Q3 2021 Capri Holdings Ltd Earnings Call
[music].
Greetings and welcome to the Capri Holdings Ltd third quarter 'twenty 'twenty, One earnings conference call.
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At its now my pleasure to introduce Jennifer Davis, Vice President of Investor Relations. Thank you you may begin good morning, everyone and thank you for joining us on Capri Holdings Ltd third quarter fiscal 'twenty 'twenty One conference call with me. This morning are chairman and Chief Executive Officer, John Idol, and Chief Financial and Chief Operating Officer, Tom Edwards.
Before we begin let me remind you that certain statements made on today's call may constitute forward looking statements, which are subject to risks and uncertainties that could cause actual result differ from those we expect.
Those risks and uncertainties are described in today's press release end in the company's SEC filings, which are available on the company's website investors should not assume that the statements made during this call will remain operative at a later time and the company undertakes no obligation to update any information discussed on the call in.
In addition, certain financial information discussed today will be presented on a non-GAAP basis.
These non-GAAP measures actually at certain costs associated with COVID-19 related charges of long lived asset impairments ERP implementation cost of Capri transformation costs and inventory step up and just net restructuring and other charges and.
Otherwise note at all financial information on today's call will be presented on a non-GAAP basis Covid.
Use of corresponding GAAP measures and related reconciliation. Please view the earnings release posted to our website earlier today at Capri Holdings Dot com.
Before we begin I would like to note that we have accompanying slides posted on our website now I would like to turn the call out of our key Mr. John Idol, Chairman and Chief Executive Officer.
Thank you Jennifer and good morning, everyone.
Before reviewing our third quarter results I would like to once again take a moment to.
To acknowledge the ongoing COVID-19 pandemic.
And it has a profound impact on the entire world.
My thoughts go out to all of those affected by the virus.
And to everyone on the front lines.
Who are tirelessly, helping combat this pandemic.
I want to thank our 15000 employees around the world.
For the hard work and dedication they.
They demonstrate every day.
To support each other and their communities during this challenging time.
It's been inspiring to see the entire organization rally together.
I'm incredibly proud of the entire team and what Capri holdings has been able to accomplish during these unprecedented times.
Looking back over the last three quarters since the onset.
Of the COVID-19 pandemic.
We're encouraged.
At the performance of all three of our luxury.
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Revenue and earnings results have significantly exceeded our original expectations.
Retail sales improved sequentially every quarter, while ecommerce sustained strong growth across all brands.
Gross margin expanded nearly 400 basis points year to date.
Through the third quarter.
Additionally, we attracted new consumers to each of our luxury houses.
As evidenced by the double digit increases in our customer databases.
Over the last three quarters.
We achieved all of this by executing against our strategic initiatives.
We'll also carefully managing expenses and liquidity.
Our performance during this difficult period illustrates the strength of our brands as well as the resilience and agility of our business.
We now believe that the near term will be more challenging.
The resurgence of the virus has led to additional restrictions and store closures that impacted the third quarter and are expanding in some countries in the fourth quarter.
However, we are encouraged at the vaccine rollouts provide some visibility to the end of this crisis.
Looking forward, we remain optimistic about the outlook for the fashion luxury industry at our company.
While there are still unknowns in front of US we believe the luxury market will continue to resume of steady growth trajectory.
And we are well positioned to participate in that recovery.
As you know a few years ago, we made the strategic decision to diversify the company and expand more significantly into the luxury space.
With Versace, and Jimmy Choo, we acquired two very powerful brands.
Of change the future growth trajectory of the company.
Over the next few years. These two luxury houses will account for approximately 40% of Capri holdings revenue at approximately one third of total company earnings.
Now I would like to turn to our third quarter results.
Revenue improved sequentially declining 17%.
And was above our expectations.
This reflected better than anticipated results in the Americas, and Asia regions, partially offset by a more challenged environment in the EMEA region due to additional restrictions and store closures.
Given our strategic initiatives to increase full price sell throughs and selectively raise prices gross margins and earnings were significantly above our expectations.
Gross margin expanded 520 basis points.
Contributing to earnings per share of $1 65.
Looking more closely.
At group revenue trends total sales for our retail channel improve sequentially declining 10%.
Pair two of 17% decline in the second quarter.
The better results were driven by.
Robust E commerce sales, which increased increased 65%.
And once again accelerated relative to the prior quarter.
Store performance also improved quarter over quarter, driven by local client telling initiatives.
By geography Asia remains the fastest recovering region.
With retail sales turning positive in the quarter.
Notably revenue in the region increased across all three of our luxury houses driven primarily by stronger growth.
In mainland China.
Additionally, in the Americas retail revenue improved sequentially with sales down low double digits.
On the other hand in.
In the EMEA region revenue trends decelerated.
Given the store closures and increase restrictions in the region.
But at the end of the quarter approximately 40% of stores in the EMEA region were closed.
Now turning to third quarter performance by brand.
Starting with Versace.
We were pleased with revenue results, which were ahead of our expectations.
Demonstrating the strength of the brand.
The success of our strategic growth initiatives.
Sales at our retail channel increased in the low double digits globally.
Positive double digit trends in the Americas, and Asia regions more than offset declines in the EMEA region.
Similar to last quarter E Commerce sales increased triple digits year over year.
We saw strength across categories as the brand emphasize the ultimate for such a look at.
At the latest styles with luxurious handbags footwear and statement jewelry.
Accessories performed well with strong consumer response to our virtuous collection, including new styles that are quilted and a V pattern at embellished with our Baroque of E signature logo.
We are pleased with the traction we have gained with the Barocco V across all classifications, including accessories footwear belts and jewelry.
Following the success of the broker V. Donatella has developed a unique signature pattern.
That will debut during our upcoming Milan fashion show.
When the new signature pattern launches at retail in the fall.
It will be accompanied by a major marketing campaign to attract and engage new consumers.
We believe this will significantly change the trajectory of versace's revenues.
As it expands the brand's portfolio of recognizable iconic products.
Turning to our store fleet in the third quarter. We were pleased to opened 13 spectacular new locations in premier luxury shopping destinations, including ruse at an array of Paris.
New Bond Street in London.
And the one off stressor in Zurich.
All of these boutiques capture versace's powerful vision of the future, while staying true to that.
Instantly recognizable design aesthetic.
We believe that physical retail will remain important for luxury fashion houses.
Given consumers' emotional connections with the brands.
Therefore, we will continue to selectively opened stores and the most important shopping destinations in the world.
