CPRI - Earnings call transcript Q3 2019

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Operator

Good day and welcome to the Capri Holdings Limited Third Quarter Fiscal 2019 Earnings Conference Call. Today's conference is being recorded. I would now like to turn the conference over to Ms. Katina Metzidakis, Vice President of Investor Relations. Please go ahead, ma'am.

Katina Metzidakis

thank quarter joining fiscal and Holdings on everyone, third Limited XXXX morning, you us for Capri Good conference call. morning and Tom this and me are Officer, Executive With John Chief Financial Chief Edwards. Officer, Operating Chief Idol;

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

discussed non-GAAP to measures be Choo our on non-GAAP certain will presented and reconciliations, charges otherwise and quoted financial please information will all addition, and transition GAAP Versace on and earlier a underperforming transaction, certain information related exclude with and basis. the at integration with non-cash corresponding stores. all costs retail acquisition website on the measures In primarily impairment and associated sales Unless on non-GAAP today Jimmy comparable To will today view call items release These restructuring basis. reported associated related a noted, presented a basis be store capriholdings.com. today's to posted revenue and be view earnings the

John Officer. Idol, the turn to Executive over Chairman Chief and like Mr. to would I Now, call

John Idol

our earnings Thank call. you, Capri first and to Katina welcome

addition, world Versace. and on of are fits have perfectly leaders style our extremely the trend. acquisition strategy luxury the in this the is of The group created into luxury in brands international world’s one leading luxury pleased we’ve one of are completed recently most storied, the With fashion to fashion that We and focus house brands groups. Versace to of

to luxury and have their growth underdeveloped Holdings have fashion brands now accelerated Both the Versace Capri global in We potential. positioned Jimmy Choo versus are market.

With significant be particular, our in help that In provide, our brands for luxury Jimmy investment category positioned resources and group accelerate both of growth. will accessories at expertise these underdeveloped the and Choo. both Versace this will will

both We with companies categories to these are rapidly. already the in develop process

Kors, revenue and the Versace With power Jimmy brands we growth. our deliver the billion Choo of iconic led position X to years well Michael $X strength multiple of accelerate as to Holdings and as fashion earnings founder of believe Capri

Now, I'd a like flat to Jimmy results Earnings turn Kors, was offset $X.XX decline billion were in reflecting for above $X.XX share of guidance our in per Capri revenue was Revenue quarter third range. X% Choo. Michael and to by increased the Holdings. from the year-over-year,

for the results new the full Our of guidance quarter fourth Versace projected and year now incorporates acquisition.

the pre-acquisition per previous For increase our of from per third $X.XX quarter share guidance expectations anticipated results. business, the dilution expect than $X.XX $X.XX reflecting to of to including for $X.XX, year, a reflects we full This to $X.XX earnings Versace. $X.XX our better share

season. our design Now, brand, experience. turning three our exciting team brand innovation, engaged engagement execute Michael Kors to during pillars of that customers strategic the and the we product continue and Michael to and delighted product against customer his created holiday

introduced which the favorite remains styles. small customer novelty results. The product Michael Kors collection, a particular our color with also Group satchel accessories holiday in was Bancroft -- shoulder jewel new strong blocking particularly in to detailing in Moving Mia performance, for showed

three produced points Whitney Kors our which with have limited in featured and Whitney design quilted prices between Michael the color $XXX helped introduction offerings ranging tri Italy. remained accessories our Michael higher strength of the average edition group. amplify line, We and are drive marketing styles to will our in in continue our in The best-selling with stores, price group runway In holiday luxury our $XXX campaign.

Our quarter. plan XX% represented Michael sales our quarter to were fleet the over accessories and retail sales to next we year. standouts XX% Kors the Signature our during also of during grow styles approximately the signature Signature fleet of

While comparable compared as sequential accessories store sales single levels. increased second declined in in saw quarter, low the we improvement we sales the inventory in a digits, to

as signature will appropriate position focus will continue on be to mix in our the well ahead, innovation levels for fourth we our believe fashion and Looking inventory more as quarter.

helped metallic featured pump Moving and we been with customers. Felix launched Suede customers our bestselling to to well well as designs. Lillie was was and The leather category well, footwear, resonating campaign Alexis Embossed Skyler platform new performance holiday Claire such sneakers. responded the that with which continued has in fashion Flap blocking Core was received. as launched active the drive to in strength prints, in perform quarter, color our continued our Billie silhouettes sneaker, trim newly styles during and our featured in glitter chain and detailing Olympia wedge and mesh snake

footwear the in to We customers. collection as sneakers. women's younger its our comparable new continued to to continues Michael all marketing our style growth to digits. category head successfully sales best Overall, history, toe one in brand. from across drew signature continue wear, season incorporate the store platform to Michael consumers drive our in experienced ready footwear company's double Kors Kors to our luxury In combinations line, offerings campaign In Kors leadership design Michael our throughout our with increased Michael’s boots of categories. new dressing resonate to successfully our

party digits. mid-single deco and embellishments. campaign, in featuring luxury focused and sellers silhouettes picks. dresses performed top ready-to-wear well. In Comparable dresses, that In art women's crystal on feminine embroidery styles best patterns, were were and sales outerwear ready assortments breaking quarter outerwear holiday of glamorous, the featured which store glitter embellished and Our inspired in increased

were to holiday for luxury gifting. responded our inspired jackets. customers sportswear, shearling strong and in signature sellers moto leather business, men's our to grained Turning items Streetwear

