Q3 2022 Capri Holdings Ltd Earnings Call
[music].
Hello, and welcome to the Capri Holdings third quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen only mode.
Speaker 1: Hello and welcome to the Capri Holdings third quarter fiscal 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Jennifer Davis. Please go ahead.
Question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
My pleasure to turn the call over to Jennifer Davis. Please go ahead.
Good morning, everyone and thank you for joining us on Capri Holdings limited third quarter fiscal 2022 conference call with me. This morning are chairman and Chief Executive Officer, John Idol, Chief Executive Officer, Michael Kors, Josh Sullivan, Chief Financial and Chief Operating Officer, Tom Edwards.
Speaker 2: Good morning, everyone, and thank you for joining us on Capri Holding Limited Third Quarter fiscal 2022 conference call. With me this morning are Chairman and Chief Executive Officer John Eidl, Chief Executive Officer of Michael Cors, Josh Schulman, 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 results to differ from those we expect.
Speaker 2: 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 results to differ from those we expect. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.
Those risks and uncertainties are described in today's press release and in the company's that these people filing 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.
Speaker 2: 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 addition, certain financial information discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain costs associated with COVID-19 related charge of long lived asset impairment ERP implementation cost.
Speaker 2: In addition, certain financial information discussed today will be presented on a non-GAT basis. These non-GAT measures exclude certain costs associated with COVID-19 related charges, long-lived asset impairment, CRP implementation costs, to pre-transformation costs restructuring and other charges. Unless otherwise noted, all financial information on today's call will be presented on a non-GAT basis.
Transformation costs restructuring and other charges that.
Unless otherwise noted all financial information on today's call will be presented on a non-GAAP basis.
Speaker 2: To view the corresponding GAT measures in related reconciliation, please view the earnings relief posted to our website earlier today at preholdings.com.
Have you the corresponding GAAP measures and related reconciliation. Please view the earnings release posted to our website earlier today, where you're holding dot com.
Speaker 2: Before we begin, we'd like to announce we will be holding an investor day after our fourth quarter fiscal 2022 earnings call to provide an update on our long term outlook.
Before we begin we'd like to announce we will be holding an investor day after our fourth quarter fiscal 2022 earnings call to provide an update on our long term outlook.
Now I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer.
Speaker 2: Now I would like to turn the call over to Mr. John Eidl, Chairman and Chief Executive Officer. Thank you, Jennifer.
Thank you Jennifer good morning, everyone.
We continue to be encouraged by the ongoing momentum of Capri holdings, as we execute against our strategic growth initiatives.
Speaker 3: We continue to be encouraged by the ongoing momentum of capri holdings as we execute against our strategic growth initiative.
Speaker 3: I'm extremely pleased with each of our fashion luxury houses robust holiday results.
I'm extremely pleased with each of our fashion luxury houses robust holiday results.
Sales trends significantly exceeded our expectations as consumers responded to compelling product offerings from Donatella Versace.
Speaker 3: Sales trends significantly exceeded our expectations, as consumers responded to compelling product offerings from Donatello Versace, Sandra Choi and Michael Corden.
Sandra Choi and Michael Kors.
Versace, Jimmy Choo, and Michael Kors continued to resonate with consumers.
Speaker 3: For such a Jimmy Chu and Michael Corps, continue to resonate with consumers.
Speaker 3: And as evidenced by the 11 and a half million new consumers added across our databases over the last year.
As evidenced by the 11 and a half million new consumers added across our databases over the last year.
Capri Holdings strong holiday results are a testament to the strength of our brands as well as the hard work and dedication of all our employees around the world.
Speaker 3: The pre-holding strong holiday results are a testament to the strength of our brands, as well as the hard work and dedication of all our employees around the world.
I am, especially pleased that we were able to deliver these results while navigating the ongoing headwinds associated with the pandemic.
Speaker 3: I am especially pleased that we were able to deliver these results while navigating the ongoing headwinds associated with the pandemic, including regional restrictions and supply chain and some of the few following events that will happen around the future.
Including regional restrictions and supply chain challenges.