Additionally, we are elevating versace's existing global retail network.
And to our new store concept.
The new format more prominently showcases accessories with enhanced positioning and increase space.
Which should drive significant increases in overall store productivity.
To date, approximately 40% of Versace store base.
As in the new concept.
And we expect to have the majority of the fleet and the new format.
Over the next two years.
In terms of brand awareness and consumer engagement for such a embraced innovative ways to connect with new and younger customers.
But I would tell them made her digital debut as an avatar in December at complex land.
Immersive internet of experience featuring.
Fashion.
Art.
Musical performances.
And cultural conversations.
They're Versace also had a digital storefront and introduced a limited edition try Greco sneaker.
The five day digital event generated approximately 6 million impressions.
In China for such a partner with GQ.
To produce a CGI animated short film.
And encompass a surreal space of Tri Greco.
And described the creative concept and background story of the sneaker in ancient Greek visual style.
The film featured celebrity key opinion leader Danny Lee.
And generated over 10 million impressions.
These initiatives helped to drive an 18% year over year increase in Versace's Global database.
Overall versace's results speak to the strength of the brand and reinforce our confidence in the luxury houses long term growth potential.
For Saatchi represents.
The largest growth opportunity for Capri holdings.
As we continue to believe revenue will increase to $2 billion overtime.
Yeah.
We anticipate versace will generate positive operating margins in fiscal 'twenty 'twenty two.
In mid teens operating margins.
By fiscal 'twenty 'twenty three.
Moving to Jimmy Choo revenue significantly decelerated relative to second quarter, given the absence of of holiday collection. This year.
During the onset of the pandemic in an effort to Regulus rigorously manage inventory, we cancelled Jimmy Choo holiday delivery.
As a result, we did not offer newness to customers in the third quarter, which meaningfully impacted sales.
Despite the absence of a holiday collection.
Sales in mainland China again increased double digits.
While trends also improved in Japan, resulting in double digit sales growth.
In the Asia region overall.
We were also pleased to see continued growth in E commerce.
We were encouraged with the performance of our expanded accessories assortment with particular strength in totes.
Our signature JC <unk> remains the best selling collection and accessories.
And footwear trainers continued to outperform and increase in penetration.
We believe Jimmy Choo has a significant opportunity to expand its casual footwear assortment beyond sneakers as demonstrated by the strong sell throughs of products such as at each day.
Youth and cruise boots.
Which are they.
Pit of meat of Chic Street style.
Additionally, our soft shearling slippers embellished with delicate pearls and crystals, where our holiday favorite.
New casual collections, featuring sneakers flats, and wedges with novelty details and a Jimmy Choo twist are now arriving in stores and online.
As a result, we have begun to see a significant improvement in sales trends.
Additionally, we are excited to be introducing our new JC signature collection in fabrications and techniques.
That will help establish a more consistent product platform reinforcing Jimmy Choo brand codes.
This new collection will be arriving at retail during the second calendar quarter of this year.
In terms of brand awareness and consumer engagement, Jimmy Choo partnered with digital Influencers around the globe to share how they celebrate at home with their favorite Jimmy Choo accessories and shoes during the 'twenty 'twenty holiday season.
Combined these influencers have over 11, and a half of million followers on Instagram.
Additionally, Sandra Choi hosted zoom cocktail in conversations with some of Jimmy Choo is very important to consumers.
In December of these consumers were surprised and delighted.
To also be joined by actress and store of the autumn Winter campaign Daisy Edgar Jones at her stylus Nicky Yates.
Participants in the zoom event were sent to holiday sketch by Sondra and a custom two cocktail kit to enjoy while sondra Daisy and Nicky discuss fashion.
Style at holiday traditions.
Our luxurious product and engaging marketing helps contribute to.
A 15% year over year increase in Jimmy Choo Global consumer database.
Overall, we believe our strategy to build accessories and expand the casual footwear assortment will enable Jimmy choo to grow revenue to approximately 1 billion overtime.
We anticipate Jimmy Choo operating margins will significantly improve in fiscal 'twenty 'twenty, two leading to low double digit operating margins by fiscal 2023.
Now turning to Michael Kors, we remain pleased with the continued progress of the recovery.
Revenue again improved sequentially in the third quarter, driven by better retail sales in the Americas and.
And Asia regions, partially offset by the slowdown in the EMEA region.
E Commerce trends also accelerated relative to the prior quarter and increased 70%.
In mainland China retail revenue increased low double digits.
Which led to growth in the Asia region.
Helping drive these results were strong sales on Tmall during Singles' day, where Michael Kors was one of the top performing at accessories brands as well as one of only three fashion brands.
To achieve sales of 100 million RMB.
In the Americas revenue declined in the low double digits compared to a decline.
And the mid twenties range in the second quarter.
Moving to product performance, we are continuing to increase signature penetration across all categories by expanding our offering and developing new designs.
Overall signature represented approximately 35% of the assortment.
Cross all categories compared to 27% last year.
In accessories signature continues to perform well as consumers respond to newness.
We delivered fresh updates throughout the holiday season, including patchwork mixed materials and of metallic update.
To our best selling printed to drive detail.
All executions, which give our classic logo and modern and sophisticated at field.
So you'd be at your penetration increased to nearly 40% of accessory sales compared to 30% last year, resulting in higher AUR and gross margins.
Signature also performed well and footwear, where penetration grew to over 25% of sales.
Within footwear, we saw strong performance in booties and fashion.
Active driven by iconic branding elements and Lux logo details.
Similarly in women's ready to wear signature logo styles were among the strongest performers.
Turning to mens one of our growth drivers for Michael Kors third quarter sales increased driven by signature and accessories.
In fact within men's signature increased to 45% of sales compared to less than 30% last year.
With respect to brand awareness.
And consumer engagement.
Kors upbeat high voltage holiday Twenty-twenty campaign centered on the question.
What makes the store.
And featured an all star cast fronted by Supermodel Bella Hadid.
My Iowa Nicholas.
At Salomon D S.
And videos the cast and crew shared their responses.
To the question posed by Michael Kors himself, while on the site.
The videos and still photography and bodies of the brand's signature glamour and optimism infused with the joy of the season.
The campaign also came to life through a special digital and in store activation titles.
M K edited by.
The first in a series of global Activations.
M K edited by Bella launched in early December.
In New York and centered around campaign store Bella Hadid must have picks for the holiday season.
This was followed by regional Activations in major cities worldwide, including Milan, Tokyo and Shanghai.