Our lightweight and sweaters Polo during well crewneck the also performed quarter. signature Greenwich

our style, collection MK Our men's Group. signature strong continued by the growth. Backpacks accessories to were show led best-selling

demand also for continued pebbled in digits. leather men's store sales increased group. We Comparable mid-single strong Harrison saw our

broader Looking line growth men's excited our new Kors ahead, business. hybrid line we believe outperform Michael further men's the will be are streetwear fall season, we’ll styles. in footwear this smartwatch to We men's business and launching Kors jewelry active and modern our new continued a segment, share access expand to in anticipate the watch the continued category. In that featuring and Michael

those band offerings. slim Sophie fashion In remained Our luxury sellers. new customers respond silhouettes, continued in and leather particularly runway watches, to best access well watch to

we see globally positive are more category and the we quarter. into trend. quarter a than secular now We are these was declines in year the being our watch watch greater anticipated. this the continues in results, declines line response in expect rate we and by encouraging. by While next anticipated watches overall jewelry category fashion was encouraged new to challenged fourth at to impacted Separately, we in to had than The continue fine

moving link season. emerged Kors holiday driven an Mercer and revenue by love new the higher fine quarter, offering to category. jewelry bracelets nesting from best our The a fashion our for during and Interchangeable line. From retail launch perspective, our sellers well led line also the has custom AURs our overall jewelry as iconic Our this to in experienced gifting. resonated heart from rings significant stores fine collection Kors significantly jewelry volume, decline

jewelry our this are future fine fewer optimistic remain approximately We growth over the of XX% expand carrying category distribution plan to in line. about We stores. and time

Now, launched new all I'd like throughs to a the saw provide on Bold, We style categories. strong performance across new October, capsule. which in this Bold is our sell by an street second signature collection, athleticwear offerings on was and our focus of very Kors’ showcases collection. men's and update which capsule fashion MKGO women's inspired

the stores, plan energy the of to have further continue these they capsules MKGO in created Given our we success introductions. with and

Now her consumer turning new life. of Binx collection Michael This featuring engagement, new luxury success campaign modern brand our campaign, seen jetset Michael's and we've Kors how highlights our Walton. vision she lives to great with

exciting the are has jetset. style, and line, energy speed, and supermodel our the mood hallmarks our created imagery of The quintessentially For Michael of our is that for spring, Hadid the Bella campaign new life that optimism Michael face reflects brand. attitude an telegraphs instantly as the featuring Kors Bella company.

globally demonstrates to database experience, continue our a and approximately Moving desirability Kors have XX continued Michael the the XX% to which million customers, now and year, of expand customer we over brand. last strength increase

in now VIP non-members, compared show to transaction over our from members a US, increase program, boasts VIP members Kors last a million to sign. metrics as quarter. and stronger XX% the engagement encouraging loyalty very X.X Moving

to audience position designers and of Michael's Overall, grow. in believe we jetset build for media reaffirming world. social our brand quarter, during that over followers, media global Overall, most vision the the social to the as increased third to foundation Kors XX Additionally, our strength a Michael's upon. for presence we the us one luxury strong the are million fashion followed continues Michael of

the in collections sneaker driven XX/X Choo, showed on offset a Madily, single the fashion flat the basis. the new digits, core with performance, strong our including accessories the to to grew by boot single digits line. active, book and fashion by Romy in and mid-single results seller. Jimmy Comparable to reported In partly turning cruise high best we a handbag as low sales basis remained transition remain Merrill growing In was ankle Now a continued also booty. footwear, best new our strength biker platform. footwear, our on revenue in store the digits strong knee a high performance, seller currency weaker constant Norway

clarity inspired of and shimmer is unparalleled Diamond diamond of diamond offered recently also in trainer. the sole, sneaker, our lightness laces and and Choi's The crystal launched sculpture sports suede. was silver design a Sandra vision, clear embodying by a a which sense We

in consumer has with all Middleton, hand as crystals timeless was Kate continued to a with of launched shoes. our Swarovski Chopra, new and a variety The category strong in response. immediately offering Margot dominate fashion groups, Cara accessories, which the an remains addition. Robbie, offer unbalanced, new pearls. photographed and a carpet season, Kate growth. and for to celebrities Priyanka Moss, from a strong to accessories a offered we become to clutch In we We the Additionally, wearing performer, of fall iconic satin continued suede crystals. and first to Choo our such generated crafted the Delevingne red transition as focus Callie elegant diamond an ranging the continued version Marianne Gerber, with Jimmy be future Kaia array key

XXXX. to campaign. spring signature More in new Choo's new accessories design and crafted collection which our including are planned be JC excited collection, throughout first highlighted are Stark, Helia launching introductions, features ever signature Jimmy our We our is

sneaker breakout Diamond Separately, our marketing, to launch was of high Asia influential digital a streetwear terms campaign, most focused content China. supported for media Qian with on continued Victoria new brand In ambassador, the engagement extensive media by shows social platforms. generate Song in our

During million. the quarter, grew to Instagram X.X Jimmy Choo's followers

Jimmy of about of dramatic continued Kaia are Jimmy campaign of by the Jimmy highlights ahead, face and internationally Kaia’s Looking thrilled will we Choo's announce timeless excited pedigree, remain growth rain brand. the With sneaker. and energy spring handbag of fresh we representation new future that the generations her the and fashion very is acclaimed Choo Gerber beauty are our and the spirit authenticity to campaign. encouraged prospects. Overall, be Choo Helia transcends perfect its supermodel of The XXXX the

a provide Now, on to I'd update like brief Versace.

vision. in While Versace sales on strong vision parts looks, a and The glamour. was media social from and from drew world. expand a begun exposure quarter. strategic with December. digit on The equal of our press our bold runway rock unmistakable global growth Donatella results, press We've of coverage around the continued Donatella’s first Molon and brand design Versace. Versace which of already execution testament basis, spirit New working both with Jonathan celebrities Akeroyd York. the heritage included The the reach York and runway experience efforts to quarter's the in evoke revenue Versace and to with reviews, not show show refined fuse show double continued store New and Versace’s standalone roll increase and show unique We were as as ever to increases a the comparable energy well the sartorial was fashion this CEO the of to the the marketing began in with generated

focus are we luxury we will are million in can from that this grow brand XXXX to We that initiatives revenues approximately in XXX achieve confident this five strategic goal. on to X in revenues. iconic billion There

