CPRI - Earnings call transcript Q2 2020

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Operator

Good day, everyone, and welcome to the Capri Holdings Limited Second Quarter 2020 Earnings Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Jennifer Davis, VP of IR at Capri. Please go ahead, ma’am.

Jennifer Davis

Thank you, Shannon. thank quarter joining fiscal and Holdings on everyone, second Limited’s 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;

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

discussed non-GAAP to measures be Choo certain will presented restructuring financial addition, and transition Versace and a transaction, certain information exclude with integration impairment costs acquisitions, on the In charges. non-cash associated non-GAAP Jimmy today items These and basis. related

capriholdings.com. posted noted, all our be otherwise corresponding store basis presented non-GAAP on numbers all on earlier and and related To measures at will GAAP the on constant financial release a Web call view Unless today’s will currency a earnings presented be the on sales basis. comparable information view today please reconciliations, site

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

John Idol

founder-led is long-term component houses. diversification strategy. Capri our in family time Holdings an a luxury has short growth Thank The of of you, assembled portfolio for Jennifer, a good period outstanding of our key morning. and fashion

update progress luxury making you to our Versace. with we like fashion are the I’d Now, group. Starting developing on

growth strategic We five to execute against our pillars. continued

are building luxury fashion Versace’s Donatella’s we vision. by momentum on runway driven First,

and the Second, brands we powerful iconic enhancing marketing. are

accelerating we introduced businesses and XXX to our fifth, goal are collections, recently Third, accessories rapidly new retail Barocco footprint our capabilities. compelling toward group Virtus And Fourth, global are signature our stores. logo. V footwear improve we our with brands are of we e-commerce our including the featuring increasing the expanding platform

to Turning Jimmy Choo.

make continue a strategic the initiatives. growth seeing category. positive innovation, active is brand with on for Starting footwear to trends We key our progress footwear,

Our VARENNE from on strategy JC penetration groups, to expand remains with track encouraging accessories collection. recently our very introduced signature results including new

Lastly, progress making to our goal to are recently Jimmy store and XXX target. global due successful towards we fleet significant expansion, raised stores that Choo retail

see the business inflection At store with growth Michael reflecting and sales continued our in improving comparable the to an Kors, point pleased Americas in we internationally. positive extremely in are second quarter trends

are has a indicates accessories that with seen consumers. innovation product resonating Our improvement our category which sequential strategies

consumers, and We and engage Z vision are successfully marketing. executing brands and Generation attract Michael’s repositioning design millennials energetic optimistic to against efforts the with

Our across exciting engagement innovation, jet-set and speed, focusing customer clearly brand renewed vision product is on energy consumers. and experience optimism

plans, growth of to positive deliver focus our fashion Overall, committed are to growth. seeing and the With remains we continued on three $X earnings that multiple grow are to years on our and in confident time Capri execution to we investment many trends luxury revenue billion track on are we over building houses. support

and of to an offset reflects increase $X.XX XX% line second partially Choo, addition by from This Now results. for the decline Michael Kors. Capri quarter turning in growth with expectations. Revenues anticipated Holdings Versace our billion year-over-year Jimmy increased of

anticipated. quarter. in and Hong also impacted translation The we Revenue during than developments and our results greater intensified the Kong exchange Kong had was a Hong foreign situation impact unfavorable originally by in on

below was share our were expectations. per Earnings which $X.XX

in expenses by timing than as impact to well as from impacted Our higher developments were than anticipated the greater Kong. due negatively in anticipated earnings quarter Hong

revenue billion for guidance Looking and of at $X.XX. per share earnings approximately $X.X are approximately fiscal we reiterating of XXXX,

For Choo at build Jimmy Versace plan execute on to on and to we strategic initiatives the Michael seeing continue remainder sales and trends our the Kors. we're the at of year, better-than-expected comparable

house second the was were quarter from We Versace. of strong of expectations wholesale $XXX stores higher million with Revenues our pleased results. our reflecting new and with ahead Starting contributions performance. of

to were in the affected in declines sales China in Kong store in EMEA, to Comparable region and Hong was as deliver challenges product. consumer quarter. incorrectly flat Americas Versace we by sales to than continued anticipated comparable experienced Asia and the the growth the for related situation double-digit an labeled reaction greater while

fall Customers 'n by roll positive faux our and to about the lush epitomize legacy. new enthusiastic particularly furs, which Versace’s response seasonal that rock offerings, vivid jewels collection. bright continued driven were Versace’s was hues Donatella's momentum featured

across drivers In codes. on lines addition, continued iconic offerings building well as were the received growth. be key of as heritage and women's men's active Both ready-to-wear all to brand's well footwear

a In variation house women's a highly quarter Pin. broad by ready-to-wear, offering and performed Safety Versace’s famous groups new featuring incorporating the well of recognizable led codes in updated

In the V aesthetic prominently launch of Barocco accessories, collection, the heritage. logo by response the displays new Virtus which encouraged a we on the early handbag brand's the were to symbol of bold

growth, by to footwear performance active drive the in category Turning led our best-selling to reaction chain fashion line. continued

this active new to also We Squalo recently the on a momentum. group, introduced build

vibrant new animal tailoring range offerings refined of highly styles men's colors prints well well lines, pattern featuring and as signature and silks a as were wide For the received.