The concept featured additional M K edited byproduct.
Curation by local Influencers.
Our marketing initiatives continue to underpin our brand pillars of speed energy and optimism.
This helped contribute to a 16% year over year increase in Michael Kors Global database.
Overall, we were encouraged by the sequential improvement in the revenue trends and significant gross margin expansion at Michael Kors.
We remain confident of our ability to grow revenue, while achieving operating margins of approximately 25% over time.
This will be driven by our initiatives to increase prices and accessories.
Reduce our product S SKU count.
And optimize our retail store.
Fleet.
At closing unprofitable doors.
In total Capri holdings third quarter results exceeded our expectations.
The sequential improvement in revenue despite increased store closures and restrictions demonstrate the strength of our brands and the resiliency of our teams across the globe.
During these unprecedented times, we have stayed focused on executing our strategic initiatives across all three luxury houses.
We believe Capri holdings will emerge a stronger and more profitable company and remain confident in the long term opportunities.
Each of our unique global luxury houses.
Now before turning the call over to Tom I would like to take a moment to provide an update around the company's efforts to support diversity and inclusion.
At Capri Holdings, we stand against racism and discrimination.
We cannot change the past, but as an organization and as individuals we have an opportunity to positively impact the future.
Therefore, we are pleased to announce the creation.
Of the Capri Holdings Foundation for the advancement of diversity and fashion.
We are donating $20 million to.
Two of the foundation to foster and support programs designed to encourage diversity and inclusion in.
In the fashion industry.
With a particular focus.
On Underrepresent of communities.
Capris role as a leading global fashion company.
As of Sept trends.
Inspire creativity.
And represent the world around us.
We aspire for fashion to be opened to all.
And are doing our part to create a more inclusive of industry.
Now, let me turn the call over to Tom.
Thank you John and good morning, everyone.
Starting with third quarter results.
Revenue of 1.3 billion decreased 17% compared to last year at <unk>.
Quenches of improvement relative to the second quarter end above our expectations.
Performance in the Americas, and Asia regions was better than anticipated, partially offset by a more challenging environment in Europe.
Net income was $250 million.
<unk> and diluted earnings per share of a dollar of 65 cents.
This was above our expectations, primarily reflecting better than anticipated gross margin expansion.
Looking at revenue trends by channel total company retail sales declined 10%.
A sequential improvement relative to the 17% decline in the second quarter.
The better results were driven in part by robust E Commerce sales, which increased 65% and once again accelerated relative to the prior quarter.
Store performance also improved quarter over quarter, driven by local client telling initiatives.
In the wholesale channel performance at point of sale also improved sequentially, but tracked lower than our own stores.
Selling is continuing to lag sell throughs and total company shipments declined at a rate similar to the second quarter.
With improving trends in the Americas offset by decelerating trends in the EMEA region.
Turning to revenue performance by brand.
Saatchi revenue was 100 at 95 million approximately flat compared to prior year end above our expectations.
Global sales in our retail channel increased low double digits with ecommerce sales once again, increasing triple digits.
Sales in mainland China increased double digits contributing to growth in the total Asia region.
The Americas was once again, the best performing region.
With revenue up double digits.
Trends in the EMEA region remained below prior year impacted by increased store closures and restrictions.
For such a ended December with of global luxury fleet of 217 retail stores, a net increase of nine from prior year.
For Jimmy Choo revenue during the quarter was 121 million, a 27% decrease compared to prior year at.
As John mentioned this reflects the absence of of holiday collection.
Retail sales in mainland China increased double digits, while trends also improved in Japan, resulting in double digit sales growth in the total Asia region.
In the Americas, and EMEA regions retail revenue declined double digits.
Significant deceleration versus second quarter trends, reflecting the lack of newness during the quarter as well as increased store closures and restrictions.
Wholesale revenue was also down significantly due to the absence of of holiday collection. This year.
Jimmy Choo ended the quarter with a global fleet of 231 retail stores, a net increase of eight from prior year.
At Michael Kors total revenue of $986 million declined 19% compared to last year.
Overall retail sales improved sequentially decreasing low double digits versus a low 20% decline in the second quarter.
E Commerce sales growth accelerated increasing approximately 70% compared to an approximate 40% increase last quarter.
We were encouraged by the sequential improvement in trends in the Americas and Asia regions.
Retail revenue in mainland China increased low double digits driving overall sales growth in the total Asia region.
In the Americas retail revenue declined at a low double digits, a significant improvement relative to the second quarter.
Well in the EMEA region trends decelerate at due to increased store closures and restrictions.
In wholesale globally, we saw performance at point of sales improved sequentially, but at a lower rate than our own retail stores.
Wholesale shipments are also improving but at recovering at a slower pace than point of sale results.
Of course ended the quarter with a global fleet of 831 retail stores, a net decrease of 15 from prior year.
Now looking at total company margin performance we.
We were pleased with gross margin expansion of 520 basis points, which was well above our expectations. This improvement primarily reflects our corporate initiatives to increase full price sell throughs and selectively raise prices.
Additionally, gross margins benefited from a higher mix of retail sales versus wholesale sales.
Operating expenses as a percentage of revenue was 45% compared to 42, 6% last year total.
Total company operating expenses decreased approximately $80 million were 12, 5%.
As a result total company operating margin expanded 290 basis points to 19, 7% compared to 16, 8% in the prior year and was well ahead of our expectations.
Looking at operating margin by brand.
<unk> operating margin of six 7% was above our expectations, reflecting both gross margin expansion and expense leverage.
Jimmy Choo operating margin of negative six 6% reflects expense deleverage due to lower revenue given the absence of of holiday collection. This year.
Michael Kors operating margin of 28, 5% was above our expectations and expanded 470 basis points over prior year.
Collecting significantly higher gross margin, partially offset by expense deleverage on lower sales.
Turning to our balance sheet, we ended the quarter with cash of 229 million end debt of $1 4 billion, resulting in net debt of $1 2 billion.
During the quarter, we paid down approximately 370 million of debt.
These results reflect the strong cash flow generation potential of our business as we were able to deliver free cash flow of approximately 460 million year to date, which was ahead of our expectations.
Total liquidity at the end of the quarter was $1 4 billion.
Looking at inventory, we ended the quarter with 789 million down 18% compared to prior year.
This reflects the aggressive inventory reduction program, we implemented at the beginning of the pandemic.
Turning to guidance.
