CPRI - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to the Michael Kors Holdings Limited First Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Katina Metzidakis. Please go ahead.

Katina E. Metzidakis

Good morning, and thank you for joining us for our first quarter fiscal 2019 earnings call. are Edwards, Chairman Officer. Chief call Officer; Chief today's Tom and Financial on John and Idol, Executive Presenting and Operating

we company's differ constitute uncertainties which release today's remind on me uncertainties risks that subject call begin, should and certain the website. to and on a call. actual discussed the and that the the available Before made in results obligation statements will press we the undertakes cause any and company statements Those at Investors filings, to to assume you risks during are the SEC in operative this that those later statements, not time, are forward-looking that information may described could update no on which from company's are made call let expect. remain

Choo, will today's In presented acquisition exclude items discussed be noted, related be to non-GAAP on stores. all charges, Unless underperforming on presented otherwise retail will a Jimmy and addition, information company's measures certain non-GAAP basis. These primarily basis. associated a certain restructuring information financial the on with call non-cash impairment today non-GAAP of

Chairman will view and Idol. turn quoted earnings all store Holdings Limited, corresponding addition, comparable basis. Chief now over to John our sales Officer and the posted the related Mr. Executive at release measures To I will the a today In GAAP reconciliations, investors.michaelkors.com. and please reported of the be Michael revenue on view earlier to Kors website call

John D. Idol

earnings that exceeded margin, revenue, Katina, our pleased morning, quarter Thank operating per results with gross and We were for share. good you, margin, and everyone. expectations first

the $X.X grew quarter were XX% year-over-year. billion and Our in revenues

share expanded to over $X.XX our XXX of over margin per grew to points XX%, Our expanded and XX.X%. year-over-year. XX% points Earnings margin gross XXX basis operating basis

basis, total driven Choo. brands. growth revenues two We Michael Kors benefits Michael our our by grew Jimmy and to XX% brand The while revenues on the Jimmy strategy, have see Choo's the pro strength Kors long-term of grew demonstrating brands: forma of X% year-over-year, our begun luxury a two

result increase As for our first previous per-share $X.XX the is $X.XX from performance, are raising a we to our of $X.XX, year a guidance. outlook our which to quarter

Michael engagement, continued which to be making and Turning on experience. brand, that the Runway on plan, Kors we the customer progress to product by we our brand innovation, encouraged XXXX focuses are

our both continued as increase dressing, to head-to-toe customers to encouraged leadership menswear our to results, helped which continued on positive to by Our respond the our womenswear. fashion Kors revenues sales Michael's and We comparable returned particular in which and in lifestyle has vision Americas engage with were customers store quarter. emphasis to Style Retail our in

product, Accessories, Collection to novelty, and mixed across solid Bancroft for turning Kors block we driven our group, details. our and demand continued Michael categories. materials fashion seasonal innovation to Now, In the all increase by saw addition of color

campaign, the small Kors Bancroft MICHAEL became on-trend group, was marketing a our our in seller a quarter. In featured top new been performer Our quarter. which Blakely group within Michael line, has this the top during spring the shoulder

our Whitney in in launch the and which momentum fall add also of of group, Mercer will been and construction success. holiday at our to particularly Whitney the We campaign be positive the momentum group. will pleased and featured We saw positive marketing best-selling new seasons. arrived during were with our tremendous a has Retail new iconic fall accordion May in

China's an Overall, month the Yang to during continue Yang leverage launch Michael the sales coincide Retail and Accessories for with influencer, launched quarter. brand and in increase has Mi, the brand celebration. actress, store positive partnered sales Chinese desirability example edition category was The to This power consumers. collaboration a and fashion design Qixi Michael our is Whitney comparable to ambassador, special we with of In addition, awareness to Group. of contributed among star Mi's to Kors how brand this

we the and performance featured launched significant helped Tara the spring revenues. our Footwear, our marketing quarter, and collection campaign highlighted hardware. Group, to in Moving was drive leather which Grommet new in during flowers This

further the active, fourth we Footwear details continued Footwear, sales showing We knit with Trainers, floral, In which further In consumers. flats Michael's to and core and perforated continued double our in from store designs, newly-launched fashion well featured standouts fashion-active in point-toe engagement to increased and results. in see strong leverage Runway Billie quarter Skyler mesh created styles, were strong our such all wedges. as as comparable our pump, sales as acceleration signature digits, our quarter. Ready-to-Wear, Allie Overall, during Novelty Women's fashion booties heritage. our

previously category. in this mentioned, Kors I on focus led strategic growth As dressing head-to-toe has to our Style continued

in strong We increased saw Comparable Women's also sales outerwear, strategic digits. sales categories and segment. mid-single in store two within Ready-to-Wear this dresses

such collection sportswear, leather logo a choice washed Father's sellers in top our also lightweight Day and were business, Greenwich leather Fine and particularly our core smooth was leather best-selling baseball logo Yarns Men's Kent in our in backpack featured an in Backpacks Refined in our resonate was We've group, silhouette, expanded the campaign. good continued jackets camo jacket. In to seller Turning pieces Henry as also seasonal gifting, knit latest colors, with popular well offering. one remained to group polo in the top by for and and a goods consumers, iconic both marketing the our newly-launched as Bryant solid quarter. our prints. seen palm leather as traction driven sweaters our nylon number pebble

Google Runway. Pay. using of grow payments to continues our near-field edition In as new Jewelry channels. ACCESS traction. our Watch both communications new will continued business We're and ability to latest to our monitoring smartwatch heart-rate smart our such Wholesale own and segment, gain called ACCESS Men's announce the the in features offer of Retail launch watch This make Our and to the smartwatches with excited