when of by during with XXXX fashion and Show inspire that runway the iconic creation the widespread brand dress Jennifer show media Google engagement, held the jungle The Spring search the celebrated function. Lopez coverage. worn historic was helped moment XXth of of In Versace a in met images quarter history awareness the print and anniversary acclaim legendary terms

the and version dress the To Grammys. Jennifer Lopez tropical show, wore of up once social re-imagined again surprised to delighted XXXX print and media she audience the the runway close lit walking the wearing a by

dressed Atelier the Jolie, Angelina who Kylie others. wearing Kendall Awards On the custom Swift dress Chainz Hadid the Carpet, was Kaia X and Atelier also Show Jenner, the Gerber, opened Red MTV Jenner, quarter among many a during Versace’s Versace look. Gigi Taylor presence extensive; superstar Versace

grew Instagram than XX in digital increase the during confidence momentum followers The approximately much coverage to of giving quarter. peers, brand and is luxury Versace’s the an that over higher to brand’s expand its media ability our year. footprint. prior retail XX% us product was million, Versace’s larger extensive of our offering

our retail achieve growth are X our offerings. as against in at and the global We well our billion executing accelerating we accessories Overall, increasing as confident in revenue. growth continuing Versace, including expanding initiatives footwear and to enhancing brand's fashion e-commerce, marketing, accelerate remain focus, footprint, goal our luxury

in and in line These offset with openings constant on currency, a wholesale store our mid-single basis partially digit results shipments, XX% in reflect new Moving to expectations. Jimmy a Choo. sales. Revenue store increased X% higher comparable decline by reported and

year. were campaign successful weaker store prior in in and the Hong XXth Kong we sales impacted Comparable a performance highly Japan anniversary a decline by in lapped as

Excluding Hong Kong Japan, have sales been and would comparable flat. store

In continued and fashion to store consumers. Sandra the active resonated This footwear, as exciting Raine Jimmy Choo designs our performance deliver new with sales sneakers. was classification, strong Choi's best-selling Diamond comparable by in led

with slingback heel showed seasonal and offerings, Fetto, Bing, luxury crystal Turning mule strong encrusted asymmetric an to including our a kick detailing. with performance introductions modern several a fashion

Bordeaux, collections response VARENNE several first signature distinct positive. comes accessories, JC rust expand has dark introducing Initial new our customer VARENNE collection to we in in and been group. offered In and to silhouettes. is colors rich the this continue green including very autumn

have VARENNE and Americas, these and groups collections comparable China. EMEA in introduced together and recently joins growth the Mainland Madeline sales Helia delivered new already in handbags

building prospects momentum future We accessories are introductions. new for about the excited by these supported

of launch advertising the our brand supported transcends was campaign. terms broad brand. Kaia's winter collection In and campaign, a awareness representation social Kaia in featured of media authenticity and Jimmy generations the and Supermodel VARENNE Gerber the who of engagement, dynamic marketing of energy featuring the fall is perfect with Choo also

with Carpet to Hadid, Chopra, Choo Cabello dominate Hudson, Song and Miller, our as handbags. wearing Kate Priyanka Jimmy shoes Sienna Bella continued and Camila celebrities such the Qian, Victoria Halsey Red

Jimmy XX% last increase Choo's grew to of Instagram an the million, followers quarter, XX over versus year. During

the $X we fleet. innovation, long-term and brand’s to grow remain revenue in drive confident billion. footwear retail product accelerate ability accessories Overall, store Choo's We expand continue to Jimmy development to our

Michael to Turning Kors brand.

a basis in expectations. with on on line our reported revenue currency Second X% a declined basis, quarter X% and constant

During expectations. the a comparable to the sales in increased our return were pleased which quarter, growth, of low with were single store ahead we digits and

of continued reflects signature sales by sale sequential due revenue the store Europe, inventories. channel, while below in retail to trended flat performance. lower in stores, at comparable Asia wholesale improved to trends our point Americas the growth accessories In the Positive part and improvement driven in in

and a be Moving has continues performance. a collection to touch our group to Michael adds luxury well Bancroft In introduced top Kors MKC collection several new received. accessories, offerings, to performer. The signature been recently product Monogramme

The iconic and Hamilton belting In back updated elements sleeker Michael nod updated modernized Hampton of functionality, and Bedford, re-launched proportions our the a the with we the to two Hamilton line, with offering our brand. lock original has and an groups; new bringing detail. been still Kors while core handbag version of

well more softer also recently to luxury legacy The Manhattan core silhouette presence. The strong we with of became groups differentiated collections casual and of perform these Cece globally, collections. Bedford offers introduced sophisticated continued a a Both a build as quickly bestsellers.

full well-known Overall, on expanded results line includes Kors improved and of styles. for luggage our global Kors accessories success delivered launched Michael lifestyle in we builds travel so jet-set accessories. quarter. This become collection now the the the during Michael Additionally, by a quarter and travel of has led and signature second category

continued to in nearly styles growth our penetration channel, with saw In improved by we signature retail in strong position, XX% inventory sales increasing the retail quarter. of comparable driven sales

now have rapidly mix to we to to strong goal, the reached the our consumer due XX% we response. XX% potential While increase see

increased levels to auctioning of strong advantage are trend. take our we in Additionally, inventory selling wholesale this signature channel