Due to the lack of visibility surrounding the progression of the pandemic macroeconomic fundamentals and tourism flows. We are unable to provide specific earnings guidance. However, I would like to share some thoughts around how we see our fiscal fourth quarter and full year 'twenty 'twenty one progressing.
We now anticipate lower revenue in the fourth quarter relative to our prior expectation due to the increase of the store closures and restrictions related to the resurgence in Covid cases.
This primarily reflects trends in the EMEA region, but also includes measures being taken in parts of the Americas and Asia regions.
Currently in the EMEA region, approximately 50% of our stores were closed compared to about 40% at the end of the third quarter.
As a result, we now expect fourth quarter revenue to decline at a rate similar to the third quarter and.
And full year fiscal 'twenty 'twenty, one revenue to decline approximately 30%.
Despite the near term slowdown in the pace of the global recovery, we remain very optimistic about the underlying health of our business.
We believe these increased restrictions are temporary and look forward to a strong rebound as vaccines become more widely distributed across the globe.
Turning to gross profit, we now anticipate gross margin expansion of approximately 300 basis points for the year.
For the fourth quarter, we forecast of approximately 100 basis points of improvement compared to prior year, driven by greater full price sell throughs and selective price increases.
Our fourth quarter outlook also includes approximate hundreds of basis point impact from higher tariffs related to the exploration of the GSP trade program as well as increased transportation costs globally.
Moving to operating expenses, we now expect operating expenses to decline approximately $425 million in fiscal 2021.
Turning to our expectations around certain non operating items.
For the full year, we estimate interest expense of approximately $45 million.
Foreign currency gains of approximately $20 million.
Our effective tax rate is estimated to be approximately 20%, we forecast weighted average shares outstanding of approximately 152 million.
Taken together, we now expect to generate a slight loss per share in the fourth quarter.
This outlook does not incorporate any significant additional store closures extensions of closures, where new government restrictions beyond what we see today that could further impact traffic and sales trends.
Now, we'd like to share some high level thoughts around our expectations for fiscal 2022.
We are very optimistic about the second half of the year end, particularly strong recovery after of vaccines are more widely distributed.
All of our luxury houses should benefit as people begin to feel comfortable returning to more normalized routines.
In terms of gross margin, we anticipate a 100 basis points of improvement in fiscal 'twenty 'twenty, two driven by price increases at Jimmy Choo, and Michael Kors as well as higher full price sell throughs at.
It should be noted as many of you know that the G. S. P program terminated at the end of calendar 2020.
At the trade program has not renewed at would result in higher tariffs and a reduction of our planned margin expansion.
Looking at operating expense, we see approximately 100 million of net savings flowing into fiscal 'twenty 'twenty two from our cost reduction actions. This reflects our original $250 million in savings, partially offset by approximately $150 million of FX impact.
Taken together, we expect higher gross margin and our expense reduction initiatives to generate meaningful operating margin expansion.
Our fiscal 'twenty 'twenty three we continue to anticipate revenue and earnings per share will exceed pre pandemic or fiscal 2020 levels because.
Of the World emerges from the pandemic, we remain confident at our three luxury houses position Capri holdings to deliver multiple years of revenue and earnings growth as well as increased shareholder value.
Now we will open up the line for questions.
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One moment, please while we poll for Europe.
Our first question comes from the line of Kimberly Greenberger with Morgan Stanley. Please proceed with your question.
Great. Thank you so much really nice results this morning, John at ease.
You've obviously been able to learn a lot about.
Pricing and inventory management and end, let's say price optimization over the last nine nine months, I mean, I don't know who who would've expected.
The silver lining end and such a at a troubled period, but I'm wondering if maybe you can sort of step back.
And think about and just share with us of your thoughts on.
What.
What's been the day sort of key unlock in your mind that has revealed the opportunity for price improvement.
Better full price selling across it seems like all of your channels and all of your brands is there a sort of key messages or of key.
Strategic pivot that you would expect to be able to continue our post pandemic.
Yeah.
Good morning, Kimberly and.
Thank you for your question.
Let me start by saying, we think we had of a very good quarter relative to the environment, we're surrounded and.
We exceeded our revenue expectations, our internal revenue expectations and that was even with.
A fairly significant downturn.
In the EMEA region at the back half of the quarter.
And and I think what that shows US is that is the key.
Consumer engagement with all three of our luxury houses at you know as you saw.
From from our prepared remarks, there were such a global David base grew 18% Jimmy true grew 15%.
And Michael of course of course grew 16%.
So when you look at all of those and those are kind of very key indicators for us in terms of the health and the desirability of our of our.
Luxury houses.
All of those things are pointing to very positive reception from the consumer.
As you noted.
We've been raising prices in and Michael Kors and specific which by the way we started that again before the pandemic began its something that we have talked about at in the last few calls that we believe that.
Where we are competitively and the way the consumer views of our brand we had actually been undervalued.
How how this.
Brand has been looked at.
That went along with a very concerted effort around the low.
At the.
The reinvigorating of our signature products across our line and you know as we said at in accessories at accounted for about 40% overall sales.
Thought numbers in our footwear and women's ready to wear areas growing very very dramatically.
And so consumers.
I believe see that Michael and his design teams are really.
Creating products that are desirable.
And then our marketing messages that are surrounding that either led by Bella hadid or some of the storytelling that we've been doing is really resonating with the customer. So I feel in Michael Kors. This is something we started out at about two years ago and as we said and also previous calls we'll be finished with most of that price reset by.
At the fall of this year calendar of fall of this year.
And we think we will have additional gross margin expansion, which will lead to operating margin expansion in the Michael Kors.
Brand at so we really feel good about the product we feel good about the pricing strategy.
And we feel great about what we're telling in terms of marketing stories.
In terms of from.
Such a I think that you know we've been on of Mr mission to reset.
So at the vision of the company, it's always going to be one way led always going to be.
Driven by Dawn of tell us our vision and end and she obviously has had an incredible vision for a long time like Michael and like Sandra.
But what we're doing is we're building a more stable base in the company, it's something of the company hasn't had for for many many years.
We now have the broke of V that was talked about and it's really resonating across multiple categories.
We're starting to see some very nice traction on some of the new accessory groups that we've introduced at <unk>.
Now we have this very significant introduction that will happen as of February market, Oh, I'll leave that for you to all watch and the fashion show coming up in March.
Be quite impressed of what we're going to do.
And I believe that's going to change the trajectory of the company significantly over the next 24 months and so again. This is everything that we had been planning all pre pandemic.
