MICHAEL KORS FINANCIAL

ANALYSIS

BY: ELLEN EBANKS & VANNESSA RICHARDS

CORPORATE PROFILE
FOR OVER 30 YEARS, MICHAEL KORS HAS SPECIALIZED
IN DISTINCTIVE DESIGNS, MATERIALS AND
CRAFTSMANSHIP WITH A UNIQUE COMBINATION OF
STYLISH ELEGANCE AND SPORTY ATTITUDE.
THE COMPANY HAS BEEN RAPIDLY GROWING ITS GLOBAL
LUXURY LIFESTYLE BRAND, LED BY A WORLD-CLASS
MANAGEMENT TEAM ALONG WITH RENOWNED, AWARDWINNING DESIGNER, MR. KORS HIMSELF.
THIS COMPANY'S VISION HAS LED IT TO BECOME A
GLOBAL PROVIDER OF ACCESSORIES, FOOTWEAR AND
APPAREL LOCATED IN OVER 95 COUNTRIES.

Balance Sheet
All numbers in thousands

Period Ending 4/2/2016 3/28/2015 3/29/2014

Cash And Cash Equivalents 702,000 978,900 971,194
Short Term Investments - - Net Receivables 307,900 363,400 328,545
Total Current Assets 1,669,800 1,989,700
1,777,169
Total Current Liabilities 435,500 326,300
308,370
For Michael Kors full BalanceSheet please visit
https://finance.yahoo.com/quote/KORS/financials?ltr=1

LIQUIDITY RATIOS
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
CFO RATIO 2.68 2.70 3.22
CASH RATIO 3.15 3.00 1.61
ACID-TEST (OR QUICK) RATIO 4.21 4.11 2.31
CURRENT RATIO 5.76 6.10 3.83
INVENTORY/CURRENT ASSET 0.24 0.26
0.33

CAN MICHAEL KORSPAY ITS LIABILITIES?

The Risk Management Association has stated in chapter 15 of Horngren's Financial
& Managerial Accounting (fourth edition), that a high current ratio indicates
sufficient current assets to maintain normal business operations andthe norm
current ratio is 1.5 or higher.However, they also stated that a ratio that is over 2.5
is too high, and this indicates that the companyis too liquid and not using its
assets effectively.
Current Ratio = Current Assets/Current Liabilities
FY 14 FY 15 FY 16
Current Ratio 5.76 6.10 3.83
At the end of the 2016 financial year, Michael Kors's current assets was at
1,669,800 and current liabilities was at 435,500, giving the company a current
ratio of 3.83,which is consideredacceptable and shows that the company can pay
its liabilities.

Can Michael Kors Meet

Their Short-Term
Obligations?
A cash ratio is very important as without an adequate supply of cash a business cannot operate.
Also, cash ratio helps determine the ability to meet short-term obligations.
Cash Ratio = Cash + Cash Equivalents / Total Current Liabilities
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
Cash Ratio 3.15 3.00 1.61
At the end of the 2016 financial year, Michael Kors's cash and cash equivalents was at 702,000 and
current liabilities was at 435,500, giving the company a cash ratio of 1.61. This cash ratio is
sufficient for the company to meets its short-term obligations.

CAN MICHAEL KORS PAY

ALL OF ITS CURRENT
LIABILITIES?

A norm for acid-test (or Quick) ratio ranges from 0.20 for retailers to 1.00 for manufacturers as
reported by Risk Management Association in chapter 15 of Horngren's Financial & Managerial
Accounting (fourth edition).
Acid-Test Ratio = Cash + Short-Term Investments + Net Current Receivables / Total
Current Liabilities
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
Acid-Test (or Quick) Ratio 4.21 4.11 2.31
At the end of the 2016 financial year, Michael Kors's cash was at702,000, their shortterminvestment was at 0, their net currentreceivables was at 307,900 and their current liabilities
was at 435,500, giving the company a acid-test (or quick) ratioof 3.83,which is

SOLVENCY RATIOS
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
DEBT RATIO 22% 17% 19%

CURRENT DEBTS TO INVENTORY RATIO 72% 63% 80%
CURRENT DEBTS TO NET WORTH RATIO 23% 20% 29%

IS MICHAEL KORS ABLE TO PAY ITS LONG-TERM DEBT?