Performance and and new sneakers. Georgie, driven with the [ph] which by resonated footwear. Irving, our including be customers, fashion fabric continues techniques, to mixed updates detailing Billie, materials metallic was highlights. Moving Seasonal by woven active led hair-cap to with Olympic

our across all items. perform popular the continued the Signature launched to Charm propel newly become classifications newly casual MK Lillie one to of helping updated with most well moccasin

we of including fashion Additionally, sales and strong Moto, hiking fall Combat emerging seen boots. have

ad In Bestsellers It in our included print, dress prints by Hadid. animal dresses and MK Bella were sales dresses logo wrap driven exotic details. trim. featuring sweater leopard women's campaign, highlighted was and ready-to-wear, fall with logo prominently

fashion and Crop collars consumer as fur trench. bestsellers MK a strong leopard Jacket response print such down to signature continued and We Denim faux cuffs, outerwear with saw removable print with puffer

expanding business, remain focused on recently across accessories men's response. the consumer including and sports led Growth introduced our to silhouette backpacks In by collection we Brooklyn and continue fashion strategically the executions. strong was see

sportswear, our colors as technical saw collection, fall Greenwich in also in we performed sport-inspired silhouettes. as Updated signature strength featuring well. well Polo capsule offerings In top-selling our from MKGO fabrics

response to leather, sporting collection with strong a mixed suede logo mesh, with seen and crafted our newly materials Additionally, of signature introduced print. have we sneaker bestsellers while our

In which category, and next about our our excited MKGO smartwatches at $XXX. we are continued retails with watch innovate to generation very watch our

Our have speakers. any that generation the feature receive ability of watches calls our next that and place smartwatches gives iPhone technology users new to through

in While to we the category to distribution continue prior declines We accelerating on to with long challenged jewelry line remains declines the focused of similar innovate overall this offset classification, watch remain term. watch quarters. fine our

quarter, saw in a channel. jewelry our sequential improvement the During sales we retail in

world. melting brand which America's a in from the XXXX and unique innovation Runway XXXXs pot the diversity to Kors for highlighted celebrated Michael role and respect With engagement, Show Collection supporting was awareness inclusion the customer inspiration fashion and as drew Spring/Summer

Michael Kors New Michael York the Kors was social first number every number ranked Fashion brand time Fashion one New media one and during the Week, York Week. for engaged on day in

Bella launched the Hadid. we Michael digital our broadened our and quarter, Bella to also featuring print, engagement in-store, Amplified the continues Supermodel customer Kors traffic fall for MICHAEL drive reach. outdoor During across and and brand campaign

China, our in Chinese social a to the campaign Lareina China. Leo the new Michael ambassadors; broad brand brand’s featuring Song, collection launched for Kors Qixi Turning and combined exposure with media we Wu Day and capsule expanding Valentine's further

Harajuku were numerous signature illustrations Yanagida and exclusively on strong results. Both logo launched limited iconic collection In by of available Masami that style vintage accessories Japan, was featured drove were Street in with sales Japan. collaborated items. edition these inspired initiatives artist His a we

including Jennifer Kidman, Michael and dressed a Kate quarter others. Nicole wide during Hudson, Porter, many Gigi array of the Billy Lopez, among Hadid celebrities

our media to approximately to our approximately expand and social over XX to by continued expanded XX XX% million presence followers We XX% million database by customers. global

brand sales Kors the very growth are store the we saw comparable quarter. Overall, pleased Michael We sales that signature significant driven in our fashion returned inflection our to by styles. during accessories

helping are initiatives our growth. jet-set marketing Our new fashion product our to renewed and drive

progress the Jimmy initiatives Versace Growth traction. fashion and recent Choo, with are we developing our gaining are conclusion, houses. In pleased we luxury are making our acquisitions, founder-led for

improvement store to For track our Michael Combined, the us fashion sales long-term. we brand. houses luxury sales to to in accelerate sequential for of growth a believe the Kors, return accessories three and over our the keep support return future growth our comparable power on growth

me Now call turn let the to over Tom.

Thomas Edwards

second our driven Michael addition Starting last billion was growth expectations. Thank with XX% by you, offset partially lower with compared X.XX quarter Choo, of and results. the revenue John. to Jimmy line by from year, of in growth increased Versace Revenue in Revenue Kors. anticipated

foreign exchange greater Kong. as than on translation Additionally, as revenues were developments anticipated impacted in well by unfavorable impact Hong

resulting our per XXX was expectations. income Net in of earnings below million, diluted was which share $X.XX, a

timing to developments Hong greater negatively Our as in than impacted than expenses as from impact well due quarter earnings Kong. by higher in were anticipated anticipated the

$X.XX per Versace. quarter share included dilution Second from of earnings

brand, comparable Total by our store million were compared were Looking new year. revenue revenue of from shipments, performance at comparable anticipated flat and contribution higher by wholesale than prior was stores expectations, XXX ahead reflecting Versace sales. partially lower offset and sales greater to revenues

reflecting the retail a digits the product. from consumer luxury Asia in and quarter. to an but in of with the to situation anticipated ended primarily increase challenges sales stores, in Hong labeled related incorrectly EMEA, than Americas and China global quarter XXX greater net increased Comparable Kong double in a fleet of two prior Versace reaction declined

were a Revenues by offset currency to increase expectations, versus in stores an comparable and mid-single reflecting basis, were XXX prior decline year. revenue Turning during constant X% store compared total On to shipments from Jimmy line a year. XX% quarter prior results These contribution digit sales. increased with Choo. the in our million, greater new wholesale higher

