Michael Kors watching for targets; 'we probably won't do anything small'
STRATEGIC SNAPSHOT08 FEB 2017
Michael Kors Holdings Ltd. [NYSE:KORS], the London-based designer and retailer of branded apparel and accessories, is actively looking at potential acquisitions, CEO John Idol said.
On the 3Q17 earnings call held 7 February, Evercore ISI analyst Omar Saad asked about the company's M&A strategy. Regarding capital allocation, CEO Idol said the top priority was to continue to reduce shares outstanding and the company would be aggressive on its buyback program.
"Secondly, we've said that we will look at potential acquisitions," Idol continued. "We are actively looking at a number of different things, and if it's right for our company and our management's ability to execute and create value for our shareholders, then we will take advantage of it."
Idol added that the company had the capacity to do "sizeable transactions" or smaller ones.
"But what we said to you in the past is that we probably won't do anything small," he said. "We think that would be a distraction for us and really not create the kind of value we think the shareholder's looking for from us. So again, actively looking and we'll see what transpires."
During the quarter, the company repurchased 2,069,706 shares for USD 100m in open market transactions. Remaining availability under the repurchase program was USD 250m at 31 December. The company ended the quarter with cash and equivalents of USD 368.8m.
A published report on 20 January said Michael Kors and Coach [NYSE:COH] were possible buyers of Kate Spade [NYSE:KATE] and were discussing potential bids with their respective boards.
In December 2016, Michael Kors was reported to have tapped Goldman Sachs to advise on a number of strategic options.
Michael Kors has three operating segments, retail, wholesale and licensing. For FY16, these segments accounted for the following percentages of total revenue, respectively, 50.8, 45.5 and 3.7.
In May 2016, it acquired Michael Kors (HK) Limited, the exclusive licensee of the company in China and certain other jurisdictions in Asia, for USD 500m in cash.
For the China deal, advisors were JPMorgan and law firms Wachtell and Paul Weiss, the last of which lists Michael Kors on its website as a representative client of the firm's Corporate Department.
Michael Kors Holdings has a market capitalization of USD 6.2bn.