Versace's on build to luxury plan runway we momentum. First,

Second, we will messaging. enhance Versace's powerful and iconic communications

XX% will Third, omni-channel Fourth, e-commerce footprint group's are women's and stores. to footwear iconic experience. led we retail Versace’s accessories three of accelerate men's very fashion create family. increase full global In development our we expand XXX founder form XX% about Fifth, excited that to houses revenues. will and from we our will a approximately conclusion, XXX Versace’s to from the to we expertise Capri leverage

double are growth. pleased we XXXX, per that earnings both to and also digit deliver We share in are fiscal expected revenue

our brands together, three Capri billion deliver accelerated approximately Taken revenue for position multiple growth. years to Holdings $X earnings and of to

Now, let over to me call turn Tom. the

Tom Edwards

everyone. Thank you, John and good morning,

and lower quarter, Kors per third expectations. flat were Michael our impacted earnings of We and were slightly below was expectations. last foreign compared of retail $X.XX billion revenue ahead X.XX year, the Net revenue. XXX our share which headwinds of million total of For income diluted currency by to was

our to versus business, basis, comparable comparable last year, points. was total which In Michael a X.X%, increases in versus decrease than offset year. line declined a reflects XXX year. retail X%. benefited new decline currency Kors’ comparable store XX X% This opening prior expectations. brand, representing sales to decreased were basis our X% sales net by to the performance On Global revenues the Kors of of constant last by more revenue billion, Turning a with e-commerce sales Michael by compared X.XX revenue related stores

comparable and XXX John the jewelry anticipated by larger As reduced combined and quarter a noted, than watches points. in headwind were basis total sales

XX% entered with the products. our versus inventory, under signature inventory, year prior were and down quarter in we penetrated at Looking

and We continue inventory mix to and have to necessary fourth appropriate level in the make to a quarter. expect adjustments more balance

Kors For the declined Michael wholesale business, revenue X%.

the season. expected full by decline of new negative and offering decreased the revenue This impact continued to also fashion as holiday into sell and than impacted noted, licensing revenue jewelry lower fashion a jewelry less our year. is previously watches. revenue, continued XX% Michael in We reflects offering. increase QX the through price Kors’ year. as result the quarter stores jewelry a fashion decline to prior We strategy versus were reduce in we next Fine in As a our from for in Jewelry prior and watches fourth anticipate inventory

shipments. store Americas, Now, flat Wholesale and revenue high the in on reported reflected Europe Europe, sales quarter. the decreased reduced primarily Kors single revenue in some a the I'd increased revenue highlights single digits Michael the as in declined our reset constant inventory during growth. a planned Wholesale regional the single low base department for retail to for improved robust digits, travel sales full and local In like in for sell high decreased mid-single by digits our sell the Americas’ the to provide Americas performance digits. in part revenue to revenues in driven basis. market reduction We full brand channel store on throughs the throughs. price strategy in In store the decline drive quarter. of we single e-commerce digits comparable the retail quarter, the in in was teens currency to quarter. the single into price the low accessory better channel. as low stronger comparable continued increase a pan-European high and digits strength, to Europe This increased declined basis

net a reduced experienced mid-single activity. China digit Mainland digits. delivered result in Turning while Japan, new increased by Kong sales Chinese mid-single single reported in low Hong primarily comparable we Constant reflecting tourist declines sales single of and store in low to digits. offset currency comparable as the a increase digits, Asia, revenue the partially XX openings, store Korea, down decline a Macau, were

traffic to forward, the I We mainland we in Looking and year. in continue anticipate growth about remain China optimistic improve expect tourist will broader expansion next into region. long-term

These driven bringing the in reflecting impact revenue the low mid-single revenue, pound like by XXX for quarter, digits of as retail The would two with stores weaker footwear, of to results stores. the turn increased forma to only was XX XXX our fleet single prior transitioned collections year. new partially offset the quarter. new digits by adjusting revenue. continued this since pro to addition of expectation net but months I in the were global grew Revenue on a year Choo period Comparable store foreign line basis acquisition, Now, XXXX. for compared Jimmy to total a currency to fourth included strength lower sales, accessories sales last million after we in our to in of business expand

comparable growth saw are which pleased We high sales our China, in with single strongest regions. digit increase, business Greater particularly all the among our

speak benefit was point the decline me the basis company the to total XX XX.X%, to a The point margin in over compared due let gross reflects reflects a basis XX year. of margin additional gross XXX inclusion brand a in to holiday Choo basis Kors Michael basis points Gross XXX of markdowns margin the This of Kors brand from Jimmy points Now, performance. margin in prior decrease prior gross retail year. decline margin and Michael season. taken

During stabilize driven the our expense, of Kors business. margins. more gross percentage fourth XX points, Total of higher Michael margins reflecting to European expense related as a We million reflects quarter, timing expense XX by we in million higher in will The a into expense XX a our basis XXX the quarter. begin XX million of Kors’ the company increased reduction Jimmy inventories markdowns. increase to in and to to higher our balanced in inventories a increased Choo percentage, signature in shift operating which the fashion margin gross In and operating our inventory continued This in will fourth segment, quarter, be resulted million. wholesale retail believe level have which ended that styles. transition greater

XX.X%, As the the Total XX.X% the with was Choo to points a of of XXX company business. expectations. expense Kors’ XX.X%, point XX.X%, XX% Jimmy operating to the lower basis margin margin Kors XXX last a primarily percentage a operating better Choo's margin Michael year. point line XX.X% increased licensing Jimmy during basis margin. margin XX% driven to Michael compared was operating gross wholesale operating Kors’ operating gross to a was XX.X, was was revenue, due increase basis compared operating basis and XXX operating operating retail XX.X% compared Kors’ in addition was last to primarily lower reflecting decline, year. margin quarter, year. margin decline by prior point expenses. Michael Michael margin XXX