successful and significantly as expected anniversary Kong and impacted marketing store Comparable declines XXth Hong we performance prior than in year. lapped product were launch Japan, weaker in highly sales the campaign by a in

increase sales would flat. and Jimmy ended retail Kong net Choo of Hong store XX prior fleet the from of Japan, XXX a Excluding quarter with comparable have year. a been global stores,

prior performance currency Total and with anticipated of basis Turning lower unfavorable year, line revenue X% sales last and to X% on X.X which billion year our basis. expectations, by in offset comparable Kors. by was reported ahead our and an to currency a to Michael increase of declined the store in on foreign compared Compared driven revenue shipments. expectations was constant in was translation the low-single digits wholesale a

global sequential Comparable the in sales reflected EMEA and continued flat, growth stores, to Kors was a comparable Asia by basis a fleet prior the with decrease The Americas in and in basis a benefited points. year. compared an four to XXX net Michael sales retail watches headwind points driven accessories. global by quarter e-commerce and approximately of ended of quarter in improvement from improvement XXX the XXX

Michael which the partially Kors was in benefit performance. margin lower a by with This to expectations, inclusion year. reflects Gross to gross offset total margin brand our a company Versace. approximately line turning XX%, from prior of Now flat primarily compared was margin

expense operating the increased increase to prior year. expense addition company reflected of related The compared XXX Versace. Total million million to of XXX

unanticipated We XX also to million incurred related expenses timing. of

As of Versace. expense revenue, reflecting XXX points percentage increased to a the of addition basis operating XX%

of for addition operating anticipated higher reflecting company due Michael compares to operating XX.X% was our This lower to margin the the last year below and Total business expenses. of XX.X% expectations margin Versace Kors.

operating XX.X% year, Michael versus year's line reflecting Versace’s gross negative X.X% anticipated to was declined was operating margin our with the basis XXX points line than during expected X.X%, expectations. SG&A X.X% margin margin negative of in and lower operating Jimmy with Kors’ the quarter of higher prior due last of compared expectations. timing. margin to our in Choo's margin

declined a operating as quarter From deleverage lower by channel on driven wholesale, perspective, of in stronger retail margins revenue. margins accessories the expanded Operating a primarily performance. result in

the year, primarily reflecting Our tax quarter. XX% in was the prior-year benefit prior rate employee for the to the to equity related compensation in lapping X.X% quarter recorded compared

We the Versace sheet. cash primarily with million last to of million quarter of addition the balance Turning with the of billion compared ended quarter debt. year X.X our of XXX inventory X.X with to and XXX equivalents billion the increase ended million. in cash We inventory XXX and reflecting

build increased and store products compared we reflecting classifications core our as higher in Jimmy lapping year inventory new reflected prior to year levels. category in these mix expansion. growing Michael the to XX% inventory support decline Choo and increased signature to increase XX%, inventory XX% accessories the prior Kors an accessories an and

inventory Over continue the expect but be smaller we year. will next increases anticipate few prior above to quarters,

turn to like guidance. our to I would Now,

XXXX fiscal a revenue by Hong X.X from our for billion, including performance for reiterating sales anticipated are Kong. for than offset Holdings, in For retail, approximately full improved developments impact Capri of Kors comparable year we expectation greater Michael

now from of one revenue X.X%. is margin of of approximately primarily fiscal an We to XXXX We Hong of approximately group expectations Kong reflecting margin anticipate which income in Hong our X.X% will operating regions. XX.X%, represent expect compared lower now highest operating prior Kong

We expect of average to of XX tax million and XX XX%, rate interest and effective weighted expense of approximately shares XXX million million. outstanding

offset income forecast a continue of approximately of share We Versace to a approximately dilution earnings include reflecting to tax per continues rate. Hong lower lower the $X.XX. diluted Guidance operating by in benefit Kong of $X.XX

expenditures to XXX expect are at we Now the to now XXX million during and turning debt of year. to approximately Capital repay capital million allocation. forecast approximately continue fiscal

guidance. quarter third to Turning

digit to approximately approximately increase the and for forecast company total quarter. year. sales a million expect from We mid-single comparable revenue X.XX flat of prior We be XXX of billion, revenue Versace

for flat be we For and sales quarter. of million approximately Choo, expect the revenue to comparable Jimmy XXX

slightly comparable quarter. for growth For below digit sales billion the the in low-single revenue range and Michael of Kors, X.X we expect

be third expected operating XX.X%. approximately Our to is quarter margin

reflecting operating a increased our investments and slightly expect margin seasonality growth negative we Versace, initiatives. to support For

Michael For prior we a Jimmy deleverage. expected with margin normal performance, brand with margin Consistent lower margin and second in expect positive year. in quarter to operating than in margin Choo, we retail is to be lower expect expansion Kors due QX line seasonality. wholesale operating our

expense expected is X Interest to approximately million. be

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

the by operating earnings higher across reflecting the primarily prior fourth double three driven operating XXX For brands. we be margins for to margin of basis per Capri, expansion year forecast quarter, share all points approximately

from Versace in which will the December, the most of year. is benefit an month month quarter, additional profitable their single

For we our operating margin anticipate investments. we Jimmy inflect benefits realize strategic Choo, will as the

a our Lastly, increase at program. comparable fleet from anticipate margin significant in as by sales cost driven as growth Michael reduction Kors, operating we well store optimization

ahead, expectations in fourth believe fiscal third the in quarters our sequential performance results Looking for we for improvement Capri XXXX. in improved and position

strategic our We to revenue achieve focused performance global efforts executing of luxury growth. against group meaningful will and remain accelerated initiatives to global luxury and to fashion to continue our our position continue underlying on long-term earnings for houses improve these each believe

the questions. open up will I line Now, for

Operator

Instructions]. [Operator you. Thank

first will from come question Our Jefferies. Randy Konik of

Randy Konik

Thanks a lot. morning, Good everybody.