That during of the our growth the our by to remain yet the Smartwatch our a not business, perfect line moderating. declines fall, in to encouraged Watches Michael about jewelry watches. fashion declines said, luxury an lifestyle be this enough the launch Separately, complement fine negatively we're of in growth trajectory for business the down category development and Kors in new this is comped we While future. our additional quarter. will the are offset Watch avenue which excited assortment provide large in

a like we all I to would turn excited Now, about. initiative are new very that to

under capsule the During fall we featured collection, our MK Go series. season, launching our first-ever new be will

logo the with showcases these a Accessories, inspired Kors help celebrates art launched Ready-to-Wear In street capsule response fashion. womenswear. we categories, on athletic Both men's are The MK to its by seen across which on expected a and new first tremendous trend, black-and-white we're Bold, City's and back best-selling on spin bags. October, street-style a our is just New our Graffiti collections new MK of and Graffiti and businesses. influence our graphic our month, Footwear, MK put which focused wear fashion-active and last York jackets, already current print, fashion Graffiti shoes to coming capsule drive have and logo products all our

of forward collections capsule the on in should fall these and amplifying our updating season. engaging sales performance capsule momentum further collections future throughout add to I with These fall you be holiday calls. will marketing on the collections look We campaigns the season.

engagement, turning million brand. a approximately year, Kors Now, our XX% the and XX Michael brand to globally, increase database the last we continued which in have of strength customers over is demonstrating desirability

other million members approximately X Our program on KORSVIP regions. working are we in program boasts in now the loyalty U.S., and the expanding

importantly, buying lists early product KORSVIP driving access on may events, More tier members-only increases to well special consistent been compared conversion in and, of the customer's KORSVIP, within accrue members creating non-members. product, Depending invitations receive reviews, course, as by as from both engagement points products. has and submitting loyalty members to wish to a

the through will similar ahead, and we quarter, most-followed in Michael's XX followers, world. across to we our XX% platforms. build media customers, online to consumers designers engage as deliver content media In be to our to million continue one site the audience a the Looking social our all social digital personalization nearly On both grew on in-store. by to capabilities position our also more first over we tailored year, fashion last note, of global flagship even reaffirming continuing

experience Turning in-store to stores, the with with better our to connect customers. to and engage technology enhance continue we

the other they for us. associates services, clienteling Kors personalized enhanced create customers with rolled a in-store user build available Our stores. also to time fully Connect offer profiles Michael to selection Kors Connect associates augment products has tool, the U.S. which, as sales of out with in with this in Europe, to ability Kors shop provides and tailored and online and styling experience quarter, will been looks every the allowing

our with Michael be innovative engage stores to brand, to over assets Our XXX locations the the as allowing to us encouraged to designs showcase serve and destination a of also of performance customer these to outperforming key continue years exceptional for both our next consumers service. the new renovate through which concept We including chain. plan stores by the luxury balance store approximately and remain two are Kors

regional performance sales, the Americas The in digits. low-single better low-single inflection largely highlights digits in meaningful digits. revenue which for in to the and point sales positive by up Retail comparable quarter, Americas, Ready-to-Wear. Michael were was Kors digits. to for during fashion brand revenue Wholesale store favorable our comparable the Americas Americas Women's our high-single revenues Turning with increased now driven across increased the a increased in increase double luxury business. This performance response Retail Accessories, Footwear assortments represents the

down sales take low-single Europe, store to revenue mid-single to decrease overall low-single the our continued further, up While full-price in will while which digits Retail sales very we the the response declined a was In drive higher quarter. Wholesale digits, digits, our department our inventory higher were encouraged as Tom portion revenue in are channel. product steps of to the sell-through. and timing, we for discuss was the by

up strong to growth Asia, continued to Turning we double digits. with revenue generate

in first net comparable digits, expand our Performance by in in the sales sales the by region, to performance declines low-single strength Hong Korea. and Retail stores Mainland quarter somewhat Macau. This increased offset was improved continued was Japan, driven the and last assortment. the of in fashion China our consumers Kong opening continued XX responded as year. new We to presence since in and

Going the forward, and continue to in invest to region. execute our growth on we plan strategy

were Choi's brand Now, top I forma the as by remained Footwear, both high-single sales robust our demonstrates high-fashion logo of that which the led Choo Footwear, as Jimmy revenues In pro increases were These core Jimmy leadership. encouraged Romy well. well in the quarter, and as extremely comparable the of low-double Emily digits, the Sneaker in groups, results the quarter. the of turning sellers strength new Mischka as Choo, grew our brand, performance and by digits. during line, to performance in delivering CHOO design we're this driven as by XX/X well the Oakland Sandra our From WANT strong store

As Kendall our shoes, Met followers. wearing the widely Accessories, X.X May, nearly in Accessories and fall. red groups fashion to launching million press, the carpet Lopez. we Instagram Jimmy look covered strategic boasts a the Choo which Jimmy new this dominated continued Hailey we for was Marianne new with Gala remains amplified during in in to the Coverage In group Choo's us, category. and this focus to celebrities forward year's XX transition Jennifer by including Jenner, Baldwin on

to to also Choo an Rosie Accessories This on new campaign Lily believe expansion. Jimmy to booties regard Smalls, to this highlight launching focused Jimmy Marianne support amplification With new Bag our is boots growth. will continue will Huntington-Whiteley. campaign that We Joan featuring exciting accelerated lead marketing, fall/winter our and and category Choo Aldridge help

the Finally, elevated the expanded most we store embodies Madison on our our which store flagship codes all of during quarter, Avenue, concept.

continued nine new Jimmy runway to the opened during net strong a also to in presence, Choo's stores particularly expand and Asia. quarter, We see

that to very over addition also have and continue conclusion, our to continue bear Tom. in to about turn long-term believe to we holiday With are Jimmy the achieve of global goal will well-positioned Choo I'll is in call excited remain across excited that, growth of and In the driving and luxury investments drive We our are billion We on luxury portfolio, Choo, the collections. e-commerce growth $X to fruit, sustainable technology Michael our where fall track. both brands, Kors our Jimmy on revenue about focus quarter. started our to to and robust

Thomas J. Edwards, Jr.