Our tax reflecting primarily and rate US the to jurisdictions. of compared for new credits the the quarter the certain the earnings in year, lower XX.X% tax in impact XX.X% prior law, tax tax of was realization higher

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

the end end after Although the of Versace QX, for borrowed of the we the transaction closed close before quarter. just funds

JVs new were prior were higher increased and to the for we and the on Middle development, new to to XXX million million mix of accelerated in XXX compared and net growth, an of prior and shares East. we signature as fiscal X% the During compared year, quarter, XX% renovation, classifications spent enhancements. year, million million XXX Capital an revenue new $XXX store of build and reflecting X Asia. million IT core inventory million remaining products repurchase Jimmy Kors’ in e-commerce inventory growth, repurchased availability store in our expansion quarter to XXXX. from Michael levels the additional increased primarily Asia and was increase Inventory authorization. and for approximately share compared these consolidation on X.X Choo XX particularly the have inventory in expenditures QX store reflecting inventory the

guidance. Now, to we'd like our to turn

We to Versace fourth the quarter and projected have acquisition. full updated incorporate guidance year the our of results

to For previous business including $X.XX business, guidance year, to to we pre-acquisition Versace. $X.XX our for per full reflecting two expect a but for $X.XX third on of This $X.XX, earnings include from be expectations quarter purchase. better of our the reflects the results. Fourth as dilution includes per of Versace share increase one share $X.XX three $X.XX to results related year anticipated the interest lag, months full we guidance months, month than will quarter a expense reporting and the

in results group, present expanded we our brands Given beyond. quarter expect future our with to and the aligned financial fourth three

overall and we Capri provide result, the will level a brand expectations As now guidance level. at the

expect the be to we total billion. approximately full year, revenue X.XX For

Choo reduction for We slight expect million, We X.XX sales reported prior revenue single impact. Jimmy low down Kors forecasts, billion Michael XXX approximately with reflecting digits. comparable exchange now foreign incremental from of forecast a

For Versace, approximately of XXX revenue forecast we million.

drive is investments amortization Versace, of investments margins negative Jimmy Choo, margin XX.X%. which approximately Kors, reflects to business. XX.X% for operating the updated purchase operating This brand additional approximately margin reflecting brand Our and for and forecast the a in Michael operating in initial for includes X.X% growth slightly accounting,

weighted rate family XX% outstanding Our shares million acquisition. approximately assumed of shares XXX average with tax for to members the in year. is issued now connection forecast X.X including We Versace million, the

of Our Jimmy expenditures as optimization store includes to openings XX our as stores IT Michael now fleet We and renovations well Kors of Kors which approximately approximately for now XX Michael and XX as expect XXX is programs. guidance close Choo part million, expenditures. for store capital

higher forecast comparable and approximately expectation single Kors sales, digit of Michael quarter. we seen The is to our closer X.XX impact the to and currency sales that the revenue the billion, Included digits rate reported decline billion. quarter, including fourth comparable end are foreign expected quarter fourth range. expect watches third to of of of low to jewelries continue this decline comparable in Michael constant the in We lower in company approximately to X.XX currency store will sales negatively closer the sales, revenue the of is forecast higher largest in the low range. the Kors comparable single close For end total a headwind

for a XXX comparable a mid-single we expect constant For including revenue Versace, we And approximately Choo, approximately reported of digits million, on basis. basis Jimmy increase low million. in XXX on single of digits expect revenue currency sales and the

expected expense to expected operating basis is prior XXX in XX.X%. margin be XX.X%, and QX. timing operating be is QX into margin approximately approximately Michael XX brand year Kors gross from to of margin reflecting a QX reduction of Our million versus points

Jimmy reflecting and a X.X%, For margin operating margin slightly an operating we normal Choo, expect approximately loss Versace. expect we seasonality negative of for

rate approximately to forecast shares a be of Versace outstanding weighted XXX to share resulted average $X.XX in of earnings expected XX%. is $X.XX, tax approximately dilution We anticipated of in $X.XX. million, range diluted effective Our including per

Now, the I fiscal and XXXX beyond like discuss Capri for would to Holdings.

While we normally our provide was our group for long-term release, expectations at major our growth Versace, evaluate Investor table of Day, update outlining felt we given guidance and these to the the earnings expectations. acquisition it of important to components the

including for Capri X.XX fiscal Holdings we billion Michael XXXX, approximately and million for Versace approximately Choo XXX to Turning Kors. and billion, X.X XXX revenue of Jimmy for million expect

We of expect per margin Capri of XX.X% earnings approximately operating Holdings’ and $X.XX. share approximately

our to development, we capital expenditures, and plan capital approximately allocation, Turning on on infrastructure. new IP store XXX focused investing million in

us enable also XXX reduce debt will in fiscal flow over by million cash free to XXXX. strong Our

investments for additional million core Fiscal for Versace’s the like single forecast operating at some digit double and a XXXX be business I'd flat, rate. on collection purchase basis. constant digit Versace a support incremental like adjusted a reflecting approximately add Now, On like non-cash basis, would Versace growing be to to high currency XX amortization growth. and increased price lines, of We Versace’s to margin information business Versace. growth reflects for exiting revenue

as and million over broader of approximately incur million XXX and Versace of we to costs to related XXX to integration the integrate million costs the transaction next group. acquisition the into expect XX several We transition years,

mid-teens continue believe We Versace next deliver operating within margin few to would the years.

group will Choo and growth strong expectations from fashion These expanded our Jimmy We and expect revenue growth. our long-term XXXX, revenue providing global Kors EPS achieve actions growth. remain drive to Michael well Capri additional taking accelerated earnings and Investor our confident deliver Kors position For we look fiscal meaningful Holdings, that forward Jimmy and Versace, as we revenue Jimmy Choo driven to be bands, are margins to by and conclusion, Day. and results for results beyond as Choo. Versace, In June three long-term luxury guidance Michael and to at Versace

the up for questions. line open I'll Now,

Operator

from take now will question We Boss Instructions] Matthew [Operator Mr. JPMorgan. our from first

