Investor Presentation June 2012
DISCLAIMER FORWARD LOOKING STATEMENTS Certain information contained in this presentation, particularly information regarding future economic performance, finances, and expectations and objectives of management, constitutes forward-looking statements. Forward-looking statements can be identified by 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 forwardlooking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied by the forward-looking statement. For discussion of some of the important factors that could cause these variations, please read the Risk Factors section of the Company s Annual Report filed on Form 20-F. Forward-looking statements contained in this presentation are based on assumptions that we have made in light of our management 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 on forward-looking statements, which speak only as of the date hereof. We do not undertake to update or revise any forward-looking statements after they are made, whether as a result of new information, future events, or otherwise, except as required by applicable law. USE OF NON-GAAP FINANCIAL MEASURES This presentation includes certain measures presented on a basis other than in accordance with generally accepted accounting principles (GAAP), including Adjusted Operating Income, Adjusted Net Income and Adjusted Earnings per Share. These amounts are not an alternative to GAAP. Management believes that these measures provide investors with transparency by helping to 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. Investors are encouraged to review the reconciliation of such measures to the most directly comparable GAAP term, included as an Appendix to this presentation. 2
JET SET LUXURY
INVESTMENT HIGHLIGHTS Rapidly growing 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 multi-format retail segment with significant growth opportunity Strong relationships with premier wholesale customers Growing licensing segment Proven and experienced management team 4
MICHAEL KORS COLLECTIONS Introduced in 1981 Reflects the pinnacle of luxury in accessories, womenswear and menswear Cornerstone of Michael Kors semi-annual runway shows Establishes the aesthetic authority of the entire brand Introduced in 2004 Positioned to address a younger demographic in the accessible luxury segment Focuses on the accessories market 5
DESIGN PROCESS Michael Kors leads the overall design direction of the Company He is actively involved in the design process and personally reviews the majority of the Company s designs Michael Kors is supported by a team of 50 designers Our global reputation enables us to attract and retain top design talent Four collections produced annually Collections are delivered 12 times per year Product is designed to support retail merchandising 6
REVENUE BY PRODUCT Accessories and related merchandise accounted for 75% of total revenue in FY 2012 These products will continue to grow and become an increasingly important driver of global comparable store sales growth Product Mix FY 2012 Product Mix Outlook Women s Apparel, Men s Apparel, and Other 25% Women s Apparel, Men s Apparel, and Other 15-20% Accessories and Related Merchandise (1) 75% Accessories and Related Merchandise (1) 80-85% (1) Includes handbags, small leather goods, footwear, watches, jewelry, eyewear and fragrances 7
REVENUE BY SEGMENT AND REGION By Segment By Region (1) 1000 FYE March ($ Millions) 1,302 65 1200 FYE March ($ Millions) 1,302 10 109 800 600 400 397 20 114 508 25 187 803 46 344 627 610 1000 Accessories (1) 800 600 400 397 1 508 11 803 1 39 764 1,183 200 263 297 414 200 397 497 0 2009A 2010A 2011A 2012A 0 2009A 2010A 2011A 2012A Wholesale Retail Licensing North America Europe Japan and Other Regions (1) Total revenue as recognized based on country of origin 8
RAPID GLOBAL GROWTH Total Revenue Adjusted Net Income (1) FYE March ($ Millions) 1,200 1,302 FYE March ($ Millions) 150 163 120 900 803 90 73 600 508 397 60 39 300 30 13 0 2009A 2010A 2011A 2012A 0 2009A 2010A 2011A 2012A (1) For Fiscal Year 2012, amounts are adjusted for certain one-time charges. Please refer to Appendix for non-gaap reconciliation. 9
MANAGEMENT Seasoned management team in the luxury and branded lifestyle sectors with an average of over 25 years experience in the retail industry, including a number of public companies Name Title Years in Industry Years at MK Michael Kors Honorary Chairman, Chief Creative Officer & Director 33 31 John Idol Chairman, Chief Executive Officer & Director 30 9 Joe Parsons Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer 23 8 Anna Bakst President Accessories & Footwear 22 8 Jaryn Bloom President Retail 26 7 Gia Castrogiovanni President Women s 26 8 Debra Margles President Canada 27 7 Toshi Tashiro President Japan 41 2 Cedric Wilmotte SVP Europe 14 4 Jill Fishman SVP Global Licensing, Marketing 18 7 Lee Sporn SVP Business Affairs, General Counsel & Secretary 23 8 10