Thank XX% net $X.XX, We're diluted begin you, above year. morning, a prior year $XXX first quarter performance everyone. of share the and good over increase with income expectations, earnings John, per to pleased million of delivering and

to quarter, XX% consecutive Jimmy This fifth Total Kors and X% were our comparable of increased to X%, Choo incremental expectations take the growth to to decrease the inventory to drive revenue benefiting in from prior From last for drive higher margin growth as the million higher Asia, perspective, comparable Europe, comparable comparable revenue sales region. increased an year, increase reflects extremely as resulted and in steps gross revenue In global strategy margin Comparable performance. by we net full-price positive operating compared driven a by sales see last compared better-than-expected and which, to revenue on achieved also basis expected, Kors We revenue we XXX regional continue lower sales and sales $XXX year. to $X.X continued not flat line and sell-through, expansion. in execute e-commerce of in with growth we billion Michael a store to we Michael sales nine In Americas. Retail sales year. increase with comparable base. in were new openings pleased return from reflecting store stores in the points.

Kors increased the Michael Wholesale business, XX%. For revenue

first were revenue the shipment new-fashion In our by across Kors the to decreased and results better above in revenue increase benefited While quarter timing Michael prior from in this QX QX sell-through as as the Wholesale shift revenues smartwatches. line by sell-through of in we multiple timing. were favorable expectations, in Licensing shipment driven that categories, the In Michael increased year. was the our to early region. Watches, our versus offering, a growth due In ACCESS addition process Wholesale Kors in and are with in Europe, in X% response very encouraged we in expected to QX. the the shift Americas, better continued base Wholesale, we resetting growth the well expectations slim-line

new fashion collection to that place collection. season, enough the the our jewelry XXXX. for to continued watch not jewelry believe with licensing We fiscal were offset elevated decline elevated results growth fashion jewelry and line in the these transition in a be position However, our the will of fine watches in will from combined fall fully initiative, fine

Jimmy turn like would I Choo. to Now, to

of of year. As basis low-double the John of representing noted, we're pleased extremely expectations, increase pro million forma performance compared Revenue with to a as These comparable bringing a high-single brand. our fleet above by digit quarter, the last was a as total stores nine since results stores. well new were net digit global our last driven to growth, sales Retail the addition XXX $XXX on

a Wholesale of In of we product innovation offerings. expand to significantly as our target and collections In in shift Accessories, to strong QX. continued exceptional from addition, also the core that Footwear perspective, of product QX led of Choo Jimmy as business we see resonance this continued a globally, in shipment revenue from benefited key to by begin we benefited pillar timing our momentum long-term From business transition $X a new billion. reaching

year, Given a of Jimmy our to are year flat. dilution full for we Choo this strong improving to start EPS to outlook $X.XX the

allowances. to compared basis lower basis Jimmy margin Now, to attributable $XX inclusion increase operating gross million, Choo. Jimmy performance, basis Total margin gross margin and gross $XX an company Michael combined margin margins to Michael from Kors the costs in points. increased gross a increase XXX-basis-point year. points XXX increased the points Wholesale benefit Kors improvement turning over of XX.X%, total increased for reflecting This a prior year, XXX Choo. including Kors, XXX of Retail was million Michael with XX-basis-point expense from prior was reduced

primarily XX.X%, was margin of versus margin operating margin. by an costs. a year, Michael higher XXX-basis-point prior percent XXX operating driven XXX a to compared margin higher expenses. sales XX.X% to Choo. basis the versus Jimmy expectations margin for operating operating Choo's primarily prior Jimmy timing brand margin consolidated revenue margin Total by sales percentage Michael XX.X% reflecting XX%, XX.X% Kors points. Michael reflecting XX.X%, Kors, was of margin, year. Michael Kors XX.X%, XX.X%, margin partially year, to to operating expansion points impact and to basis and a XXX-basis-point dilutive last a XX.X% deleverage. leverage the operating inclusion compared an reflecting for points was driven Kors margin was better above of gross as operating year, year. XX.X% was from compared operating the revenue, increase the to Michael Wholesale gross was lower down on increase leverage points XX improvement by expense decreased gross basis higher of of Licensing on Kors' and XXX by Michael Retail operating was for last due and basis As Kors' offset prior expense was of

in legislation, U.S. tax employee of quarter prior to XX.X% the to the benefit for tax related as expected tax benefit well year, reform compensation. new reflecting from as compared XX.X% equity was Our the rate lower tax a U.S. the the rate

we cash Turning our and with now million quarter cash the sheet, ended balance $XXX million debt. of and to equivalents $XXX in

we were the $XXX and prior million shares to in quarter, inventory million store e-commerce for compared Inventory Choo, associated was repurchase remaining development, Michael year. Capital expenditures of approximately brand on XX% Kors the $XX down $XXX and X.X million, and last the Jimmy of enhancements. for same quarter authorization. was for availability the million acquisition approximately million million with year. to million information $XXX have $XXX $XXX of the of renovations an our $XXX including the compared related technology new Inventory repurchased were to and million During quarter additional share

guidance. to turn to like I'd Now,

better-than-anticipated EPS Jimmy and Choo for year reflect both brands. the performance guidance by first full the our Kors quarter raising are We Michael to $X.XX

