Michael Kors Holdings Ltd. is joining a growing list of brands and retailers ditching stores in a bid to navigate an increasingly digital retail landscape.
Over the next two years there will be about 100 to 125 fewer full-price Michael Kors outposts, the company revealed in its fourth-quarter earnings release today.
According to Michael Kors chairman and CEO John Idol, the firm grappled with heavy promotions as well as company-specific challenges, leading Q4 sales to tumble 11.2 percent+ to $1.06 billion. Those results narrowly beat market watchers’ estimate for sales of $1.04 billion.
“Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels,” Idol said in a release. “In addition, our product and store experience did not sufficiently engage and excite consumers.”He added, “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.”
The company — which has been rumored to be courting Jimmy Choo after a reported failed attempt to snap up Kate Spade & Co. this year — posted a net loss of $26.8 million, or 17 cents per diluted share. Adjusted net income was $118 million, or 73 cents per diluted share, which also beat estimates predicting earnings of 70 cents per share.
In addition to planned store closures, for the year ahead, Michael Kors management also provided a disappointing outlook.
For the first quarter of fiscal 2018, the firm anticipates total revenue of between $910 million and $930 million, and a comparable sales decrease in the high-single-digit range. Diluted earnings per share are expected to be in the range of 60 cents to 64 cents. Analysts had expected the firm to predict revenues of $950 million and diluted EPS of 75 cents.
For the full year, the company expects total revenue to be about $4.25 billion and for comparable sales to decrease in the high-single-digit range. Diluted earnings per share are expected to be in the range of $3.57 to $3.67.
“Looking ahead, as we expand the fashion innovation in our accessories assortments, right-size our store fleet and elevate our store experience, fiscal 2018 will be a transition year in which we establish a new baseline before returning to long-term growth,” Idol said. “We have a strong brand, led by Michael Kors, with a history of fashion innovation and leadership, a global footprint with stores positioned in the best locations around the world and the marketing expertise to effectively convey our fashion stories.”
The company expects to generate an ongoing annual savings of about $60 million due to its store closures.
As of 9:35 a.m., Michael Kors stock had shed 9.4 percent to $32.86.