I John. questions; both I detail very you guess, couple and Tom, a So of you ask to want helpful

quarter, points. on believe the XXX headwind, XXX Just points. you watch recall the headwind If watch basis basis was I said last I

absolutely Just the watch So to on subside sense from a of that get of starts assume headwind, when forward basis? point going kind reduction XX a trying category. that to should basis headwind that sequential trajectory in we

margin in channel going second, continue gave nice that’s on distribution. forward. inflection sounds prospective like to retail going very channel us by Kors you some operating It really margins And the good

headwind Thanks. to of – do assume out the we room comp come expansion year? kind the abate, margins how towards fence lot to operating get watch channel can with And think now over positive we as of the much or to within next of on calendar into you’re then since get a the years starts to the in should kind retail flatten we and we in expect Kors? curious how start we side the that and that’s wholesale, Just reduction much of down starting

John Idol

going I’m the the Randy. Good and Hi, will the part first Tom second the of regarding question It’s to morning. take John Idol. in part. watches margins discuss

First Kors for Europe the quarter very off, pleased business And we as Asia globally see Michael and healthy of been low-single was business in to our expectations. our we both retail very, were return mentioned ahead in digit international in prepared us which growth that to and which our saw growth, has I continuation in what you signature remarks, what our further comp improvement a to accessories something returned the few years led in driven think initiatives, and sequential ago. by again even our we’ve But of a seen. was by that is a exciting we was told most really flat the which is that extremely Americas

pulled We less tried kind back mistake. was that to assortments, and of from classification made to that and our really a had had meaningful wrong. make We that

own other we’ve retail corrected So as course across seeing well. seen some very we’ve we’re and extremely pleased that our resonate in we’re that And products with. beyond strong selling accessories

Michael to unfortunately continued it So in overall Kor. but the positive that headwinds continuing in becoming percent for of It’s The of effect that’s and drove of what you still more importantly even is for our Hong we both a it’s Again, shrink. Kong. every quarter the to saw decelerate. smaller for really face FX meaningful, saw again, business. what And in kind watches

driven can And really and tell demand. – by we actually the there’s really XXX think business. quarter share Apple XXX don’t from deceleration And don’t basis will the consumer that piece market we has globally of in the subsiding. significant fashion question or see no watch watch you a in more here that the particular we taken be points. That’s whether a I think points sit basis

to in we��re we excited are forecast quarter-to-quarter very about happening So delta seeing it’s a on for what What accessories. us to is what is the really hard our be going basis.

telling us improvement across saw also that globe – resonating. sequential again, the was traffic and We the that that’s brand really

jet-set our around image. talked our We initiatives kind of about new

about a fantastic in and want and design callout see relation we’re I really a leadership one And there. think we’ve put starting very teams doing big what so We’ve to that talked are to public you’re I teams think proud doing – job. to I resonate, super of Michael’s got field with traffic in think the talk off making we’re out top quite to in that that retail the to about for about then really I’ll improvement I that, it best to and and opportunity and turn happen us. margins. teams the this feeling to for good of they’re Our marketing continue grow. also Tom over And see

Thomas Edwards

Randy. Hi,

a provided Kors So guidance. margin what little think had is over had we as we the quarter. from I stable being as perspective, discussed extremely happening now previously when And seeing forward time look longer-term we’re and Michael see in a is we encouraging what

I the be to QX. operating retail in margins inflect expand positive and As and has already to mentioned, started

supported the year, which Asia QX We that by is really store and by growth are noticed – profitable this the term margin operating And we our also closing and stores And retail region expect margins optimization that were in fleet higher in we’re a an opening we beyond. course continue that Longer accessories. stores. XX unprofitable stores for growth us. of where into through going to supported that’s accessories improvement in

So that us. will help

savings across we’re to addition, cost our ultimately In and generating going be portfolio. synergies

wholesale. and support will that both So retail

business doing quickly as as also this will believe and And we possible longer side, through channel improving as season signature we’ll On be that and the beyond. near begins that wholesale to what term the mix holiday term be moderate. and which will will stabilize, deleverage quarter in help

expansion believe So Kors we Michael in this for QX nicely up do margin. that brand sets very

John Idol

Randy. you, Thank

Randy Konik

Very helpful. Thank you.