$X.XXX of Jimmy million full $XXX between year, of $XXX revenue including and we million For incremental approximately revenues expect Choo. the billion, total from

We low-single expectation decline revenue We the digits. flat and raised the our to which Michael expect an with margin store in to Licensing decrease comparable Kors digits, for in is sales, prior high-single to approximately revenue digits the operating improvement Retail grow forecast, our mid-single in revenue Wholesale to from XX%.

continue to Choo. as reflecting of from expense slightly we We well as Jimmy year of grow and Michael higher as percentage the sales operating modest a in assume gross a the with expansion points margin basis line business, margin XXX Kors as Retail approximately operating dilution prior

We a per Our assumed XX.X%. $X.XX range $X.XX. earnings resulting forecast XXX diluted average in share of outstanding is to million approximately of tax rate shares weighted

For improved EPS dilution Jimmy results Choo, and improvement is which a versus $X.XX we now year expect $X.XX flat, forecast lower to full guidance. our prior of

We luxury expenditures for and million, $XXX of stores approximately Jimmy continue capital approximately of which Limited to focus fleet format as Kors stores, over XXX XX next opening Kors our to a reflects with renovations also the XX approximately on to Michael Kors anticipate our to Holdings Michael Asia. Choo Retail part our This the years. new two of includes move Michael initiative stores

between we from For reflect QX low-single robust of total for digits. versus is million revenue pro $XXX Choo grow billion, and the to incremental second quarter, QX revenue to Kors Michael million approximately continues prior year. $XXX revenue Choo. the in Jimmy Jimmy expected including expect of revenue $X.XX Retail forma growth

is to digits. sales remain Comparable the We anticipated positive to decline in declines expect Asia, Europe. comparable low-single by Americas offset store and expected sales in the store in growth

margin in revenue decline XX%, dilution Licensing digits revenue in including basis Choo. and an anticipate the of digits. of Wholesale Jimmy to high-single to low-single expect from approximately XXX operating We points the We decrease

diluted Choo operating to rate per the second $XX quarter tax resulting $X.XX. $XX million for earnings including approximately With to revenues open reflects questions. from in of our of quarter approximately that, of first weighted earlier range quarter. the expected now approximately shipments the of $X.XX that $X.XX into I XX.X%. million expenses wholesale guidance shifted the first Jimmy average approximately have outstanding dilution QX XXX of EPS in and million into anticipated shares share in will line $X.XX, Our forecast We is

Operator

Hey, this first Easter to take there we'll Securities morning. Suisse question how Credit is comps point trying in get Michael kind for could about our the Binetti in ask, think is Americas model Credit the going you. much in from trajectory – to with (USA) to way that going Michael want general, is taking think I And the our I guys. of here. LLC quarter? any here the guys from - you back Thanks just questions Suisse. impacted way here Binetti help how cadence good forward Thank just to U.S. from and you think forward, comp to see the about positive us

Thomas J. Edwards, Jr.

Thanks, Tom. it's Michael,

So, overall comp first did little fourth quarter great despite from feel first occurring. in with moving of we our with even we was that we're quarter quarter, at headwind expectations, so a was our Easter the and in year. see into Even Americas positive the in about that, where last America line our comp

Operator

our And Bank. next we'll question Paul Deutsche from take with Trussell

Paul Trussell

Good the front, given discuss can that in in in some help place meaningful provide taking list improve challenges Wholesale Europe margin and business. taking the Wanted and particular place Americas just you to us Wholesale opportunity if of with what's timetable in that you can the the in what's and to happening and on the have just division morning. understand Europe contrast on revenue detail the the improvement and channel, if you very

John D. Idol

resonating morning, in customers, challenged, across watches we're starting business. our Ready-to-Wear our and is still seeing Tom our though and This you, good And we're seeing good like North seeing fashion slim that America mentioned, that business, and with even business, us. to perform. Thank Watch as The and our healthy we're Footwear Accessories to which our really across American things led Women's consumer business feels design Wholesale is is our team, innovation, Idol. channel Michael is Paul. is The and John by

being in in remarks, the in In now watch actually collections delivered. the that trend as the earlier we're new delivered, prepared and XX:XX Sofie, some happening of – two there strong smartwatch particularly results, said we've happen. Watches: before are So that the seeing and trend very Accessories, slim-watch see some we trends I've you new nice the one

Retail our channel. both happening in and also store it's really that's happening So our department stores in

to We've own now Our channel full-price get channel trend the the Retail promotional store sell-throughs inside good. better. both and cadence our continued anniversaried department and the feels

reported, we're the I of we're seeing that stores inside performance the The you seen become that growth that certain as beginning their can side. is think mitigated, stores. traffic trend see on department e-commerce good getting we declines so by previously well, are to and have the had

I tell you reorders. the U.S. and in channels, we QX a seeing good. in so nice some a feel we're and saw We're That's earlier. store would merchandise inventory ship little market, very QX So, needed you, terms inside a shift little to actually large what we between part department of the light of also, of some our in