MARKETING / PUBLIC RELATIONS STRATEGY Print & Online Advertising A leading advertiser in global fashion publications Catalog published three times per year Our online advertising is expected to account for a large portion of our advertising expense Use of social media to build brand awareness Fashion Shows Reinforces Michael Kors designer status and high-fashion image Creates excitement around the Michael Kors collection Global coverage by online and print media Editorial Strong relationships with the fashion and trade press Maintains the reputation and designer status profile of the Michael Kors brand Allows us to market key seasonal fashion products Project Runway Huge marketing asset unique to Michael Kors Builds awareness of chief designer Leverages the popularity of the show to broaden brand awareness E-Commerce Communicates brand image with full product assortment displayed on website Reinforces the luxury image of our brands Allows us to communicate directly with customers and drive store traffic 11
GROWTH STRATEGIES Several Key Initiatives Are Underway to Grow Sales Expand North American retail presence Seek to expand to approximately 400 retail stores in the long-term Increase size of existing stores Drive outstanding comparable store sales growth Introduce new product categories such as fashion jewelry to further drive comparable store sales Expansion of current product categories including logo products and small leather goods Grow North American shop-in-shops at select department stores Continue to convert selling space into shop-in-shops Increase number and expand size of existing shop-in-shops Develop European retail and wholesale businesses Leverage fully-integrated selling offices in London, Milan, Munich, Paris and Madrid to drive continued retail and wholesale expansion Seek to increase number of stores to approximately 100 locations and $500 million in revenue in the long-term Build out Japanese business Established wholly-owned Japanese subsidiary in 2010 Capitalize on existing relationships with top Japanese department stores Seek to increase number of stores to approximately 100 locations in the long-term 12
RETAIL STORE GROWTH New store growth strategy: Open new stores in high-traffic street and mall locations, predominately in high-income demographic areas Adhere to already successful retail store format, which reinforces brand image and generates strong sales per square foot Michael Kors Retail Store Count (1) by Region FYE March 600 166 106 5 74 2 17 144 74 104 237 17 29 191 100 100 400 2009A 2010A 2011A 2012A Long-Term Goal North America Europe Japan 13 (1) Includes concessions
SELECT RETAIL LOCATIONS MADISON AVENUE, NEW YORK REGENT STREET, LONDON
COMPARABLE STORE GROWTH DRIVERS Logo Products Small Leather Goods Fashion Jewelry Our goal is for logo handbags, small leather goods and active footwear to represent ~25% of retail sales over the long-term We are targeting increased penetration of small leather goods to represent 10-15% of retail store sales over the longterm Brand new product category added to retail stores with the goal of reaching 5% of sales in the long-term Jewelry retails between $45 and $400 Positive Comparable Store Sales Growth Every Quarter Over the Last Six Years 60% 38% 41% 49% 46% 39% 38% 36% 7% 22% 21% 13% 19% 19% 22% 10% 7% 8% 5% 6% 10% 14% 22% 29% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 15 FY 2007: 16% FY 2008: 18% FY 2009: 6% FY 2010: 19% FY 2011: 48% FY 2012: 39%
WHOLESALE GROWTH INITIATIVES Continue to transform retail department store locations into branded shop-in-shops with proprietary customized fixtures Increase and expand size of existing department store shop-in-shops Differentiate our in-store sales organization through proprietary jet-set intensive training Expand shop-in-shop footprint at select department stores throughout Europe 16
GLOBAL WHOLESALE CUSTOMERS Total N.A. Doors: 2,027 (1) International Wholesale Doors: 650 (1) North America Europe Asia (1) As of March 31, 2012 17
SHOP-IN-SHOPS Wholesale growth initiatives through shop-in-shops: Continue to transform retail department store locations into branded shop-in-shops with proprietary customized fixtures Increase number and expand size of existing department store shop-in-shops Differentiate our in-store sales organization through proprietary jet-set intensive training Expand shop-in-shop footprint at select department stores throughout Europe Currently have 550 shop-in-shops globally with a long-term target of ~1,200 18
E-COMMERCE Communicates brand image with full product assortment displayed on website Reinforces the luxury image of our brands Allows us to communicate directly with customers and drive store traffic Plans to transition e-commerce in-house Current website operated in partnership with Neiman Marcus (launched in 2007) 19