Looking forward as the World continues to recover from the impact of the global pandemic, we remain confident in our future growth potential.
Speaker 3: Looking forward, as the world continues to recover from the impact of the global pandemic, we remain confident in our future growth potential.
Now turning to third quarter results.
Speaker 3: We were pleased that revenue, operating margin, and earnings per share all exceeded our expectations.
We were pleased that revenue operating margin and earnings per share all exceeded our expectations.
Total revenue increased 24%.
Speaker 3: Total revenue increased 24% reflecting better than anticipated results at all three brands.
Collecting better than anticipated results at all three brands.
Speaker 3: This represents a sequential acceleration relative to the second quarter on both a one and two year base.
This represents a sequential acceleration relative to the second quarter on both a one and two year basis.
Gross margin continued to expand even with greater than anticipated supply chain costs.
Speaker 3: Gross margin continued to expand even with greater than anticipated supply chain costs.
Speaker 3: Operating margin of 22.3% was above our expectation.
Operating margin of 22, 3% was above our expectations.
As a result earnings per share of $2.22 was better than anticipated.
Speaker 3: As a result, earnings per share of $2.22 was better than anticipated.
Looking at group revenue trends by geography.
In the Americas revenue growth continued to significantly exceed our expectations increasing 26%.
Speaker 3: In the Americas, revenue growth continued to significantly exceed our expectations, increasing 26 percent.
Speaker 3: and would have been even greater if not for inventory constraints. In EMEA,
And would have been even greater if not for inventory constraints.
In EMEA.
Revenue increased 35%.
Also above our expectations with growth across all houses.
Speaker 3: also above our expectations with growth across all houses, despite increased restrictions in certain countries.
Despite increased restrictions.
In certain countries.
The strong momentum in the region was driven by robust domestic consumer demand as international tourism has not yet recovered.
Speaker 3: The strong momentum in the region was driven by robust domestic consumer demand as international tourism has not yet recovered.
In Asia.
Speaker 3: In Asia, revenue increased 3%.
Revenue increased 3%.
Speaker 3: reflecting improving trends in Japan, Korea, and Southeast Asia.
Reflecting improving trends in Japan, Korea, and Southeast Asia.
This was partially offset by trends in mainland, China, where revenue declined due to store closings travel restrictions and select city lockdowns.
Now turning to third quarter performance by brand.
Starting with Versace.
Results significantly exceeded our expectations once again.
Revenue increased 29% demonstrating.
Speaker 3: demonstrating the momentum of the brand and the success of our strategic growth in
Demonstrating the momentum.
The brand and the success of our strategic growth initiatives.
Speaker 3: We saw strength across all product categories as the brand emphasized the very versace look by pairing the latest runway styles with luxurious accessories, footwear, and statement jewelry.
We saw strength across all product categories as the brand emphasized the very versace look by pairing the latest runway styles with luxurious accessories footwear and statement jewelry.
Speaker 3: Runway styles featured our new brand code LaGreca, which is off to a
Runway styles featured our new brand code Lagreca.
Which is off to a strong start.
Speaker 3: Our signature code anchored itself as a new pillar and accounted for 17% of sales across.
Our signature code anchored itself as a new pillar.
And accounted for 17%.
Of sales across all product categories.
Turning to accessories, which are a key component of our growth strategy.
Speaker 3: Turning to accessories, which are a key component of our roadstrap.
Retail sales nearly doubled versus prior year.
Speaker 3: retail sales nearly doubled versus prior year.
Importantly, we saw strength across all three of our pillars La Medusa Lagreca.
And virtuous.
With the three iconic pillars now in place we are making significant progress in our goal to expand accessories revenue to $1 billion overtime.
We are more confident than ever in our ability to position Versace is a leading luxury leather house.
Footwear also performed well as we continued to build our core offering focused on our iconic brand codes.
In the third quarter women's footwear sales at retail increased strong double digits.
As we gain authority and women's luxury fashion footwear.
Men's and women's sneakers also continued to perform well.
With ongoing strength in Tribeca, and lug rack I styles as well as a positive response to the new men's Greco labyrinth trainer, featuring a chunky Greco pattern salt. Additionally.