We in sales and we're most cetera. have, know, that slightly our through up conversion and down and you planned AUR, inventory et channels, getting as

that in to all healthy seems us So to North be an in playing that out America. feels environment

there's different allowance reduced expectation, result that's really that and better full-price Retail In our talk I'll a was about a just own channel. Europe, of commented there picture, and sell-throughs. also We first

which reduction. a and you America. prepared as If through inventories, in kind had really actually take sometimes in in we to that Tom desirability. to America quite that very than of us Michael go very you long know we anticipated. creates which product in at it's We down decline frankly process And Kors North is seriously North told more is saw you place about year-and-a-half We've a got believe as past more aggressive takes our of And desire a high-double discussed scarcity very, the Europe, really XX%. the inventory look some year, we which his quicker a to there little in we in of get that overall about remarks, terms be digits, that foothold, have

had like and going the where declines through of we little we've that stores look are a declines digit And the same in of what thing, inventory, And really, low-single moved we're we versus so anticipate own year. the seeing. earlier We're and little delta Europe the department see you we if sell-in, double-digit than some that's we the our on the reducing going the better bit have we're decline amount shipments through to the up exact just at that Europe, in in got stores sell-throughs, store see to between some in that we reorder in the to we a happen. same lean initially the channel freshen anticipated. process had a we and we little are inventory, And up so starting balance

So, would tell fiscal our you business it'll you of the growth. again, the Thank to track, we're balance but us you, on through until return see take I positive Europe that Retail year for in Paul.

Operator

next And Walvis with question we'll take Goldman our Alexandra Sachs. from

Alexandra Walvis

related your was full-line stores? question, the for Good and a versus if you the Thank between I trends in discrepancy help and Thank this? performance within morning. what a quarter, material question. quarter you. are tourist could through wonder business in there stores whether any you change understand And expectations your outlet the for have material seen you us to your the Retail prior

John D. Idol

really with Kors of new and bit and brand quarter. We first pleased what and customers purchase was starting number. million Kors we're the saw shipments our you Jimmy similar a outlet. in that's kinds Choo, some that. that Wholesale in really gigantic number, frequent. really Michael that and material Retail cycles in we've more pleased Choo Well, Footwear is, visits from of which Alexandra, the saw with to performance in past, performed it's of Jimmy encouraging And we're not so Accessories and creates while And we're stores you. – what are both some than We $XX about by, of in the we the us, the our where collections. happened our saw get more that better again, was which you Michael and the And brand to both attributable arrival for business of the led indicated good where Alexandra, for the us, performance of full-price a full-price quarter while I in particular, morning, in because thank Ready-to-Wear think a in in shift, and better for been very was leverage a in little during

be to So happening of is to our along numbers. we're that far We I very feel and double-digit really on full-price call we're pleased business, online some from products Kors tribute of real that business, so good very with there, – very, didn't which the our course, we accelerate in with pleased helped to everything our a we're terms KORSVIP with customize that. ever our our of think really in strong we what's VIP making we this talked Style that's And, about about growth that ability the would program, website. in with think improvements

our performing some of in of Southeast the would Asia; Asia that anticipated it's and had for shopping very tourist, was and I seen as had in year. Chinese Korea, us were Japan, a in in talked you in so improvement tourists, follows. about particular terms The the business in last nicely. where inflections tell Europe is softer In shift, we seeing business more whether we also happening of is We're actually than

performance in during saw also strong the very, and business duty-free some our quarter. We very airport

some in particular, the So, Middle the oil where, rise geography we of prices European marketplace. other that of the come customers, in in mix particular anticipate as the the consumers Chinese consumer we And and markets, is who East recovery think with of it's into some shopping. the

cases. in position feel much, really their in local very Alexandra. we're airports, duty-free Thank tourist, that in it's to capture good locations that a through or markets, traveling we So both you whether

Operator

And Greenberger with Morgan from we'll next question Stanley. take our Kimberly

Kimberly Conroy Greenberger

remodeled of can wanted to ask that are outperforming, by your there, if to quarter, guys. And constant just give if what's then, help just that any John, that and great. comments I'm you. little have store around if you wondering us and more discuss the have you that Great. magnitude understand outperformance us would Great I currency bit of happening geography. you a could comps those Thank kind be been the stores remodels

Thomas J. Edwards, Jr.

Hi, here. Kimberly. It's Tom

provide our revenue our at sales be reported of the and we constant. Regarding the scripted as providing on we'll won't comparable the we a currency constant noted basis, beginning so comments, comps,

highlight changes material However, implications, we'll move we as any are forward. if there certainly or them

John D. Idol

renovations Roosevelt Jersey us, Women's City some some it's our of these two Century menswear. think Beverly one, Number and to in or been in much new Footwear Mall presentation of West some more of the Field about in Short have if the new or you'll stores or encouraging Center, talked is a for cases, of the Kimberly, have find Hills Ready-to-Wear and in store store what out I the Coast now been stores robust or things: New very whether we've – you've and, on

the store. So, is And see the occurred us, things. in customer these can was what because higher seeing remodels seeing for affluent that seeing we're we're seeing demographics encouraging for affluent consistent in, same past. have two third actually one, is, we've we're so the we we're than by obviously are our seen the more customer markets number to visits two that of That customers improving, thing store the shopping conversions. a Number one. more Number these and us

is in cases, the North the as these comp are performing, anywhere know, many is, from high-single where low-single to in So comps. digit you digit in stores America double-digit comp chain

together. of And Style the pull So very part pleased very, with whole that is the we're of that. also seeing Kors excitement

As category categories, and more our on that's have Footwear were and that in performance, to our which our past focused men's out and many categories for our business, to store in two strong reported going our very we we're another come on frankly the you the continue think stores outperforming long quite frequently. categories. those business. categories offset, our as you we And chain Ready-to-Wear we predominantly comp unfortunately, our customer reason Accessories of to are But know, to the of we give being growing Watch term, build by more terms being to

