2017 performance review
Fiscal 2017 was a tough year for Michael Kors (KORS). The company posted a year-over-year (or YoY) sales decline in all four quarters. For fiscal 2017, total sales fell 4.6% YoY to $4.5 billion. Management blamed increasing competition and a highly promotional environment for the slowdown.
Close competitor Coach (COH), however, recorded a 3.9% YoY jump in LTM (last-12-month) sales, which stood at $4.5 billion. The company is in the process of implementing a transformation plan in order to push sales and margins and better compete in the fiercely competitive US retail landscape.
Talking about KORS’ wholesale and retail segments
Both the retail and wholesale businesses remained under pressure in 2017. Comparable-store sales stayed negative through all four quarters, bottoming with a 14% decline in 4Q17.
Wholesale’s performance was even worse. The segment recorded a 17% decline in sales, largely driven by the company’s decision to reduce its departmental store footprint and promotional days.
Looking into 2018
Management expects a further slowdown in fiscal 2018. The top line is forecast to contract more than 5% to $4.25 billion, mainly driven by to tighter inventory control and reduction in promotional days.
Wholesale net sales are projected to decline at a low-teens rate. Retail sales are likely to remain flat with a high single-digit rate decline in sales comps. The company also plans to close 20 to 40 full-price stores in fiscal 2018 and another 80 to 85 stores next year.
For the first quarter of 2018, management has predicted a 6% to 8% decline in the top line. Sales comps are likely to fall at a high single-digit rate during the quarter.
ETF investors seeking to add exposure to KORS can consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF), which invests 1.6% of its portfolio in the company.