And lastly, as it relates to Jimmy Choo, We've introduced you know of getting the company never had any kind of identifiable icon with introduced of JC signature logo.
Which has been extremely well received by the consumer we are coming out with additional line extensions around that and most importantly is to is to develop the accessories business.
Again, that's a little more difficult given where we are in the cycle of the pandemic and how consumers are really engaging.
With with more classic products, if I can say that end I think that we haven't had that history at Jimmy Choo of having that strength in accessories, although we're going to build on that.
And then of course, we've been discerned remediated so to some degree with the with the dress footwear business and we're really pushing hard on all of our active in our more casual classifications, which are getting excellent traction.
So we've got probably the most amount of work to do there because we got a few more things that are hitting us, but I think what you see is is.
Our ability to stay focused on our strategies that were really being set in place before.
And then Mike started and the consumer is resonating one thing. We know is that we have three incredible luxury names with Michael Kors Versace, and Jimmy Choo, We just when you say those names there they're powerful they are important and they resonate with consumers. So we will come out of this hum very dark.
Moment.
And I think we will actually be stronger across all three of these brands because we stay focus we didn't really.
Try to lose lose any of our brand values or our vision for the future and I think the consumer is enjoying all the products that are being defined by Michael by Donatella and end by Sondra and their wonderful design team. So I compliment them on this call. So thank you for flow and just.
Lastly on end and inventory management I think that's always been something we've done well.
As a company are and.
You know, we we suffered some some significant pain of Jimmy Choo.
We made a decision very early on in the pandemic the council of the holiday collection.
Hindsight is 2020 of that was probably up to two of severe of a move but it was something we could do quickly.
Keep our inventories in line.
We did also lose revenue in particular in North America with Michael Kors. We also made at similar decision, we canceled most of our boots and booties.
I had a fairly big impact on us and end and we ran out of a quite of few styles and signature during the holiday season. So we could have done more business in Michael Kors in North America, and quite frankly, as we're getting replenished right now I can't tell you, it's going to hold forever, but Michael Kors in North America is positive.
Our comp store sales right now, which is really quite extraordinary given where we are in the end.
The continued.
Hum impact at the pandemic is having so again, we're very pleased with the performance of all of the brands really led by product at all.
Also the marketing messages that are associated with the stores that we're telling them. So thank you Kimberly.
Thank you.
Thank you. Our next question is coming from the lineup of <unk> Bara child with Wells Fargo. Please proceed with your question.
Hey, good morning, Congrats on the goodwill of a solid quarter I guess John of I Wonder if you could elaborate on some of them said during the remarks on Kors I think.
You mentioned blending to get the brand's operating margins back to approximately 25% I believe last year, you had talked more about a range of 20% to 25% of the targets has something changed to give you a bit more confidence of the brand's profit outlook just kind of curious if you could elaborate a little bit.
[noise].
Sure.
You know as you know historically, the brand's been around 20% and so so I think you know as we move closer into our visibility for next year.
And.
Again, you saw extraordinary gross margin expansion during the quarter.
And as Tom said in his remarks.
A great deal of that has actually led by full price selling and again led by these product initiatives and the consumer response, so we of consumers engaging products selling through.
Certain categories were actually.
And then it's a lot of good thing to say you run out of things, but sometimes it is a good thing.
So we're really getting very very strong.
Response from from our consumer so I think of.
We have a little bit more confidence in our ability to reach those targets.
Targets and again as we are.
As I mentioned as we work through our fleet optimization program.
We will be reducing stores.
And again, we still plan on closing well over 100 stores.
And that's just kind of really helped improve the overall operating margin as we do that still going to take us.
18 to 24 months to do that.
But but many of our of leases are coming off naturally.
And you know, we'll renew those stores, where we are profitable in those stores, where we're not we won't because it doesn't make sense for us to do that.
And so I think we have a bit more confidence I do want to put a caveat, which Tom mentioned in his remarks and that is that there's the G. S. P program, which we.
We are hopeful it gets renewed but if not that could have some some headwinds.
Headwinds for us on the gross margin side, but I think in general we see Hum.
Optimism.
Around what is happening in the Michael Kors brand and end and the way we're growing at at.
Relative to our expectations.
Has has given us a strong point of view on that.
Thank you Mike.
Sure.
Thank you. Our next question comes from the line of Matthew Boss with J P. Morgan. Please proceed with your question.
Great. Thanks, John.
John maybe near term can you speak to recent revenue trends in the Americas post holiday partially driving.
Reduction in the fourth quarter top line plan that you cited and then multi year on your target for revenue to exceed pre pandemic.
Fiscal 'twenty three how do you see the relative pace of recovery by region and by brand playing out.
First of all good morning, Matt.
But the.
Caution that we gave in our in our.
Prepared remarks was not actually directed towards North America, and as I, just said a moment ago.
Again, I can't tell you that it is going to hold true, but for the moment the Michael Kors brand as an example in North America is showing actually positive comp results, which is quite extraordinary given where we are right. Now again I don't know it's subtle remained true for the balance of the season. So.
North America has actually for actually all three brands for for Saatchi in.
And at Jimmy Choo, we've we've seen of a very healthy January kind of can't tell you what February and March of going to look like but so far we're off to a good start.
In Europe.
So I think we indicated we have more stores closed in this quarter than we had last quarter I assume everyone. On this call is reading the press announcements as they come out we anticipate most of the government restrictions.
Which in some cases have accelerated in places like France.
To remain in place through the balance of of the quarter, even though many say they will lift them in the early part of March I think we're less optimistic.
As you know the vaccine rollout of its been quite slow across Continental Europe.
So we think that that's going to really have an impact and we actually believe that will we will stay true through most of the first half of calendar <unk>.
'twenty 'twenty one so.
We believe the results will be of Dragon of headwind for the company.
And then in Asia, there's a slight bit of concern as I say again, I assume you're reading or hearing from other people. There there has been some small resurgence of the virus in China.
And they end the government has not required but requested more limited travel during the during the.
Coming Chinese new year, we don't know what that means.
So we're we're just at a little more.
Cautious again business will be still strong in the region, whether it will have the same level of intensity given the.
Our cautious nature of of the way that they.
They are approaching the situation is something that gives us just a little bit of pause. We don't think it's of any kind of of long term trend.
So as we look at the future. We think again that the first quarter of next year will be a bit bumpy again, it's all going to depend on how quickly the rollout.
What happens at the vaccines and you all probably know as much as we do in terms of how that's happening.