North markets. further in We're So to open we're to well, stores just in some We'll America. as not as get starting some results it's internationally seeing stores similar more we'll of some stores and opened. C report to open you these we B so those And start marketplaces.

us we that talking help this about really comp we'll one on that that the overall, next of years, store feel few so, improvement. very will the sales for to Kimberly. be needle will good things you, the move over two be And Thank

Operator

Bank Merrill question Hutchinson America comes from And with of Lynch. our Lorraine next

Lorraine Corrine Hutchinson

morning. a you talked you. of the When Wholesale up about as I quality Thank the year, follow sales. improve business. Good to guiding you on XQ in wanted you Americas the were sharper decline continue to

can holiday promotional that removing in business better expecting you that, you of spite over you still the performance, the some activity? Wholesale grow period or of the the are Given think do

John D. Idol

our that last in sell-through Lorraine. revenues. so after we at calls even from the faster Tom this said at actual we we by answer reduced morning, Good Wholesale What a were take full-price. and inventories thought I'll was actually we in I'll talk better of on performance parts. perspective, encouraged the by season going having turn about happened two previous Lorraine, and I'll could what holiday that sell-throughs let it terms our inventories

see We continue to that happen.

our at planned So up of and the plan performance is, with every Wholesale. we in of Retail we're up Retail down sales in almost partners planned are Retail one terms

to we the inventories want also we turn to faster, sell-throughs. full-price higher want So have

So that. on changed our not has position

a certainly performance would sales see we're delivered retailer better Wholesale higher that for say the QX You magnitude. let sales higher us. for happen and QX could for -- and the just the performance that that again comp did on prepared encouraged We basis I'll up year, reorder to them third making QX, and talk for QX to in potentially but Tom end not are but Retail that retailer that the positive

Thomas J. Edwards, Jr.

Michael improved we for into of due when We've Kors. the year, down look Lorraine, mid-single it's and, now full low-single John down And, with as really the mentioned, at come we to that digits Wholesale guidance digits Sure. the year to sell-through we're year we for through Wholesale. improved our and for outlook were timing beyond QX to even of that into enough was million, the the but shift some in QX $XX about comfortable in raising that, from QX flowing There year.

John D. Idol

Thank you, Lorraine.

Operator

Brian And Tunick Canada. with Royal our next question of Bank comes from

Brian Jay Tunick

selling views morning, between I vision questions. John, that's guess recovery. point, AUR two curious on on maybe Good are the AURs. plan out laid are in maybe what you And margin. are regarding big the U.S. your on guys One, brand XXXX I Kors Thanks. a where curious then and you where you significantly been Runway know ahead guys. Europe, you for your Michael of your

and expected. regarding just you maybe very getting XXs guys Kors what back than are sooner curious So puts the you takes much. brand margins Thank into Michael the the

John D. Idol

our positive to We've had own stores. particular, a seeing a in be driver be us, the we're capability of Retail that for to continue AURs for price-points, always in higher Brian, selling and continue us.

in channel the remains Retail particular, se being online. made store traffic While still North America traffic-wise is down in up per that in

see media online, double-digit, can our in you So base, that followings. can traffic our see you growing dramatically our that and customer is also in social

conversion you And The on have lot and she good getting fashion. I shout-out us. proud when have think so, our our say, only feel same products related seeing really basic it sell-through and on teams leadership is the of wants Jimmy higher in differentiation, customer thing. it things what sell-throughs, seeing could that's our there getting so Choo own happen AUR, and Sandra's and that wants at so we're for number, also really, then, response, there's days there in somewhat the The give and position really for she wants we're brand on leadership and much a and delivering assessment like in we're as well, fashion going we're I that impressive positive in of She we're what store great design pretty of digits. as of to than behind part are are, in luxury also really a course, in cycle. for just a a novelty, innovation, up that Michael would luxury our more Accessories I improved business your my that's brand really are We're about high-single to there. us. mean, today. our Obviously, we're we least comping I stores, wants Footwear are what's some that, excited design a comped products to well. That's which we but and is

XXXX In we where terms just the about talk are to margin Runway expectations. I'll little in brand, and Tom talk of bit let about I'm process, the going the a

that absolutely are you're be where in of this kind seeing all at we on we'd point of We time, and ahead thought metrics.

Retail that You're on seeing sell-throughs.

consumer the way responding the on that is us. seeing to You're

there's Retail, style and are You're for reflection fashion movement and us at a because seeing that that happening margins at definitely on a that's of what's customers looking leadership.

our our has for focused openings collection very about improved piece pleased really that. be of want I'm on collection part talking there. I what's as store is to that us So, to globally. well business some some on traction. also business, with our getting of mention Michael also that our there's happening where innovative going business, around designer we our We're think opportunity been

product and continues the XXXX, Kors we're with is it small it's very pleased to said, still the we've Ready-to-Wear men's strength – over consumer grow. So and categories. I in how Tom Accessories, where the while about total turn response to company, margins. brand Women's with of seeing I'll to we're today you to the Footwear, would executed we it that the sit and tell and Michael results And that Runway we as

Thomas J. Edwards, Jr.

comfortable as this we expand the margins guidance from we're Kors when to just higher this in for little SG&A Retail and year. on Runway enough XXX about XX.X% a little the over XX% just costs year perspective. a basis for perspective nearly quarter, that right going where a margin had now, that we're out Right first on with of stronger, we on we increase for gross performance ago, to But year's felt slightly we be margin business. rolled XXXX level. expected ahead year noted a to points Michael We've be this XX% Brian, that a we're holding to little operating little just

progress So about the we've made. feeling good

position expectations. sell-through forward, great move we XXXX upside, as at that Runway about feel growth at course, overall Of improved more or in could but we're sales we're relationship the and to where in provide our

John D. Idol

you, Thank Brian.