Matthew Boss

term the the fourth XXX Michael margin could on a the on I just the multi-year, what now basis the then here I'm puts behind X-year the curious points maybe quarter, So for stable calls anything brand for gross drivers outlook the maybe takes comp Kors X-year in just near you comp Kors the little compression just plan embedded in and guess on elaborate margins, brand, is? on and that the

John Idol

Matt. morning, Good

Let start XXXX, Capri to to I’m remarks, the which today a we initiatives. saying, to prepared focused Choo the very and Michael called great vision in said that Kors as our off was seen in the first course got excited power me started by see in brand, performance in three extremely of position on Holdings have the have we've Runway Jimmy that’s in Versace of we've we a powerful brand Michael for and Kors

that exciting through innovation we being to brand the and would First how the level growth product product return we were of delivering.

the as we inventories fashion on should penetration stores pushed amount that we level had, in also was in and did kind the we of something quarter, saw were hard the of that had at spring of into signature had delivered that majority of the end reducing penetration or spring season, our the we During the the reducing season, very not That our We the to inside we the a well an have too little given stores bit signature of the the saw signature company. a QX, amount not reduced far. have our did. mistake. impact we We

a, was we by one, happen you've anticipated us that inventory I really improved we quick there. About hit only things saw which the impact we comp much action saw well We so in points primarily down of comp flows in negatively comp. very had already saw were We at in declines had wholesale watch this planned accessories were very previously. which watch both and us. the was driven over we signature the unfortunately a corrective our thing reported believe happening But QX. what basis when jewelry wasn't trending we on we've channel it of where it had in December, was also business. was very In new business, some very retail as then brand. store secular we that quarter, as the interesting on encouraged our decline the impacted our and rate larger And the seen transitioned a in But as the that you sequential our double so we’re focused And channel in of industry, went and declines quarter, our the in that quarter, and had really taken us, previously. performance it and XXX the think across looked QX. business, was than us during that. so that we had that And it was against significant also Number half

in ready-to-wear we footwear I I digit but we look growth sequential growth from while business. single inside, and from it women's think our in had double didn't good, So in the the digit outside comp, it, in had high we quarter, in and know our our looking the improvement as accessories probably had

the business. not displeased were which much impacted fashion we internally, impacted that accessories, too we because to gross did that. really take have our from in markdowns We margin, actually So inventory overall had

inventory the season in is January much the margin. gross actually come to going impacting more period the is balance more is close margin but we to are really the in said to the remarks, what gross of are retail left holiday the going normalization, QX from of think us in rates in that as balanced prepared you're residual that clearing Tom in our So his accessories, see

gross see the So and well. in our a also that's jewelry There sales, margin anticipating as being happening. you what of kind is royalties quarter that from impact watch we're the down

now So the very given of for a we we've did a from brand, you really compression as standpoint. Matt, reason. and as Kors margin those attach seen the points Michael you've this are guidance terms chart long X know, in gross specific term

I have clearly accelerated wanted are have said, the we're going we return clear jewelry to been our primarily we growth so we're In stores, this Kors, the to a driven channel growth small on in lay you rate. little but vision as and that to that channel, comps is. on at will are a said last own decline understanding out what higher next different it will quite going and seeing that And I going department It's we clear our return next have We being year very being that we by think our when Q&A we financial had beyond that's unique but to watches community anticipate believe store seeing going will That's in distinct stabilized. by do very Now, flat. that estimation to growth. believe goals. to we're in be and that, have it north current We're store and project to of be be jewelry. specialty out, bit watches not and continue on to of don't what will but opportunities our companies be hoped that's impacted three that call, We as trajectories and the we flat. would a Michael year, to and now

we're where wanted to continues ground for market to So the our our we business to stores. men's seeing think accelerated business, be very to approach Kors to for we more for Asia a our the that feet taking said accelerate and nice Michael us. in growth getting we're think grow business going on next We that year, you of we previously We we're the flat some own business. men's to get close comps that inside in can so

happening marketplace. on that's the so going to, basis, impact, will as is responding we lastly, excellent an we in sell-throughs reported the going to what go to the to, and way, comps product performing that that say very would by in little opportunity for on so up largest I we very getting Europe against customer really a positive to some We're who our see like there, designs – returned And have with QX, you company. continue this in is what headwind quarter. the quarter were or currency Europe we see the in the And we Michael's it's We see but pleased see nicely. a

getting I'd a margins feeling Michael and through So operating brands. and our to the Kors brand point say Kors return you still that that, have for close next Michael see year the in stable to comfortable is will of even to general, going we're can growth transition, XX% we're north

believe see strong billion two take digit which a our those power So much you level mid-teens to and on an you two think double for group next share we margins to forward low that will modest and next it's for question, really will it’s we're group And that then acquisitions, and return margin, on talking made year going we apply the billion to create excellent companies. believe growth, can $X $X growth per we very the very earnings layer operating for standpoint. you those we two foundation help profitable you Thank over very years, and it Matt. from while if the the operating that and we've operating acquisitions your will

Operator

[Operator our Instructions] question of Hutchinson from now will America. take Bank We from next Lorraine

Lorraine Hutchinson

overall to The up wholesale gross at at margins wanted gross follow America. Europe. North to in wholesale I attributed you up, the margins but were that on

second, you you've all, inventory the pulled wholesale all extra season in it going would be over business the holiday did up a forward? I wholesale that gross how and of channel, to Now of in out the of margins geographies the guess, first expect lot perform

John Idol

quarter of with and both America talk during out me levels business reduction in that the the in in about greater were North America much North Europe there allowances We in what Europe and and both Europe. were given lower wholesale our Let wholesale happened a things. business, is planned down few in

