8/9/2019 2013.11.19 MS Conference V2
21/27
STRONG FISCAL 2Q 2014 PERFORMANCE
21
2Q 2014 vs. 2Q 2013 Summary Financials Highlights
($ Millions, except per share data)
Three Months Ended
September 28,
2013
September 29,
2012
%Growth/
Margin Exp (bps)
Total Revenue 740 533 39%
Gross Profit 450 316 42%
Gross Margin 61% 59% +150 bps
Income fromOperations 221 158 40%
% Margin 30% 30% +30 bps
Net Income 146 98 49%
% Margin 20% 18% +200 bps
Net Income Per
Ordinary Share:Diluted $0.71 $0.49 45%
Retail
– Global comparable store sales growth of 23% drivenby continued strength of accessories line
– Opened 24 stores globally during the quarter
– Ending store count of 352
Wholesale
– Net sales growth of 30%
– Continued strong sell-through
– Continued conversion of wholesale departmentstore doors into shop-in-shops, resulting inincreased sales volume per door
Licensing
– Revenue growth of 65% driven by continuedstrength in the company’s luxury watches
Gross Margins expanded 150 bps largely due to morefavorable product and geographic mix
-
8/9/2019 2013.11.19 MS Conference V2
22/27
STRONG FINANCIAL POSITION
Net cash position and strong liquidity
New store growth funded from cash flow from operations
Capital expenditures to support long-term growth, store openings, shop-in-
shops, warehouse, corporate and information systems
22
-
8/9/2019 2013.11.19 MS Conference V2
23/27
Global luxury lifestyle brand with compelling growth metrics
Design vision led by world-renowned, award-winning designer
Poised to take share in growing global accessories product category
Proven retail format
Strong relationships with premier wholesale customers
Growing licensing business
Experienced management team
INVESTMENT HIGHLIGHTS
23
-
8/9/2019 2013.11.19 MS Conference V2
24/27
APPENDIX
24
-
8/9/2019 2013.11.19 MS Conference V2
25/27
NON-GAAP RECONCILIATION FOR FISCAL 2012
25
Reconciliation of income from operations, as reported, to income from operations, as adjusted
($ Thousands)
March 30, March 31,
2013 2012
Income from operations, as reported 630,014$ 247,682$
Add back adjustments for one time charges:
Stock option expense - 10,600
IPO fees - 3,170
Employee share option redemption - private placeme - 10,690
Income from operations, as adjusted 630,014$ 272,142$
Fiscal Year Ended
Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude
certain charges or credits such as transaction expenses related to the Company's IPO, Stock option expense and other offering fees. These amounts are not in accordance with, or
an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business
trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and
monitor budgets and operational goals and to evaluate the performance of the Company.
-
8/9/2019 2013.11.19 MS Conference V2
26/27
NON-GAAP RECONCILIATION FOR FISCAL 2012
26
Reconciliation of net income, as reported, to net income, as adjusted
Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude
certain charges or credits such as transaction expenses related to the Company's IPO, Stock option expense and other offering fees. These amounts are not in accordance with, or
an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business
trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and
monitor budgets and operational goals and to evaluate the performance of the Company.
($ Thousands)
March 30, March 31,
2013 2012
Net income, as reported 397,602$ 147,364$
Add back adjustments for one time charges:Stock option expense - 10,600
IPO fees - 3,170
Employee share option redemption - private placeme - 10,690
Less tax benefit on above - (8,686)
Net income, as adjusted 397,602$ 163,138$
Weighted average ordinary shares outstanding:
Diluted 201,540,144 189,299,197
Fiscal Year Ended
-
8/9/2019 2013.11.19 MS Conference V2
27/27