A solvency ratio higher than 20% is considered to be financially sound. A lower
solvency ratio reflects a higher probability of being in default with debt
obligations.As a rule of thumb, the solvency ratio should not exceed 60% as a
higher percentage wouldmean significant pressure on future cash flows.
Current Debts to Net Worth Ratio = Current Liabilities / Net worth
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
Current Debts to Net worth Ratio 17% 15% 21%
At the end of the 2016 financial year, Michael Kors'sTotal Liabilities was at
571,100, and Net Worth was at 1,995,700, giving the companya Current Debts
to Net Worth Ratio of 29%. This means that the company had a net income of
$0.29 for each dollar of total revenue earned this year. This ensures the
company enough profits to pay off its long-term debts.

Income Statement
All numbers in thousands
Period Ending 4/2/2016 3/28/2015
3/29/2014
Total Revenue 4,712,100 4,371,500
3,310,800
Gross Profit 2,797,200 2,647,700
2,016,100
Operating Income or Loss 1,175,100 1,257,000
1,008,200
Net Income 839,100 881,000
For Michael Kors full Income Statement please visit
661,500
https://finance.yahoo.com/quote/KORS/financials?ltr=1

PROFITABILITY RATIOS

FY 14 FY 15 FY 16

3/29/2014 3/28/2015 4/2/2016

5/28/2014 5/27/2015 6/1/2016
EBITDA MARGIN 33.07% 32.03% 28.88%
GROSS PROFIT MARGIN 60.89% 60.57% 59.36%
PROFIT MARGIN RATIO 20.00% 20.00% 18.00%
PRE-TAX PROFIT MARGIN 30.00% 29.00% 25.00%
OPERATING MARGIN 30.45% 28.75% 24.94%
RETURN ON ASSETS 0.00% 0.00% 31.96%
PRE-TAX RETURN ON EQUITY 56.00% 56.00% 59.00%
AFTER TAX RETURN OF EQUITY 37.00% 39.00%
42.00%
NET ASSETS TURNOVER 2.18 2.05 2.10

HOW PROFITABLE IS MICHAEL KORS?

THE FUNDAMENTAL GOAL OF OUR BUSINESS IS TO EARN PROFITS THEREFORE, WE STRIVE FOR HIGH
PROFIT MARGINS, THE HIGHER THE BETTER. THE PROFIT MARGIN SHOWS THE PERCENTAGE OF EACH NET
SALES DOLLAR EARNED AS NET EARNS ON EVERY $1 OF SALES.
HOW MUCH NET INCOME IS EARNED ON EVERY DOLLAR OF NET SALES FOR MICHAEL KORS?
PROFIT MARGIN RATIO = NET INCOME/NET SALES
FY 14 FY 15 FY 16
PROFIT MARGIN RATIO 20.00% 20.00% 18.00%

AT THE END OF THE 2016 FINANCIAL YEAR, MICHAEL KORS'S NET SALES WAS AT 4,712,100, AND NET
INCOME WAS AT 839,100, GIVING THE COMPANYA PROFIT MARGIN OF18%. THIS MEANS THAT THE
COMPANY HAD A NET INCOME OF $0.18 FOR EACH DOLLAR OF TOTAL REVENUE EARNED THIS YEAR.
ALTHOUGH THIS AMOUNT HAS DROPPED BY 2% OVER THE PAST 2 YEARS, THE COMPANY IS STILL
MANAGING TO MAINTAIN SIGNIFICANT PROFITS.

Cash Flow Statement

All numbers in thousands
Period Ending 4/2/2016 3/28/2015
3/29/2014
Net Income 839,100 881,000 661,500
Total Cash Flow From Operating Activities 1,228,400 857,900
633,000
Total Cash Flows From Investing Activities -381,100 -388,400
-215,500
Total Cash Flows From Financing Activities -1,128,300 -434,700
71,100
For Michael
full Cash Flow
please visit
Change In Cash and
Cash Kors
Equivalents
Statement
-276,900
7,700
https://finance.yahoo.com/quote/KORS/financials?ltr=1
483,900

MARKET PROSPECT RATIOS

FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
EARNINGS PER SHARE 3.27 4.35 4.50
PRICE/EARNINGS RATIO 28.36 15.40 12.66

Earnings per share (EPS) reports the amount of net income (loss) for each share of the
company's outstanding common stock.
Earnings Per Share = Net Income Preferred Dividends / Weighted Average
Number of Common Shares Outstanding
FY 14 FY 15 FY 16
3/29/2014 3/28/2015 4/2/2016
5/28/2014 5/27/2015 6/1/2016
Earnings Per Share 3.27 4.35 4.50
At the end of the 2016 financial year, Michael Kors's earnings per share was at 4.50, and it
has been increasing annually. We recommend that Michael Kors continue to increase their
EPS by increasing their net income, in order to continue to be competitive with other
companies in their industry.