Operator

[Operator Murphy our Instructions]. Erinn next of And Jaffray. come question Piper will from

Erinn Murphy

of Could question And are you guess on then that that to mislabeled is removed then any just specifically you the Mainland, product, Thanks. versus us I are Hong what now the And how balance for between seeing in planning in of you’ve that morning China improvement? signs help out all. the John, Versace year? Kong break region quarter? Good business. Thanks. saw Great. and you my the the you Mainland you

John Idol

morning, Good Erinn. Thanks.

very So by that going start to integration smoothly. the want Versace, I very, out is saying

the that I smoothly. had integration think with saw Choo very Jimmy went you we

also revenue we a the exact we been called right We’re one other the focus of position down that in this have lines thing one which remind $XXX and standpoint. we called that Versace. was seeing almost to through are a Versus the in think everyone Collection two was the from exiting I same in to shutting and in the want Versace to company; order and company is collection, the on way are that almost was million in luxury process

to I last on talked we renovate high renovations new seen, double we want that store have add are rates that after that also the stores. the about we performing call, digit really at very these

for the have pleased. fleet extremely that intent also really of some not modernized to incredible we’re work but the design product brand to and innovation stores only leading a our the So most the years look globally associates an renovate for inside and stories really been has And vision we store more over getting next few to position really with with. Donatella the really

very, group have who to incredibly people been have with stores have talented give I to we customers. strong of callout working clienteling our our inside of a very engaging and again, big And an – in

So we’ve any today. America, of as levels reached seen which situation digit growth North started we first in think don’t us to there double double Kong would EMEA this has growth the in Asia reach Hong it unfortunately before said in happen that digit thought in I that was and

the material Kong. impact that in on Hong Versace business And a had has so

there do. a was people. the a for the negative apologizing right what and consumer the publicly was think reaction And it public the was T-shirt then and saw mislabeled that initially thing to Chinese apology We we that product apologized citizens secondly, and Donatella which making represented, a for including to on that, us Mainland I to

that slowly we’re think seeing subside. I

how So we’ve planning cautious the got for we’re year. view a the in business of total greater for China the very of Versace balance

we’re the T-shirt fourth more situation quarter recovery from of year. in first quarter and think the see to next I going probably the

view the any for in remarks, so that in comp down company know about of across while make going talked the some in with up to decline that’s the other We of see Hong to don’t But we’re We that its situation Kors revenues to position of areas going we’ve significant conservative prepared for taken a that whole very, Tom’s resolved. gets he hope we’re sight. you don’t taking was with point Kong that means. particular that Michael company, better Though a end very X.X% revenue performance. that store a in X.X%, we company what

going flows So be brands. various as through years ebbs we some in to go there’s the always and building the

with we unfortunate is with very in think the get more feel situation just and more The confident the but continues fact engage that and consumer continues to powerful. I brand the to Versace us

So double remain just our I if I reopened we flagship see we growth Chengdu think we’ll results on results. some digit think very our strong in initiatives, focused And also I that. are say the and might from

experience staying meet the our brand I right that to long-term their consumer to targets. be we’ll on again, So grow the to if think we’re it able and doing with the things, show that goes continue and focused

really it last mentioned Barocco that that a our the give and is in And quickly fashion on very, to it I traction. new right now, think stores us I the Instagram starting for and – and you course in meant want in seen is to to gain show. you’ve saw very some mention our just what call, on I logo of I worked Donatella, also as developing quick to V you

Versace and that point what by we to callout to see, But a So and even with that Erinn. that’s product. I didn’t our big we’re quite very encouraged would you, again, at think Donatella. Thank team be this frankly we quickly,

Erinn Murphy

you. Thank

Operator

question next Boss JPMorgan. come Our Matthew will of from

Matthew Boss

at congrats positive comps on Thanks Michael the return and to Kors.

John Idol

Thank you, Matt.

Matthew Boss

marketing guess overall fully are improvement do the maybe customer levels, John, to category? this I about accessible seeing you you larger products company luxury picture, thinking attribute and any tourism in traffic, side? specific inflection more America on handbag accessories if and we execution were your promotional Maybe North

John Idol

say that over was of certain we One see where is the product position. would been have in removal have two relatively was last better Charm probably Matthew, away we signature ways. two our one, completely from that issues a the self-inflicted and North to walking us. could that as I’d from that So, MK categories things we was American answer design that leadership happened and quite I frankly Number healthy years the consumer two the

here, spectacular. I say have exciting team in of it very we resonating and product have looks kind with side a with side The here. The consumers’ working to what’s Michael team line, a happening it’s new and of been about groups to a talked while we’ve that products, of certain assortment type resonate three we core or have happening. four are that it’s in and new by level had since starting really we

We’ve past more So way the our that into and we in obviously been the refresh has I’d of And work it’s I for needed to our leadership. vision. our Hadid means just been design the really is led a that took And first whole would Bella sensational. self vision need modern more with as a to again what been category and and on jet-set thing inflicted vision leading has and put it’s that say on sensational. we Michael and us new marketing really the and campaigns second Michael

consumer leading those for to better So things two think us. are I response

in the e-commerce think American that I saw other marketing to for any change. we grow by put have being think much, traffic. backdrop challenging the core you in business than is rapidly That still driven by said, of an to We more store us. initiatives. that the channel being much That’s still our amongst product our obviously and this it’s issue we where sense But continues inflection of we consumer healthy. And traffic quarter saw continue the

our going see in Tom inflection QX from an optimization program. we’re fleet that to mentioned before

end of We’re of close we become the pretty growth. lot getting initiative. a result a ago really close that again, of was that you, that unprofitable to and going had to were stores We years e-commerce told our two

up ending of we’re malls so some the they where Also are some of in benefits the And North to of where of versus healthier in as is America going to traffic some malls see healthy. the we’re not better start the that.

