Major Asia investment for Michael Kors
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Michael Kors has paid $500 million in cash to acquire Michael Kors HK, the exclusive licensee of the company in China and certain other jurisdictions in Asia.
Approved by independent members of the company’s board of directors, the acquisition is subject to adjustment.
The greater China business generated total revenue of $197 million for the year ended March 31, with a network of 91 company-run retail stores and six travel retail locations across China, Hong Kong, Macau and Taiwan.
This fiscal year, the greater China business is expected to contribute about $200 million to retail net sales, reflecting sales for the 10-month period following the closing of the acquisition.
Michael Kors chairman/CEO John Idol says the company is excited about acquiring its greater China licensee. “We have worked diligently over the past several years with our licensed partner in this region to build the infrastructure, establish the brand and grow acceptance of Michael Kors in the Chinese market.
“We believe our brand is gaining strong momentum in greater China, making it the ideal time for us to integrate this territory into our business and capitalise on the enormous growth potential in this region.”
CEO Neil Saunders of retail research agency Conlumino says the acquisition will allow the business to ramp up its pace of expansion in the region and, over the medium term, boost earnings potential.
“It is fortunate Michael Kors has other regions to turn to for growth, with Asia having the most potential.”
An award-winning designer of luxury accessories and ready-to-wear fashion, Michael Kors established his namesake company in 1981. Michael Kors stores can be found in Seoul and Tokyo.
Questions & Answers
Q.What is the primary financial reason for Michael Kors to acquire its greater China licensee?
What is the primary financial reason for Michael Kors to acquire its greater China licensee?
The acquisition allows Michael Kors to integrate the territory into its business and capitalise on the enormous growth potential in the region. This is expected to boost earnings potential over the medium term and increase the pace of expansion.
Q.What was the previous financial performance of the greater China business before the acquisition?
What was the previous financial performance of the greater China business before the acquisition?
For the year ended March 31, the greater China business generated total revenue of $197 million. It operated a network of 91 company-run retail stores and six travel retail locations across the region.
Q.What is the expected contribution of the greater China business to retail net sales after the acquisition?
What is the expected contribution of the greater China business to retail net sales after the acquisition?
Following the closing of the acquisition, the greater China business is expected to contribute about $200 million to retail net sales for this fiscal year. This figure reflects sales over a 10-month period.
Q.Which specific territories does the acquired Michael Kors HK licensee cover?
Which specific territories does the acquired Michael Kors HK licensee cover?
Michael Kors HK is the exclusive licensee for China and certain other jurisdictions in Asia. The greater China business specifically includes China, Hong Kong, Macau and Taiwan, where it operates retail stores.
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