RECOMMENDATIO
NS
Profitability
The company's current ratio for FY 2016
is at 18% which is 2% lower than the
previous years. Therefore, we
recommend that Michael Kors, reduce
their marketing costs and to aim to
target their customers through
electronic methods as well as social
media platforms.
Liquidity:
The company's current ratio of 3.83 for
the FY 2016is too high and therefore we
suggest that the company utilizes its
assets more effectively by considering to
reduce their merchandise inventory
levels in order to not tie up available
resources.

Market Prospects
Michael Kors does not pay out
dividends to their shareholders.
This could be the case,if
directors believe that since the
company is still growing
rapidly,it is better toinvest the
profits earned back intothe
company in order to make the
business more profitable. Our
recommendations for Michael
Kors, however, is to consider
paying out a small dividends as
an adequate rewardto their
patient shareholders.

BEHIND THE LABEL AMERICA'S

NEXT BILLION DOLLAR BRAND
MICHAEL KORS, IS ON THE FAST TRACK TO LEGENDARY STATUS.BY
WINNING NUMEROUS DESIGNER AWARDS, REDEFININGCOOL, CLASSIC, ALL
AMERICANCHIC, HE HAS ESTABLISHED HIMSELF AS ONE OF FASHION'S
MOST RECOGNIZABLE NAMES AND ONE OF THE MOST BELOVED AMERICAN
DESIGNERS NEXT TO OTHER TOP BRANDS SUCH AS, TOMMY HILFIGER,
CALVIN KLEIN AND RALPH LAUREN.
MICHAEL KORS'S SLOGAN IS "AMERICAN LUXURY FOR EVERYDAY LIFE".
ALTHOUGH, MICHAEL KORS PRODUCTS CAN BE VERY EXPENSIVE,HIS AIM IS
TO OFFER BETTER PRICED SPORTSWEAR AND ACCESSORIES FOR ALL TO
ENJOYAND HEHAS ACCOMPLISHED THIS BY INTRODUCING OTHER LINES
SUCH AS, "MICHAEL" BY MICHAEL KORS, WHERE EVERYONE CAN NOW ENJOY
MICHAEL KOR'S HIGH END QUALITY DESIGNS AT AN AFFORDABLE PRICE.
MICHAEL KORSIS ALSO TAKING STEPS TO KEEP UP WITH THE INNOVATIONS
OF TODAY'S WORLD BYCOLLABORATING INNOVATIVE IDEAS INTO HIS
DESIGNS. FOR EXAMPLE,HE JUST RECENTLY LAUNCHED HIS "NEW MICHAEL
KORS ACCESS SMARTWATCH" EARLIER THIS YEAR. THIS NEW WATCH IS AN
ANDROID WEAR SMARTWATCH FOR PEOPLE WHO WANT A SMARTWATCH
MEANWHILE MAINTAINING THE LOOK OF A TRADITIONAL WATCH.
WE STRONGLY RECOMMEND INVESTING INMICHAELKORS AS THE MOST
RECENT FINANCIALS FOR FY 2016 SHOWS THAT THE COMPANY IS IN A
STRONG POSITION IN TERMS OF MAKING HIGH PROFITS AND BEING ABLE
TO PAY BOTH THEIR SHORT-TERM AND LONG-TERM DEBTS. THE FINANCIALS
ALSO SHOW THAT THE COMPANY HAS A LARGE AMOUNT OF CASH SUPPLY
WHICH IS NECESSARY IN ORDER FOR THE BUSINESS TO CONTINUE TO
OPERATE.

REFERENCES
Michael Kors Financials. Retrieved from
http://investors.michaelkors.com/financials/quarterly-reports/default.aspx
Nasdaq. Kors Company Financials. Retrieved from
http://www.nasdaq.com/symbol/kors/financials?query=ratios#ixzz4QWfQePVq
Nobles, T., Mattison, B., & Matsumura, E.M., (2014). Horngren's Financial &
Managerial Accounting (fourth edition), Ch. 15.
Reserve Channel, (2012). Michael Kors America's next billion dollar brand:
Behind the label. Retrieved from
https://www.youtube.com/watch?v=hKkklMJ_4I4