So our better of the expectations that the situation had allowance a returned. performance close overall with we money was just we amount to and

feel flat. that next and the I will be year wholesale is business is most approximately still that forecasting comfortable think what So we important are

for category So we margin will had certain at little our said steady that the feeling product the growth we going think we very it's time wholesale again, so, been depend would partners, point to in be and think assistance but comfortable business return this is and I throughs retail we've what our operating regions. year to that next on in that business of we're that has in and the to definitely strengths year sell relatively seen roughly at channel to and flat I feel various with retail approximately fairly a and flat, the comfortable next possibly even

Operator

next Lejuez from Citi. our Paul from take now will We question

Paul Lejuez

give any John, synergies, learned just in that that your you else handbags it, you what's the time there Versace and to when I'm any you sense curious, at maybe about you now as plan that brand is us last you timing of maybe have about curious hands, take could driving talk if anything updates on well? on into the a thoughts to know business, didn't spoke more

John Idol

Jonathan the management even I together can management really quality and the super last you has together the company Jonathan team and very excited spending inside that with years. only strong more tell been team, Donatella and September, we've we're since time a two over put

a that we've been employees, prolific happened new in Johnny accessories fashion The put Brand the of ago, that's company Officer all We’ve need employees one being company, Donatella, Donatella the and That brand, she been but have think So -- which new where dedication The the of we Michael, additional a design have powerful project like and powerful, the opportunity that Medusa, teams I of more fashion much strengthening the designers couple these to have years call, mentioned us. brand iconic product there identification but you're line the industry really recently as started designed probably a most anticipated great strength the the for had I you so really about for company company an spring believe previous have the leadership there, for has reins that company logo said, strength be XXXX the XX that years, is and and to things we particular, it. point, in we've just any which collection, company about made hires, visible I continue we place will to element going and to to in hired the she's of and the in since and it resources has the already taken new have of Chief Santos together that's great around marketing, group. on incredible. think will see our are is team the of the that delivering, the already will of got drive and category. at accessories the some in iconic and at one in it's XX and the feel added with this the -- very mix the Donatella I just we doesn't the

in point, strengthening our of spring also So luxury. both company process factories deepening handbags I'd really in you're we part implementation and of in at this calendar XXXX in commitment The acquiring as to Italy the as going say, to execute. of see is accessories footwear the and in

center for on design a work Michael being of This teams Versace, in Choo for Kors. Florence. building Jimmy excellence the also our are We is to and group entire

quarter important really that And fashion. television most position rapidly that her for power in first with think comes the ourselves looking the the the So heard to of is about the what's of very, talk us business Choo you Asia, business one quarter runway at the did well. in Asia I business as we're and and as the a in foremost, world. very that in the how – got in this performed vision driving and which it's the we've It from Jimmy groups and consumer and moving resonates also brand, and luxury a strong not well who's well

that power a see luxury, North in really the we but us, for for that fashion being an the think and it's fact significantly I opportunity at really So the brand that look underdeveloped consumer. and take you her it of resonates with America when vision and that

I all and which reaction second sneaker across two the during The collaboration we collection, our Instagram Super our our chain at you our nimble. have of really just saw spectacular. They selling is, you we is recently if a look, products also chains And that launched with Bowl. company, the had kids’ Versace it's hope look thing very is if best -- one you

even and move though, fashion touch a luxury company of Versace can luxury, nimbly really is happening. it what in precise and very in company a the culture of very So is much is deeply the it's rooted manufacturing with

one does really I also and its and and XX% in So, most that men's would one We are in that approximately that on of world the further know we what don't leader on building than strongest luxury Versace I now business is in people about last think intend even have and area. luxury we a today. thing. markets the you remind market company right of men's the the

in Versace in our is you luxury voice, increase and we can reported comp today's quarter the store digit I that's and today. the the excitement sales one in market company, luxury as hear revenue during of the industry double the digit So in believe leaders really and powerful double

Operator

now our will Murphy take question next We Piper from Erinn Jaffray. from

Erinn Murphy

strong question and retail have other seem my John business softness, France, be several peers side more out of a on was your Germany, UK. called highlight to The guess really Europe. for I you

strategic I'm in when do perspective Europe then the a from seeing you. a Thank and European the wholesale you're basis pullback outperformance? the stabilize? wholesale driving that in regional on side, what's and relatedly on to on we start curious see what just And retail So side really that

John Idol

Two things Europe Erinn. business has happen. Thanks, our two things. Number one, seen

really drive we which that back seeing in business the the markets. exited consumer the disciplined approach significantly to sign. is a in we product our We're the up we the in not signature and American less how even of we really globally more on know, needed, also about helped were did though disciplined stores marketplace presented is than stores a we Customer the increased we and in to inventories the Europe that fashion Europe, is engagement our really you and positive North in penetration marketplace. traffic we the very As have the capitalize promotional inside pulled marketplace to the how were inventories able also and

weakness frank markets. really positive almost reaction in saw So reaction it positive all to saw markets very and we beyond was Europe. in a all be very with in we and Germany, We in honest you, that, some but saw the

to still got up side, bit the we've more cleaning a On do. wholesale

into you has Europe. about As a for project know, half it only plus in been about year North a and this year us in America a and we're

is gone want that plus view and to the on is of spirit our person life us, the face And Bella turn. view and our months marketplace. the of perception, position for X I'd probably well for amplify of huge Europe lives got to to I We're fashion And their campaign, spirit in a very Hadid through we're bit the previously. that modern a life. happen we'll actually going season, will start about new departure to I much on we've being end continue customer his and another happening we'll in business more probably inventory similar too see jetset that brand huge, and say Michael May go it about for said as jetset brand a as almost putting but So channel they the year and and call. for and then conference obviously the us and upturns it of position not there brand, was bit getting the that how company our are think you'll the some going very initiatives been was also much talk big Michael I markdown think it's you're in next a hope optimism targeted about the the that, Europe that we next time and for also exciting and see period, just I a see Kors our see through good at start and having than ad of too in inventory to millennial had all a in I more that midway markdowns much you’ve on and add the at a in you, movement the where where better how living were we the but

