Michael Kors completed the acquisition of Michael Kors (HK) Limited, the exclusive licensee of the company in China and other jurisdictions in Asia for $500 million.
The Greater China business generated total revenue of $197 million for the year ending March 31 and had a network of 91 company-operated retail stores and six travel retail locations across China, Hong Kong, Macau and Taiwan.
The Greater China business is expected to contribute approximately $200 million in retail net sales, reflecting sales for the 10 month period following the closing of the acquisition.
“We are very excited about the acquisition of our Greater China licensee,” said John D. Idol, the company’s chairman and CEO said in a press release. “As you know, 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.”
Idol continued, “We believe that our brand is gaining strong momentum in Greater China, making it the ideal time for us to integrate this territory into our business and capitalize on the enormous growth potential in this region.”
Idol said during a fourth quarter earnings call, the brand believes that Asia will ultimately be a billion dollar market and this acquisition is the cornerstone for its growth plan in this region.
“We believe that by taking direct control of this market, we can better leverage our infrastructure across Asia and make a greater impact on the expansion of our business in this region,” said Idol.
The brand has worked hard over the past several years to build the infrastructure, establish the brand and grow the acceptance of Michael Kors across Asia.
“We believe that we are on a strong trajectory with a rapidly growing following among Chinese, Japanese, Korean and Southeast Asian consumers,” said Idol. “This makes it an ideal time for us to take direct control of the China operations, integrate it into our business, and unlock the enormous potential in this market.”
Idol said in the long-term, they believe that the China business represents a $500 million revenue opportunity, based on their assessment of the market and the growing demand for the Michael Kors brand.
Micheal Kors also established its Hong Kong wholesale distribution operations, which will enable the company to provide better service and support to Asian customers.
“We are pleased to see the strong trends in our Korea business since we took the license in-house this past January,” said Idol. “Customer demand for Michael Kors brand is growing and we will continue to invest in this region through new store expansion.”
Michael Kors currently has 36 retail stores and concession shops in South Korea with plans to ultimately expand to 50 locations generating revenues of approximately $100 million.
In other Asian regions, Michael Kors is gaining momentum in Japan. The brand is seeing double-digit revenue gains and growing brand awareness.
“We continue to believe that Japan will ultimately reach $300 million in revenue,” said Idol. “In Hong Kong, where we established distribution operations to service duty-free retail locations and our Southeast Asian licensed operations, we see $100 million revenue opportunity as we continue to grow this business.”
Idol said combined, the brand’s Asian markets in total represent a billion dollar opportunity for the company.