We believe North America will have or United States in particular.
We will have the fastest rollout of the vaccine ultimately.
And we're encouraged.
As Tom said in his remarks, we think the calendar back half of this year, particularly starting in September October and November there could be a very.
Strong rebound as people return to it.
At a different type of normal and so were most encouraged about.
North America, and mainland China in particular, and we think there could be.
Some very.
Continued growth.
Positive trajectory in both of those marketplaces, where quite unsure about the back half of the year and EMEA region and that'll just depend on how the how the vaccine gets rolled out.
And in terms of the brands.
I would say you know of.
I'll start again with Michael Kors.
We're really pleased with what I'm.
Michael and the design teams are delivering in terms of product innovation and how our marketing teams are developing story, telling around that so we feel.
Very positive we also believe that that.
At the the Department store businesses will start to return and maybe not quite catch up to where we are but we think theres going to be.
A more solid development of of that so that should help impact our wholesale businesses.
Which you know even though they are significantly reduced from where they were are still important to the company.
And.
And we also believe that there'll be some recovery in the department store business in Europe, which as you probably know is at.
As is.
For all intensive purposes, almost closed and in many cases.
So that's quite.
Difficult for for for Us and for our partners there.
And so and so we see you know.
Very encouraged about that we're super excited about what we think can happen for versace in terms of what we're going to show.
Here in March and how that's kind of really resonate with the consumer.
And then Jimmy Choo, it's going to take us a little bit longer given given again, we need.
People to feel a bit more comfortable with I'm.
Going to restaurants of two events and things like that and so that was at the recovery on that would be a little bit slower.
And we're much more optimistic in fiscal year 'twenty to 'twenty three with Jimmy Choo, Although we do believe Jimmy Choo Jimmy Choo.
It will be profitable for the company exit year, which is a very positive thing for us and encouraged by that.
Thank you Matt.
Thank you. Our next question comes from the line of all of our site of Evercore ISI. Please proceed with your question.
Good morning, Thanks for all the information.
At the margin updated margin targets for Jimmy Choo, and Versace, a really impressive actually coming off of where we stand now.
The key driver there of the key factor.
Of the return on sales and being able to leverage sales of their other key drivers that we should think about looking at that magnitude of the margin improvement, we'll see over the next couple of years.
That's really what my quick question sensors around centers around thanks, John.
Sure Omar this is Tom here, thanks for the question.
There there are a couple of different things that are driving the increase and an expansion in margin for Jimmy Choo and Versace and in the first is our gross margin. So it can be choo, we're looking to increase pricing selectively and believe we have opportunity to do that compared to our luxury peers.
And for both brands, we're looking at increased full price sell through.
And finally across both accessories is a key focus for Jimmy Choo and Versace already made a significant headway in creating collections and end logos and signatures to build on and we'll be expanding those over the next several years. So we do believe that gross margin is an opportunity across.
Both brands and the second piece is leverage and we will be seeing leverage at both the store level and at the SG&A level for corporate because we've significantly made investments in the businesses after buying them and had cost reductions coming into the year due to COVID-19. So we'll be building off of that as we quickly lever and grew.
Low revenue over the next couple of years for those businesses and as we mentioned earlier, the 15% or of mid teens margin goals for the brands compared to other luxury peers and actually very favorably and below so for Versace, we're looking at getting to that level in FY 'twenty three looking at double digits for good.
Meet you in FY 'twenty three.
And opportunity.
Versace since we won't be at the $2 billion in sales level to even go beyond that.
<unk>.
Got it at all.
Let me at Omar.
Well Mark let me add one other thing too is as you heard my level of excitement about what we're going to be showing an end in March AR and what that's going to do as you heard me say I believe it's going to significantly change the trajectory of of the for such a business, which were already pleased with.
As we build out a base for this company, which the company really over its history Hasnt had.
Compared to our other luxury peers.
That will improve the profitability dramatically of.
For such at because we're doing this today, primarily on ready to wear.
As you know has has higher markdown rates.
And end has you clear that inventory, whereas accessories and in particular in the footwear area of core items.
How have the possibility for greater longevity really creating a margin story for us there so it's not going to necessarily at that at.
For such a b of gross margin story, but it will be in operating margin story, because sell through of the sell throughs will be up at.
And and that maintain profitability, but will be better and you saw what's happening at Michael Kors by us doing that.
And we're gonna be applying those same principles end and also to Jimmy Choo.
As well over time, so I think we understand the formula.
And I think we have the we're resolute in our and our vision to implement those strategies even during these very difficult times. Thank you Omar.
Great.
Thank you. Our next question comes from the line of Michael Binetti with Credit Suisse. Please proceed with your question.
Hey, guys. Thanks for all of the detail today.
Tom would you mind clarifying.
What your the language on the operating expense plan for fiscal 'twenty two in dollars. Please.
Okay.
Sure Michael Happy too so for fiscal 'twenty two of our next fiscal year, we see a $100 million of savings flowing through from our savings initiatives. This year. As you know we had originally provided a target of 250 and the underlying drivers of that were head count reduction of 20%.
Other cost savings all of those things remain in place, we do see though a weaker dollar, creating an FX headwind, which will make SG&A at a higher as a result, so there's 150 offset to that so we see 100 million flowing in and that's off of a base of of pre Covid day, So FY 'twenty.
That's how to think about that now we're continuing to work on managing expenses and as John noted, we continue to execute our store closure and fleet optimization plan and that is also contributing to these savings and something that could further drive savings in the future.
Okay. Thanks for that clarification very helpful. And then I guess could you space.
I'm curious on the supply chain any complexities you are seeing today in the on the West coast ports, given some of the California restrictions, we've seen or how do you see that the freight outlook as we think about margins in the near term. Please.
Sure. So we have seen delays in some capacity constraints on transportation due to Covid. We noted at in the prepared remarks in Q4, as an offset to some of the great results coming through on AUR and margin for the business and we are seeing.
Some delays in receiving merchandise so it will have some impact.
And we have been and our teams have been doing a fantastic job planning to mitigate this and managing through it so costs have increased.
We're at vessel in freight but.
The impact is included in our in our guidance remarks, we anticipate it will continue into the beginning of next year, but that eventually will normalize as again the world at comes back to a more normal situation as of vaccines of more widely distributed so at.
We believe it's of short term situation.
Okay. Thank you very much of a help I appreciate it.
Thank you. Our next question comes from the line of Jay sole with UBS. Please proceed with your question.