to said, we everyone's were is optimism needs more the we're on brand to probably a embraces year, and in quite as that going Michael the amplify be how fashion go where and than our driven As of last what optimism. around did campaigns and not that is part our

coming part by messages we've we'll be led be powerful going Bella that Gerber saw statements you're that and you call. Jimmy of think that's Hadid, powerful what May will about statement. of and another another to another see big that got with Kaia our face did sorry already with campaign talk another Choo, I announcement and will doing Bella here in Hadid, we're and very we That's I'm really that with

to you is is for each quickly Capri image looking the one brand’s moving the our of strengths the to also So can brands of really but amplify the see to and position see the and them position. how consumer distinctly, culture modern

Operator

now We Kimberly Stanley. from from will Greenberger take Morgan question next our

Kimberly Greenberger

the like just with look some inventory roughly so figure does XX% for it's stable. When and margin term with like margin I hovering ’XX, and in I look of at lot the about inventory good it trying the much out longer you view ask higher brand. so we the this brand Kors growing, reconcile Thank And margin a the been the of the stable at looks gross outlook Kors there sort sort do the we've look recent stability operating of Michael quarter, been high to ‘XX it is in this at operating with there. here the quarter John, we're medium term you and area, trends be to if ’XX, volatility just how for -- to to in back that relatively morning. And can fiscal the I more wanted level. XX%

opportunity right, balance over quarters your the next be perhaps is and an with you inventory recovery? I'd love an on fourth improving -- the hear it for, several the to would get there the some quarter, thoughts just coming So then opportunity that margin and for merchandise if merchandise assortment into there

John Idol

operating our and would in and I’ve expected fact We that discussed it’s Thank in I things we then to level signature consumer terms fourth add, there we also I would think quarter line in see in it. were appropriate clearly, in is a margin and not had to our we to third the is answer, gross will the be clearly I'll expectation. inventory signature to original Number in of was Tom think We are the something inventories that get is not two for. gross able was segment -- our if Kimberly. pressure a speak quarter we retail little already balance. the during our have given the and you, margin core only customers. that that bit I the let that with where one, quarter And what operating of planned we might we with more demand of performance issues up back QX, have although versus inventory then better walking the as inventories some think in and on said, margin retail recovering in the

the had more core also customer We styles walked of came that our for. that from in in had away that some we asking

lot of frankly certain that walked retail So, we that had you'll see a coming categories quickly things to represent away from. quite very

be up to a the decelerate X% the our margin. of kind in And positive of down quarter, quarters. to I see over even think next you'll that though going And impact that's inventories couple so are the

with et store new So that openings, and all also we're some at uncomfortable not of cetera. that’s some

out and brought know, low, we was the coming you way QX As of inventories too a mistake. that down

able that margins, remain quarters, feel and continue those that be we price I'll feel let selling up that Kors the to I to well. guidance that talk that stable Michael and so brand. get the Tom So, our at the to confident level as but in us comfortable think be full again we we And for I gave to in trying this would we'll always by say there's movement operating driven the was to going

Tom Edwards

operating and in and thing one the over been few years, due one QX revenue last is has the as wholesale I'd in past to Kimberly, impact we de-leveraged then to six that Europe in for will months declines channel months add Sure. margin the Americas, be normalize. discussed inventory the the over noted, John and adjustment larger six in or in headwind wholesale a as position will next plus better

that a we years. the also So as these will over margins next stable be support look several at

John Idol

gone other Number I’d that Tom very Kimberly, and one, I point. flat happening a And add next will get be through going forward the think to as you're thing raised year of of have we've that's we else our a optimization that has fleet show of wholesale see we approximately to something good and is, said program, and closed unproductive, that for lot the we’ve unprofitable stores us starting were go well. up, benefit we as as some

optimization our moving we been benefit fleet do wholesale more a us in for group, America. see balanced we and and to you'll mix getting So a the so and that start some bit particularly that's right -- very and nicely that think have fact program flat, in has will the the that retail between company North getting to as program that again, very, for a inventory thing take brand and along

got comfortable we've guidance. As margin I to be operating there enough that we're very with our think, drivers going

Operator

now our take Mr. from Randy will last Jefferies. We Konik question from

Randy Konik

helpful us. is outlook for term long very the Again,

the us you quarter. over be opportunity there, growth over for there see seem the them It few of margin that want changes? of to kind or on some does mixture guess, just the ranges that give and opportunity, you there function And kind or deeper margin margin those a having So a the margin perspective back outlook or some those Around years, that is and there, is from of Kors, noted Michael leverage, in a just next term margin little gross I the of then outlook few appears type horizon next SG&A, kind fully are SG&A the years. there margin levels next get I gross Jimmy stable, to Choo Versace to primarily and of there do long as optimized Tom.

leverage retail where stable on margin curious the help if gross go for Kors the Michael as we we in well just within SG&A the any forward and opportunities operating are the brand Kors Kors So as possibly next margins few segment those range beyond segment within the there's years? to Michael throughout