looking. So way consumer our and feeling that are store and I the marketing product looks fleet the the way about the good think the way we looks, American are

going we’re that over the when us category. over and last watch a to less to with, to couple is a And Randy of the years. going extraordinarily smaller don’t terms competitor little going we’re don’t and a years. for a of consumer-driven But been turnaround. next few we And think been issue. in But in relevant to situation actually That’s that category is going back that getting headwind, keep I augment know trying. our accessories disintermediated particular, to the painful question is shame. We’ve somewhat going the And of by kind that’s become

much question, very you Matthew. thank So for that

Operator

will Our from ISI. Saad Evercore Omar next question of come

Omar Saad

taking XQ question. I’m for up I you guys the Versace. to and Kong talking well Hong big be follow normally as It high how brand. when DTC trying the is at versus XQ for on given Good we’re XQ million percent the ask would is XXX XQ, I like rate the and over the we wanted look morning. impact quarter T-shirt? think for Thanks And to forecast about a run understand presumably in million. John, are a big my XXX looks the

effect you for what couple could bridge kind the Versace of is kind maybe understand, over guys next and of the gaps on those of So plan the versus Hong us the underlying Kong the Thanks. quarters? T-shirt of help

John Idol

it I’ll as then well. that turn to over and take Tom of Yes, part I’ll

saying clear a have call far thought, and now think had be has fact a having is impact material particular it for here to we a very sitting it material this on would group impact that want in I again, Hong ever I said didn’t more the we than that are Kong company material call had impact. last So, in I

all north we of So brands region decline three seeing the revenue in are across XX%.

So on impact that is Versace going And the painful obviously region. incredibly in for that’s have us. to an

I of would be in not the is sitting December two weight also the mention issues, QX Versace. which between to traditional to for We’re but want month the quarter actually separate difference that going a large very

So some the seeing in is revenues. weighting that you’re of what

will for comp it in T-shirt But original China again, it two positive we Erinn’s for still pretty as region return one the And relates is year. to brand earlier We’re issue. question we a subside. determine Mainland can’t the to quarter, in of Again, confident quarters, to program starting think in three see when will to don’t the starting renovated we that. we’re quarters, first I close store our the that definitely But to just think as said, we growth that we’re we’re can China we’re today. that and we that starting our that stores And see – very renovation return. we digit double as I objectives from the one strong seeing I measure comp

to And I we’re that that over mitigate. turn time feeling will I’ll over So think Tom. it

Thomas Edwards

a little just I’ll Sure. add commentary. color

those a wholesale whole. a that time quarters, that Versace. up shipped mentioned In December for there businesses we China Versus line be And so in the QX headwinds impact, through as the Collection and building Versace versus in over company are with in some and had for also continue prior that Kong large with Mainland lot luxury overall QX, it be business exited to earlier, then Hong we’ll the John that were which FX addition China or year for and as will QX the

Omar Saad

Thanks.

John Idol

Thank you, Omar.

Operator

Michael Our of Credit next will Binetti from come Suisse. question

Michael Binetti

Congrats guys. nice But to Hi, just the on positive I to to you. it’s want comps, see. ask brand returning Kors

sales, beat You’ve miss. so commented a were a wholesale on same Kors this a little sales on but bit, but plan store your little was below, total you

particularly the some channel, about return made and you’re North you side? thinking America wholesale the you on comments can think when start that growth to there. seeing do to retail You mirror How in are the

while action that quarters for to your I now America a get feel channel. you’ve trying – to bit channel trying to to speed and look you and like that now. that do said try more a North you contribute said in wholesale you’re up comments speed for at know brand? anything to into channel help some the few could Is wholesale growth the you I today it how regulating there and into pivot little a when the been in accelerated to signature

John Idol

North color at Good global Michael. morning. channel. the I’ll you, give on we’ll some look wholesale Thank wholesale you then and America channel the

around on the So whether closures, they have the world some obvious there’s bankruptcies, channel, there’s with whether department disruption. been global been issues created there’s been stores

the So we channel about also in wholesale in remember, itself there’s some in basis. disruption a because we the particular we’re that duty amount Hong on are Kong who the you’re fair market. global of our area in feeling been in have hearing that the in that channel retail Also free of impact will partners feel

impacted be as to well. going they’re this So by

scale, – the that a global of terms particularly not healthy. In is on so channel

business when the whether our footwear businesses those On inside it’s men’s North are look and American you – at relatively our partners scale, wear, ready-to-wear, women’s of healthy.

business. been The earlier, And self ship It’s our the many and our I been of happened business. we’ve a but have. inflicted we it’s have from said So we business accessories in issues two then business accessories as the categories. our course that watch of don’t watch accessories standpoint, business wholesale

to price our that’s business inflection see and declines slow In been are the in beginning and starting we that particular, are days, saw that XX same starting are retail an full We’re last the see channel our channel the growing the in seeing we signature. and absolutely business. thing driven happen to over we in expanding wholesale to by where

doing America. So channel our moved quicker wholesale the in we channels are in in own same now we much North doing where thing that we are our

in quarter that Q&A And I think felt in we be QX. that we said prepared see of on an would that remarks – last of more our you’d the really inflection

this change inventory results believe in into we’re going quarter in got the and the we to there. some channel to start that we’ve So see heading

our back the was not product. channel goal the to that as to were not as So that with to seeing we’re achieve as from be, of stabilize it’s that in get will path again We consumer to the what at that you particular goal it a that this next that healthy and response given in stable. And be North I’d year able used revenues for while And opportunity America know believe to beginning itself original channel. goal our us still our is once the we’ve we say for our is year. got an to was in do