Operator

next Evercore our Saad And Omar ISI. take from we'll with question

Omar Saad

in of especially to wanted seen John, in job my ask about of I were the newness it the have innovation it's you lot and guys around know newness? European seem as a of taking I doesn't have How you – has think been the two not would are aspirational maybe trickling for on newness margins, you well, like Do strength last few down – expected here. Great maybe guys. the past? any you one have for the future newness. thoughts questions about so are kind And way about you segment luxury also, for the and how a that guys and rather. as the brands on that XX% or others then and performing, as thinking ratio quite it How why where I question. on you we've quarters, seasons? into focused translating we in And And is the Thanks of more thinking the much in compete. quarter you newness season Thanks. lot it's

John D. Idol

handful. very, those doing great is of the job. and Jimmy hats that's which Choo so increases, because a are ranking minute our start think, I range. our very of we this the comp and at product there as said, is terrific are quite and ago, because to we companies top-end on Choo That the on like of we we're a particular. compete of. Good Omar. luxury who sector morning, reminding I'd there in proud a mentioned just being to luxury consumer incredible of Omar, innovation, are take performance, frankly performance few globally competitors off We in our Clearly, call, solidly you companies And Jimmy everyone by store out with in brand the putting very do desirability, a some they're believe upper-tier

in Secondly, the the compete relates Collection compete area in we as our it Michael we both with accessible brand. luxury area Michael and Kors, to luxury Kors

very quite our that think that some desirability. new didn't compelling we candid we that us, were and so launches were created consumer I innovation said for and product of the it frankly our think with enough

sales the we space on or better in here the high-double levels are of to tell a year don't competitors we'll feel we you comp that just wouldn't that's believe all are three be much think we digit that. do positive and think comp we that luxury to where global the will store who regions. return on that able sit in a I basis achieve. two can XXXX, fiscal in store four We about growth. We I running reach or level

the in And in on, Europe, again, our that turned so probably I global players are of think the around performance, that if pack get very focused on basis. rank business we the which we can think would I middle real our a of luxury

operating would of had very and revenue the high-double our pyramid extraordinary you our the the rate proud at company. aspiration We our also what tell digit I margins are, And is. for in operating growth company much that margin and I'm at look you we're that's growth. So, performance, when an look our top terms where of very at of our

perform will so high-end we look on for potentially We level at And in when based of but believe as of we're very, of a we're some growth. to not comp be competitors, per revenue metrics, the our guidance a you starting and group, very we double-digit that key those exactly earnings all at our the the growth place. have that high-single believe, year, digit share we'll good

Thank globally. how indicator responding that you, So I an is performing of to that are group the products consumers is think and how our Omar.

Operator

Simeon our next question take And Siegel we'll with Nomura from Instinet.

Simeon Avram Siegel

was or something so, it more Thanks. have that you was the Wholesale was guys. point congrats that a a customer Hi, your if shipment about chase shipping timing year. light And John, potentially whether function in view whether you category a broad-based? specific and timing, it if clean the on on just demand? so earlier due million of product to with sell-through being to do to the a or that was shipment pure Good it And strong strong inventory, of could Thanks. $XX just is continues? and start the morning,

John D. Idol

Yeah. Simeon, there's two things.

some America. planned, is was something, reduction before, biggest said in the reduction the Europe – we've is – North although is for the inventory here the as it company planned On there inventory, predominantly inventory yeah, inventory and it's the piece reduction, of

earlier "timing we're earlier, we about get piece up of As the we anticipated. deliveries to And I stores, performing that just additional wanted pleased into some moved shift" part because than they're got second we is us. the which that is early because had some very said that reorders shipments we for

share our outperforming we're pretty shift front while to why QX, think in QX put really better it's of year know see And performance the up that's increase holiday until carrying in when the and which the I guidance feel we half into will but hopefully that us than we're season. of get we level, the earnings back So won't you'll the together, the a $X.XX two for possibly timing really a between year the per forward year, quarters on nicely. do sets we and we obviously the significant anticipated, have you that half

As company. a great. do try chase is I and on to little And that some said earlier, a of of as I are light the magnitude because don't think inventory probably – being this in that we're to of things, we able all terms going clearly

also inventories see QX reduced with in will fairly us also. You significantly

a So position of a with better little and in QX QX for be already bit we'll inventories. we've and our kind course-corrected

planned. quicker we little just As you, Simeon. sell-throughs said, a Thank happened I some of the than had

Operator

Canaccord question next from comes Genuity. Lyon our with And Camilo

Camilo Lyon

to start a my Thanks. good on Good year. morning. two the Also, questions. congrats John,

fashion declines, still the some about trying because year of ACCESS nice the expect launch some Could that watch just mix think sounds drag by up collections it in should capsule you're on just get category, maybe a modest of should comp just then component. effort. these to for will conversion this past the we to I'm has there's the mix – collections, How watches on that increases And like about so sounds the the year? how secondly, you I years, capsule improves? seeing accounted that unfold from two as throughout color the frequency traffic you the the although from you think end think on how a ACCESS like First, detail improvement the half in albeit decline