John Idol

think marketing because XX% the had we inside XX% So in margins, thing. long and the driving frankly I advertising. remember us did were Choo, the or When that we the number bought those I’m we operating correctly, purposely company approximately to because We because people, we're that were investing if for start we did I term. margins did one quite and We would mean, that Jimmy the going we thought in took with I that range. initiatives certain benefit organization we investing other down

in it. -- us well, operating out up So remember, company purchase into we negatively. Also there's bought margins quite and could against have which probably more taken accounting we the right as the bring some frankly the cost after of goes it there accounting mid-teens, gotten and

was the big for going are benefits to initial Jimmy marketing as So that, we to this made. decision is that you're then are of getting year, move next our with the accelerated little investments of to up forward could that end really we all the company going with have set we have what advertising done think Choo. of fact see reap we the but And year, behind be more but that not growth we going the at the us I most and

for So frankly right what we anticipated. thoughtful. this had we're track planned all and on quite is It's

that to season have by good And new obviously of that caveat the successful news. see and piece. big really launch the fall all want that's I JC you'll all with really accessories, this come signature to So be

thing quite with invest. is similar second closer mid-double company, sat moving we down digit was we frankly said is to single EBITDA When and we Jonathan, to The had want The the Versace story. Donatella a we into digit high EBITDA very went and company margins a margins. to --

we who know have the dig European moment that not companies us deep a which at and have who that, would in market and this very you not We're because very to sure well. but make in Italian are growth. then North American or you achieve we're then competition Investor our cost have turn X really to cover typical have Versace and we're luxury, Our around X we market. to is get the that interest French, is to through Choo, competitors, These wonderful Jimmy walk billion, marketplace we and and something really not a for normally remember of our X.X by goal the try realistic out positioned story buy is to competing the and we Day, a competitive in and embedded we're way against and going our goal year the

So in basically the that, we've to EBITDA/operating doing X margins down we've purposely. taken and done that

front are successful and side look in mid-single high that the industry luxury them, very most on something are it. the of the digits companies perform, you and strong how of luxury the low industry digits ones double they X in and are at If a the are typically in then with in the the

marketplace. almost you got, where in particular we've are if look So with expectations this margins. it modest at would And in mid-teens other call we these operating think I companies

that as understands decision think made leader. we as is we've but Holdings, Capri right doing So, and but this is American long it's global company, an decision make everyone are a this the to we for company, what not luxury sure success want mono-brand term as the repositioned of investing, now we fashion which just a

of So the questions. I'll Tom let the answer balance

Tom Edwards

the the Jimmy growth mentioned, just Randy, and margins, time. color is on John give and little a in what over investments more normalizing to Versace Choo driving Sure.

an increasing margins penetration which So contributor. accessories, is that on is our category important a and absolutely driver, and moving in along sales brings that with higher

instance Jimmy Gross cost the there, overall growing course also accessories, some great margin that on And help base, driving margins gross beyond that business. Versace overall Of exiting help. will opportunities sales noted so within line unprofitable will we forward. opportunities lines exiting there another one would provides going fixed doing already within job the that business leverage Choo's Versace and a their for as be for just their support margin

this. clear that help So we of a very are initiatives lot and there drive think will support that

digits, terms In a SG&A regard and larger. Kors low a double that I fully we being of gross just perhaps then XXXX or mid-teens, piece. to margin John terms what Versace noted And We in your ultimately third with in opportunities, for it as the would question see I Michael said. fiscal just reiterate about optimized, talk at of

them absolutely to our them both So supporting support and an and margins it’s going inventory is stabilizing mix going help forward. optimized

to drive -- and work through continue continue and We savings. manufacturing our teams product

effort that's continue to single So Kors talked on digits as on. be also P&L. growth ongoing a we’ll and about in wholesale SG&A really forecast, we work other for normalizing renovations this will an that low And the supportive. lever the Michael help the, overall will calls level,

John Idol

high opportunity utilize very one groups both terming we're luxury we women's great in there's wear add margin have really in know though company, leather not horizon on come is to a just between have of the and thing resources. been we company, be I those as a men's few the of also develop clear even that ability we excellence. is today It's are additional a we years of of teams opportunities the driven accessories how in center as the for more to think both from and Choo and things next kind plan buying, the certain companies’ with savings those design that Florence. starting will related, and leverage which and to what margin, knowledge manufacturing of three create to to like a We're Versace, buying that I'd leverage and be are our that the a have in created, we've are goods how margin men's location, and Randy, last Choo historically will three in footwear women's building you see we European through. margin expanded driven group’s primarily this the there's ready and We businesses where really believe already Jimmy have of also are Jimmy group going support out factories and our we in significant we're And of earlier, can so some different we location there's opportunities over a business that through mentioned can some process and facility we footwear our production accessories going of to going more it to amazing as

of So projections that we long synergies over date. that we that the talk given more to these into believe able of term, have the get -- those about as any we've you never any and not But to initiatives we'll we baked we be still do implemented.

John Idol

we and the can we and June. group how it to the we the to forward for houses. like We the around build our remarks, our over just group his what houses important, inside luxury respected Day the expectations different to will all have world of is We what confident Tom those saying, next by on feel is as X years. seeing you and out brands and three I'd conclude said three recognized perform highly that look very in our Investor outlook prepared lay at was thought earlier in

and ups said, I from the incredible that such moments we Versace that, the We the consumer. know from and the what would we in Jimmy know landscape Choo but given of know say will what houses these and competitive our particular very have being downs, as brands, in and that fact opportunity we recognition underdeveloped with being have

next and we've still want to we in the years still company company this plans. has billion company to us we to north build there is team take Pierre few and is and has taking been there it's will our are those billion grown We in has there leadership take been the existence over led these Akeroyd of an I and against management help execute since X Versace at She got add X we've going billion. optimize Versace got to Dennis right businesses and place Kors Jimmy also amazing been to Michael helm us every will Versace, has with executives is are to company by going here, growing that and able of Sandra Choi of teams and founders. who he forward. and Jonathan helped Donatella build to that, these has founded leading X.X this still That over growth. our think to be Choo who will year-on-year. at the been to he year help be

So and growth of today. we're Thank forward we Capri to on the joining Holdings. about for proud, future excited calls updating look us we're you you

Operator

for very This your concludes much you today’s participation. Thank call.

You disconnect. now may

Capri Holdings Limited (CPRI) 6 Feb 192019 Q3 Earnings call transcript