Michael Binetti

you. Thank

Operator

Our Stanley. next Morgan Greenberger of from question will Kimberly come

Kimberly Greenberger

question. so on up just follow Thank much. last wanted Great. you John, to I that

some anything margin are cost-cutting stabilize the feels to wondering that else, traction there? wholesale sort you So it’s of the any be there help wholesale wholesale to drag like to there? might or see margin Is to able I’m it starting you get that require North take sufficient improving additional efforts America some that sounds like do and action to stabilize other you is

remodeling Versace you’re the fleet that a you next you’re getting in to And of store would How repositioning of closure different mentioned few to be store John, the years. the location over up fiscal you. expect for wondering closure in you’re said to place? additional follow think the then end stores then the discussion. Kors. for if remodel Versace, any closures as program expecting meaning opposed XXXX. global I’m the existing expecting wanted just during on towards to you moving I to remodel And many I Thank process, you

John Idol

Kimberly. Thank you,

performance create still don’t not point believe in as the inflection said, I wholesale we be that we set said continue largest, whether be clear or QX. side, will year, and that we’re comment the case. revenue year, be through We during revenue will in able declines QX so better will channel we’d up with to QX a next America. and inflection continue begin better that business think hopefully decline. the leverage do that and channel. the a that in our in we hopefully business seeing can we do stabilized to will to us that see be think this for the we year On will again. that North QX year that want stabilizing We We to quarter be the that I last And and in not to see to the wholesale see

I very think earlier, as pleased. said Tom we’re

to make drive Kors. operating been the retail help to wholesale, inflection potentially margin on point in We’re starting margin and than to wholesale a margin. larger operating being has really Michael the that that in retail offset At progress time, expansion for will expansion

trying to when We’re not that obviously would to tell happen, head. but you ready where that’s we’re

Kors program, the as closure will the majority that year. this of be the said, of terms end by done In of I store

margin operating and cost year we’re something to we’re need the next the that our get of company. more We’ll continue with will that see less Because store will on year augmented going that. in But still obviously with stores starting this or base more is help our in have particular. the be more small to where revenues will reduction, we It that that or the what and in be in closure progress focused will terms some openings cost our Asia to we’re full declined, program that’s very and have next by of so offset to revenues year. do were of store close in we fruits line a good make

Versace, it those out handful take we’re you of in of because comp that a it out of some to you renovating noise place. will that period the out moving stores time. – renovating, you Obviously service relates of actually it take sometimes renovate we’re most a create of of a that for As but store, base, sometimes there’s when stores the we’re

think going what seeing. over to I we’re that’s So create takeaway years. we But process of go two as some the is through noise the next that the results

needed weren’t stores to in We’ve distribution the going we’ve that really now either we’re we’re couple to we’re to And cities then additional that additional able that well. that next able we’ll of cities of action. probably XXX next major and – Versace know or be years you over in call got announcing the we in doing course open approximately on be

leadership there, So is stores. working acquired there renovated on already that to Pierre had that. I quickly team in the company, we lastly, just Choo. might When Jimmy mention want Denis really most the of And the particular,

openings on acquired really process. So more group. there does a company new not renovation we’re And to really that of go in store that through focused we have that

Thomas Edwards

one additional Versace. And comment just on

the closures net high, retail closing really and appear as opened, to we’ve Versus are are exiting and year-to-date, be the latest locations. those stores Kimberly, line the new doesn’t XX the really So closures – because the at

John Idol

Kimberly. you, Thank

Kimberly Greenberger

Great. Thank you both.

Operator

of Our Chen from and final come Cowen will Company. question Oliver

Jungwon Kim

penetration Thank is retail? much. product to And getting pace for as XX% This Jungwon Oliver. color taking you so wholesale Thank right thinking in in the signature are for about well? rate just our Hi. level questions. you of you on provide the how you signature the penetration more side that Could of

John Idol

rate year. somewhere reach probably that XX% between We’re QX next – QX fairly comfortable of in QX we’re going and to just

there been luxury stores our So you much we’re were stop again, able competitors, there than would level. I at And the might to behind, our be inventory also to do will self and it tell And look assortment. own that like in feeling penetrations we’re When inflicted, but at to not be up get they making quite really that real that. positioned higher in we’ve we’re progress. some you frankly, European in their

who wholesale will our of our And again, doing leadership channel. little just take the as that I with the want division in are I spectacular a to give well. a it longer big said, to acknowledgment job Michael and right and a And design product team now as

would we’re when stores Thank will the QX going probably at for saw quicker drifting wholesale we QX, question. we than closer think that days we there see but own maybe channel. be our be to that, a I XX to in you into least little

those in And long-term make on Jimmy important that in at Choo we very saying very initiatives results Michael Choo close as initiatives, place accessories I’d we are at put the on and at you are progress Versace, to that starting our to and at like with just at significant and are in Versace Kors. our Jimmy have to the we particular pleased know success.

give that multiyear that into of on lot per growth XXXX, fashion will world continue to believe an the are will We us basis. see revenues. they portfolio give we in that we move And best and initiatives that accelerate a fiscal some earnings will us luxury the assembled our the we’ve of our of as expand think opportunity opportunity bear fruit share the to houses that to a

joining you forward look to soon. for I today. all you call speaking Thank the to

Operator

you That your teleconference. participation. does all conclude for Thank today’s

disconnect. now You may

Capri Holdings Limited (CPRI) 6 Nov 192020 Q2 Earnings call transcript