Great. Thank you so much I just wanted to ask about the GSP trade deal could you sort of elaborate on what the impact is and what the prospects are for that Youre getting renewed and is the impact of the be retroactive. If the deal is not renewed.
So Jay at the GSP program as you know provide says low or no tariffs for certain countries for importing into the U S and at expired at the end of the year in the past at has been renewed and it has been renewed retroactively to the beginning of the year.
But as we all know there are a lot of different priorities right now for Congress and we can't predict if and when it would be renewed the impact to us is a little too early to tell because it does depend on where we source our goods from and we do of the ability to change that sourcing and shift production.
So as we get through the quarter end into the new year and talk to you in the May June timeframe, and I think we'll have a lot better visibility on the impact for the year, but we would of course work to mitigate it if it is not renewed.
Got it okay. Thank you so much.
Okay.
Thank you. Our next question comes from the line of Erinn Murphy with Piper Sandler. Please proceed with your question.
Great. Thanks, Good morning, I guess my question is around at China within China can you share a little bit more about what you're seeing in Hainan Island, and then bigger picture. How do you think about the recovery of global travel retail within your framework of getting back to pre pandemic are exceeding pre pandemic levels for both sales and EPS by 23. Thank you.
Good morning, Thank you for your question.
Aaron.
Obviously as you know from us from from our our other.
Other contemporaries in the in the industry.
China has has been the strongest region.
And that's been fueled by.
The fact that the.
Traveling Chinese tourists does not necessarily traveling outside the.
The country.
We see the unfortunate effects of that in Europe in particular, and we see the effects of that in Hong Kong, and Macau, which still have.
Not recover of of actually are very very difficult.
In terms of performance.
Oh, so so that the China business is.
[noise] remains quite strong and as I said earlier, even with the.
Of the government.
Encouraging.
People not to travel.
As broadly as they normally would during this upcoming Chinese new year, we still think at Wil will generally be of a very solid performance, maybe not quite as strong as we had all anticipated, but still a solid performance.
As I'm sure you've heard Hainan Island as it is on fire.
It's it's it's been extraordinary of the results there.
Travel has continued and we're all again, we're no different than anyone else the performance remains.
Phenomenal. So so we're enjoying the benefits of what is happening there with the consumer visiting that location.
Uh Huh, that's probably the only tourists location that we can talk about globally that is that.
That is seeing a strong performance, we do not believe and we've said this in previous Hum.
Calls, we don't believe the travel retail business comes back until our fiscal 2023.
And to put that more calendar rise that's calendar 2022, and we really don't think that comes back until.
Kind of May.
May on in calendar 2022, so that's in our projections when things come back end and as you know this is going to depend on on.
First and foremost we'll countries allow people to travel across into their borders and.
And will there be a quarantine a requirement or not.
As long as corn teen requirements remain in place I think most people are gonna be uncomfortable because they can't take the time to do that and question just will countries, even certain countries don't even allow you to traveling.
Regardless of corn team and.
So we don't think that the vaccine is fully.
Distributed in enough of a broad based way.
To create that type of more comfortable cross border traffic well into calendar next year.
And as we've said to you before on these calls when you think of wholesale.
For our company, Yes, North America, and North America Department stores as a part of that business. It is not the business.
Largest piece of it is the European.
Our department store and specialty store business and that's for all three of our luxury houses.
And that for all intensive purposes is we don't believe.
We think theres going to be some recovery to that at the tail end of this year, but not as robust as we're going to see here in North America.
And following on to the current success in China.
And then and then the other part for US the third part of wholesale is travel retail, which is sort of its significant.
Now, where we will be lapping the lost of that loss of that business I would say come at.
April or so when we were probably that was the last hum.
We were really shipping some of those people.
And as I said, we don't think we will see that return until calendar.
At April may of of.
'twenty two is kind of our best estimate of sitting here today.
Thank you very much.
Thank you. Our next question comes from the line of Simeon Siegel with BMO capital markets. Please proceed with your question.
Thanks, Good morning, everyone and congrats on the ongoing progress.
John E. Comm strength is obviously fantastic what are the E. Comm penetration is by brand now and then did you know at any regional discrepancies that are worth calling out I guess I'm just wondering about performance in India, given the greater store restrictions and then just Tom really encouraging to see the ongoing material debt pay downs any help on thinking about quantifying how much you expect to pay down.
Over the next year thanks, guys.
Good morning Simeon.
So E Com, obviously has been the shining star and I'm, So proud of everyone in our organization.
Michael Kors as you know, we've made significant investments into our E comm capabilities.
Whether those sort of platform, whether those are distribution capabilities, whether those are store order fulfillment capabilities and end and even the way our sales associates are using it to engage with us with our clients.
The results, we're seeing from that.
It's really just extraordinary how how that has helped.
Two two.
Hum have this growth level that you've seen kind of quarter after quarter.
And we've been able to ship and deliver which is which is.
It's important for the consumer obviously.
We don't break out penetrations by brand or by region or anything like that I'm not giving you some.
Sort of thoughts around where we can where we think that will be in the future, but but clearly north America has the strongest growth.
Across the brands and which incredible as we're doing that on an already very significant levels.
Europe is becoming the highest.
What type of penetration, but that doesn't it doesn't make any difference right now that's just because of stores were closed.
So we can't look at that today.
Although it is growing very very fast and end.
Reaching in many cases close to North America kind of growth rates, which is which is.
Good to see it's good to see that were able to transition consumers.
To that channel.
And then lastly, I would say.
Both China and Japan.
Which for the past many many years it was not a significant business for us although we were engaged in it.
It's becoming it's becoming very a very important business for us in the regions.
And of course, we don't make commentary about our great success in China.
On Tmall.
And in particular, how how successful we've been with the Michael Kors brand and.
And so I think you know we view the day, the online capability and quite frankly, our omni capability as being a great strength across the group.
We look to continue to further.
Invest around again platform enhancement at.
Particular also around analytics and and how we're going to continue to use this great success, we've had in growing our database.
Then using that to our advantage across each one of our luxury houses to engage with our customers both new.
And in olds, where we need to to reengage with lapsed customers et cetera.
So I think that that and lastly, let me just say that where do at where having the same type of of conversations of relationships with with our wholesale partners plus could be pure play or they could be department stores, who have at ecommerce capability.
And we're you know we're we're growing those those.
<unk> business is exponentially as well.
So I think that you know obviously E. Commerce is here to stay at a big part of our future and we believe it's one of our are quite of a core competency set of great strength of the group.