Eyewear Fragrances Jewelry Watches LICENSING PARTNERS Opportunity to grow through a select number of licensees who produce brand-enhancing products across categories requiring specialized expertise Fossil has been our exclusive watch licensee since April 2004 Must-have" status item among young fashion consumers Builds brand loyalty with younger customers with opportunity to leverage success across other demographics Price points range from $150 to $500 Fossil has been our exclusive fashion jewelry licensee since December 2010 Complementary to watch and accessory lines Comprised of bracelets, necklaces, rings and earrings Price points range from $45 to $400 Estee Lauder has been our exclusive women s and men s fragrance licensee since May 2003 Price points range from $20 to $115 Marchon has been our exclusive eyewear licensee since January 2004 Focus on logo / status eyewear Price points range from $85 to $285 20
21 FINANCIAL OVERVIEW
HISTORICAL FINANCIAL SUMMARY Total Revenue Gross Profit FYE March ($ Millions) 1,302 FYE March ($ Millions) 753 803 446 397 508 189 267 FY 2009 FY 2010 FY 2011 FY 2012 Margin (%) FY 2009 FY 2010 FY 2011 FY 2012 47.5 52.5 55.5 57.8 Adjusted Income from Operations (1) Adjusted Net Income (1) FYE March ($ Millions) 272 FYE March ($ Millions) 163 137 73 56 39 24 13 FY 2009 FY 2010 FY 2011 FY 2012 FY 2009 FY 2010 FY 2011 FY 2012 Margin (%) 6.1 11.1 17.0 20.9 Margin (%) 3.3 7.7 9.0 12.5 (1) For Fiscal 2012, amounts are adjusted for certain one-time charges. Please refer to Appendix for non-gaap reconciliation. 22
STRONG 2012 PERFORMANCE Full Year 2012 vs. 2011 Summary Financials ($ Millions, except per share data) Fiscal Year Ended %Growth/ March 31, 2012 April 2, 2011 Margin Exp Revenue: Retail Net Sales 627 344 82% Wholesale Net Sales 610 414 48% Licensing 65 46 43% Total Revenue 1,302 803 62% Gross Profit 753 446 69% Gross Margin 58% 56% +230 bps Adjusted Income from Operations (1) 272 137 99% % Margin 21% 17% +390 bps Highlights Retail Global comparable store sales growth of 39.2% Opened 71 stores globally Ending store count of 237 Wholesale Net sales growth of 48% Continued strong sell-through Continued conversion of wholesale doors into shop-in-shops Licensing Revenue growth of 43% driven by strong sales led by Michael Kors watch lines and eyewear Adjusted Net Income (1) 163 73 125% % Margin 13% 9% +350 bps Strong comparable store sales growth drove gross margin expansion of 230 bps and adjusted operating margin expansion of 200 bps Adjusted EPS (1) $0.86 $0.40 115% (1) For Fiscal Year Ended March 31, 2012, amounts are adjusted for certain one-time charges. Please refer to Appendix for non-gaap reconciliation. 23
STRONG FINANCIAL POSITION Net cash position and strong liquidity supported by Revolving Credit Facility Provides for up to $100 million of borrowings ($35 million sub-limit for loans and letters of credit to the European subsidiaries) Amended in September 2011 and expires in September 2015 Revolver used for seasonal working capital requirements Historically funded new store growth out of cash flow from operations and revolver availability Capital expenditures are expected to fund store openings, the development of shop-inshops, build-out of our warehouse, corporate offices and enhancement of our information systems infrastructure Expect to spend approximately $150 - $170 million during Fiscal 2013 24
FISCAL 2013 AND 1Q13 GUIDANCE Summary Guidance Issued June 12, 2012 1Q13 FY13 Net Revenues $360 - $370 $1,700 - $1,800 Adjusted EPS $0.18 - $0.20 $1.08 - $1.12 Guidance Detail For the first quarter of fiscal 2013, the Company expects total revenue to be in the range of $360 million to $370 million. This assumes a comparable store sales increase of approximately 35%. Diluted earnings per share are expected to be in the range of $0.18 to $0.20 for the quarter. This assumes 199.0 million diluted weighted average shares outstanding and a 38% tax rate. For fiscal 2013, the Company expects total revenue to be in the range of $1.7 billion to $1.8 billion. This assumes a comparable store sales increase of approximately 20%. Diluted earnings per share are expected to be in the range of $1.08 to $1.12 for the year. This assumes 201.2 million diluted weighted average shares outstanding and a 38% tax rate. 25
26 APPENDIX
NON-GAAP RECONCILIATION Reconciliation of income from operations, as reported, to income from operations, as adjusted Fiscal Year Ended March 31, April 2, 2012 2011 Income from operations, as reported $ 247,682 $ 136,866 Add back adjustments for one time charges: Stock option expense 10,600 - IPO fees 3,170 - Employee share option redemption - private placement 10,690 - Income from operations, as adjusted $ 272,142 $ 136,866 27 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.
NON-GAAP RECONCILIATION Reconciliation of net income, as reported, to net income, as adjusted Fiscal Year Ended March 31, April 2, 2012 2011 Net income, as reported $ 147,364 $ 72,506 Add back adjustments for one time charges: Stock option expense 10,600 - IPO fees 3,170 - Employee share option redemption - private placement 10,690 - Less tax benefit on above (8,686) - Net income, as adjusted $ 163,138 $ 72,506 Weighted average ordinary shares outstanding: Diluted 189,299,197 179,177,268 Net income per ordinary share, as adjusted: Diluted $ 0.86 $ 0.40 27 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.