John D. Idol

watches to Watch remember, – things a you, I new them technology, we We're spectacular. so, A is have bring with reported maybe similar. tell XX%, that clearly, because there, of it's of be our can lot have Thank are to the qualify obviously, also one kind day technology you, company. amazing expanding that watches, Camilo. to – smartwatches. and leader, is Google business an the XX% say, on yesterday smartwatches. that couple can a running watches our for as I have existing watch. us we say this of area Fossil They business here the partner, a sit do on but the partnership working can't with the to incredible. Fossil of that different with it'll about they in in that there's relationship XX% I They're

small a see I payment with not different device issue. be number think this people near-field continue communications, this is a going you're And to this to of used by activities. for the

this we're in we to we in that a the up that people them world think know run take terms with there. We brand offices out in today, we're the many possibly of the area. And As they we're three functionality a having know, watches, singular dinner you and therefore, number they devices, believe right other is. so want we wallet in leader all to to of – out this continue go business. who grow we But or big more in going think may to think and not by

on to our a from and part said, being are business. So away Fossil's by fashion commitment it we is very, I watch see not iota backing season. and very the our serious part. fall you go that come stores encourage And one

changed styles old almost have to I assortment XX% push really a entire fashion assortment, customer discontinue and changed – the them, of major, really, think out will for And made the really watch will we've a be We deliver new presentation. of out the it's season. take fall major

have we that. in we're we're the where up. in channel the And And, comping kind of store said, excited department declines I moderating. as seen particular, about weeks, are So

So, don't sand. call to want line the I in again, a

in comp a we're also, that's be we be like watches We are our a in we'd going is you here from by The case, right our internal results the for line us of in States being – do. thinking. to again stores. – only that goal in the standpoint, positive hurt Again, arrived, discontinuation and have jewelry know but also are and and and year. We encouraging but weeks sit our a jewelry that's in Europe. definitively the inside fashion the to the next sell-throughs fine category line tell can't the thing the both new initial And United for store, few I quite it's to minds has

have So company. we're for as we've a in hopeful smartwatches, going – chance getting will the the that deliveries between well as the year fashion got that next and jewelry, this category strong pretty trend the in turned we fashion new watches, a around obviously,

our capsule Lastly, in Certain store. really of stores items collections, on sell-throughs a it of items ago out certain and We've about already. in sold on weeks to are excited the XX%-types put the couple happened. what

of collection the about situation. like we like a what limited-edition almost is it's capsule So type

get in. need You to

pieces. the get to need You

don't not be you. the get to going for pieces, there you they're If

more the but footwear, Now, which this to been our going there And based go is we've and to in kind Ready-to-Wear out. to fashion it's about But always and with exclusively start in first go we trend slightly and with now current super-hot broaden that. along the of are capsule active collections be right certain around bags know then our we've And you sport got now. capsule again, edition, that we forward. collection will was stores, limited launched as

So, thank you very Camilo. much,

Operator

question Jefferies. take Randy Konik from we'll with And our last

Randal J. Konik

Yeah, lot. thanks a

margin since have it somewhat, just should gross starting a trend to year. SG&A would of guys thinking over but very of going SG&A on deleverage time can rate like on operating So, back terms part seems a corner be be company holds job medium-term Thanks. newness, as business, we to the about margin of And little period. SG&A as get sales? lowering of opportunity to of the the the an be controlling it and of are good there's a the to of terms for of up margin years more inventory, structural give and selling. line that that predictable us over sales. SG&A in going How to you we Tom, strong looks mentioned of can a where So or solid you thinking as turn want – the be picture is that percent go doing in slight full-price gross great sustainable leading just SG&A over for be the of sales where some the because a the you're picture where a bit to kind percent it about some sustained for long-term penciling time percent and look next color that really we as couple at, in of start the that a

Thomas J. Edwards, Jr.

Well, thanks, Randy.

as margin expect expansion a it. start And a in Retail. little pleased year our we're great overall, margin, we higher as It's out you really gross just roll mentioned, modest I'd with and spot. we So with SG&A bit this

lever about we and Retail XX% we're As Wholesale a out. good from But said that for sales in able you Kors we grow of Wholesale to mix we XX% look to over a time, and I'd lever Retail, that XX% believe we XX% Michael be spot as move that before, to so model SG&A. let to

John D. Idol

Thank you, Randy.

John D. Idol

progress Choo. growth were strategic quarter excited performance we the about XXXX. across Kors initiatives Jimmy our to at remain are encouraging fiscal with strong and pleased Michael conclusion, start and making very first we our both We In

look you earnings as shares our sheet on call. to balance giving well and look repurchase potential flow strong much. luxury acquisitions. forward to next continue will we Additionally, Thank updates our further to as use very outstanding you I cash at strategic

Operator

And does you that conference. conclude today's Thank your for participation.

You may now disconnect.

Katina E. Metzidakis	Michael Kors Holdings Ltd.
John D. Idol	Michael Kors Holdings Ltd.
Thomas J. Edwards, Jr.	Michael Kors Holdings Ltd.
Michael Binetti	Credit Suisse Securities (NYSE:USA) LLC
Paul Trussell	Deutsche Bank Securities, Inc.
Alexandra Walvis	Goldman Sachs & Co. LLC
Kimberly Conroy Greenberger	Morgan Stanley & Co. LLC
Lorraine Corrine Hutchinson	Bank of America Merrill Lynch
Brian Jay Tunick	RBC Capital Markets LLC
Omar Saad	Evercore ISI
Simeon Avram Siegel	Nomura Instinet
Camilo Lyon	Canaccord Genuity, Inc.
Randal J. Konik	Jefferies LLC

Capri Holdings Limited (CPRI) 8 Aug 182019 Q1 Earnings call transcript