I'll, let Tom answer the second part of the conversation.
So related to our debt I'll start start Simeon.
We're really pleased with the cash flow generation of the company in the quarter generated free cash flow of $370 million and $460 million a year.
Year to date.
And of Covid year paying down debt of $3 70 in the quarter end 700, nearly 800 million year to date. So we ended the quarter with $1 2 million of net debt and our leverage ratio is below three so we're feeling comfortable with the with the progress.
As we look to the future.
We do feel strongly about the cash flow generation potential of the company and we would first invest in the business second continue to repay debt. So that is at focused but as we are emerging from the pandemic we will reevaluate.
Sending cash back to shareholders and in the past, we have been able to implement share repurchase as well as pay down debt. So that's something we would certainly reevaluate.
So our belief right now we're in a very strong liquidity position and balance sheet position and it positions us well for the future.
Thanks, a lot guys best of luck of the rest of the year of congrats again.
Thank you. Our next question comes from the line of Paul Trussell with Deutsche Bank. Please proceed with your question.
Good morning, and very solid results.
John you spoke to our signature penetration nicely higher year over year in footwear and handbags did you see that penetration continuing to go higher or do you feel like you're now at at the right levels currently and I'd also be curious to hear what you're seeing.
From a ready to wear and watch of standpoint.
At course, and then Tom just on the margin front could you maybe just speak to some of the key items for us to really keep in mind as we think about for Q and how it's differentiated from what you experienced in <unk>.
<unk>.
Good morning, Paul Thank you for your question.
First off of it at at Michael Kors. The you know the strategy that we set upon two years ago to take.
Take a classification.
Very highly identical identifiable classification of our accessories business and make it.
A much more strategically important than we had.
For some time before that.
<unk> has been a huge win for the company.
And again I think the consumer is resonating around that product and what it stands for and what it means to them. So I don't forget.
But really it's it's led by Michael and our design teams and what a great job they're doing.
That's the first thing and end to be penetrated at 40%.
We wouldn't be uncomfortable with back up to 50% of I don't think that's something you know you know many of our luxury competitors are in the seventies.
So so I would say we would be happy to see that continue to move up and we think that also provides additional.
Opportunity from margin expansion, because it's a product that suffers less markdowns and we get more consistency in terms of of base.
As I mentioned, we're very pleased with what's happening at our footwear business around.
Around of our signature products.
And in women's ready to wear which is which is quite extraordinary our women's ready to wear business has been the most difficult business in the company.
We've talked about at previously.
A large part of our business with some dressers and that kind of classification has been.
It was significantly impacted.
Impacted we've been making up with outerwear.
And actually some of our active AR collections will be talking to you about some major announcements that we have around that.
In the coming quarters.
So so we we we know that this is a shift and we don't think of shipped as permanent actually when we talk about of rebound, we think that actually women's ready to wear will be one of the classifications that gets a very strong rebound coming.
From the fault.
Latter part of this year season, when when people are feeling more comfortable maybe social gathering at.
And wanting to get dressed up again at its going to come back it's not a matter of if it's just a matter of when and so so we feel great about that and I have to tell you. The watch business continues to get better.
In fact, the last few reports I've been reading at especially in North America. We've for the first time I think end.
Four plus years have comped up in watches over the past few weeks. So again I don't want to say that that's any kind of an indicator I may get on the call.
Our next earnings call and tell you something completely different but we had a very nice holiday season and watches are both on our own company.
And at the wholesale distribution level and are there different at least feels to be seems to be a little bit of a of a turn in that business I wouldnt call at a dramatic turn but it's definitely a place where.
We're not seeing those huge declines that we were suffering previously and as I said, we just over the last few weeks have had some very nice results to.
To report.
I also might add that hopefully and it will be.
Too early days, but we won't be talking to probably until at this time next year, but hopefully we'll be talking about those penetration levels, we won't be quite that high end.
For Saatchi and ultimately Jimmy Choo.
So as we develop a more consistent business around iconic logo in the case of of Versace, we have the broker would be and also I might have always had the medusa. So I don't want to take anything away from from what it's been.
Historically, the customer of the company's historic iconic symbol.
Which has been continues to perform for us.
But we'll have the broker V and now will have a.
A more signature pattern.
We're quite confident at the teller will make at a very exciting and recognized by our by our.
Highly engaged consumers and new consumers.
And so I think those are going to also add to.
Profitability and engagement for.
Jimmy Choo and Versace and.
Again to reiterate what we've said those two brands.
Ultimately will account for 40% of this company's revenue and end of third of the Companys profit, so it's going to be quite exciting to to.
See that story unfolds.
Tom I'll turn it over to you.
Thanks, and Paul related to margins in Q4, we continue to anticipate as we noted in the prepared remarks at gross margin would expand at about 100 basis points and that's really driven by just a continuation of the benefits of higher AUR better full price sell throughs across the businesses and park.
<unk> offset by some of the GSP G S P and supply chain costs in the quarter, but feel confident that that will continue and then those underlying drivers continue into next year with the additional benefits of pricing and accessories growth across different parts of the business.
From an SG&A perspective, we'd noted that $425 million of savings would occur in the year and thats really up from our prior forecast driven by.
Lower costs and great expense control in Q3, and Q4, we are seeing impact from the off of a weaker dollar and the FX impact on SG&A. So that is.
Probably trade a little of deleverage on that line.
Accordingly, as we look forward, we will still get paid net of $100 million of savings flowing into FY 'twenty two from all of those initiatives.
Thank you for the color I want to thank.
I want to thank everyone for joining us today and thank you for staying on a little bit longer with us I just wanna at closing.
Ill tell you that we remain very encouraged about the future of Capri holdings and our three very prominent.
Brands Versace, Jimmy Choo, and Michael Kors end and the ability to grow all three of those in the future I'd like to just make one last comment and I'm also very proud of our announcements came yesterday about the four patients of the Capri.
Holdings Foundation for the advancement of diversity and fashion.
We are in the in the industry, we consider ourselves to be leaders and visionaries and we think this is of great step forward for our industry to be able to support those in underserved communities.
Underrepresented I'm, sorry at communities and end and and we think that we are going to need to do even more.
To foster our involvement in the ability to create opportunity. So we're very proud of the organization and.
And its commitment to diversity and inclusion. Thank you all stay safe and have a great day.
Yeah.
Thank you for your participation today. This does conclude today's teleconference. You may disconnect your lines at this time.
Great day.