Additionally, we saw strength in men's and women's ready to wear with retail sales up double digits.
We were especially pleased with the positive response to the new La Greco signature pattern.
We also continued to drive sales as we expand our core lines, which incorporate iconic house codes to broaden versace's reach.
Now turning to brand awareness and consumer engagement.
In October for such a launch to localized campaigns in Asia.
As the brand increased its emphasis in the region.
The first was in China, featuring our brand Ambassador Betty will.
The Chinese singer and actress has over 25 million followers on our social media accounts.
The second was in Japan, featuring Japanese model and actress Nana seen them.
The 360 degree communications focused on the La Greco signature pattern.
With a vertical amazed and inspired by our iconic recommend chief.
As the backdrop.
Additionally, during the quarter Versace opened pop up shops in key cities throughout China.
The immerse pop ups were designed to portray the iconic Greco motif and featured the new seasons signature products.
For holiday and celebration of winter sports.
The brand showcase bold styles with glamorous gift ideas.
The campaign featured key house pillars, while Medusa, La Greco and virtuous in very versed in such a fashion.
This was versace's top performing holiday campaign to date generating tremendous engagement.
New consumers and strong revenues.
These powerful initiatives among others helped to drive a 30% year over year increase in Versace's Global database.
Overall, versace's third quarter results speak to the strength of the brand and reinforce our confidence in our ability to grow the house to at least 2 billion in revenue.
With the launch of La Greco we now have the key building blocks in place to realize the full potential of this powerful brand.
We are more optimistic than ever about versace's future growth opportunity.
Moving to Jimmy Choo.
Our results were significantly ahead of our expectations with.
With revenue, increasing 47% as we continued to execute against our strategic initiatives.
Our overarching strategy is grounded in reinforcing the brand's glamorous DNA across everything we do.
Jimmy Choo epitomize as glamour everyday anytime and anywhere.
From formal to casual across accessories and footwear.
In accessories, we were pleased with our progress as third quarter revenue increased strong double digits.
Accessories sales were driven by the continued focus on our three key hero handbag families VRM.
Modeling and Bonbons.
Evening bags with dual access.
And standout embellishment also performed very well.
Well, where sales increased double digits in the quarter driven by a recovery in dress footwear styles as people engaged in social activities enjoyed special occasions and celebrated the holidays.
Casual styles also performed well from shearling slippers embellished with delicate pearls and crystals to.
To combat boots with Crystal embellishments.
We continue to see growth in sneakers.
With positive consumer reaction to our new Memphis trainer.
Now turning to brand awareness and consumer engagement.
In October Jimmy Choo launched an incredibly successful limited edition chasing stars collection in.
In collaboration with New York based artist, Eric Hayes, and curated by Japanese fashion icon Pogy.
The collection fused east with West and high fashion with Street culture.
Offering a modern interpretation of glamour.
In addition to the unisex capsule.
Accessories footwear and apparel.
The collaboration featured co branded bare brick collectible figures.
Pioneering the world of F T's and collectibles.
The capsule melded physical products with virtual.
The N F T's and collectibles sold out within one hour of launching online.
To bring these items to life, Jimmy Choo held store takeover events and launched pop up shops in Asia.
Numerous Chinese celebrities, including brand Ambassador Victoria song.
Funded events at the boutiques generating social media excitement.
Post by celebrity Influencers and fashion accounts help the hashtag Jimmy Choo, Eric Hayes gain over 65 million views.
For holiday, our consumer communication campaign once again featured Hailey Bieber.
Who is the embodiment of the modern glamour that defines Jimmy Choo.
A continuation of the autumn time today our campaign.
Kaylee Beaver is once again on top of the world living the life she dares.
The campaign transitioned from day to night celebrating the return of glamour as Hayley shined in accessories, and footwear that were created to make a statement.
Our engaging marketing combined with glamorous product helped contribute to a 23% year over year increase in Jimmy Choo as global consumer database.
Overall, Jimmy Choo strong revenue growth and operating margin expansion in the third quarter reinforces our confidence in the luxury houses future growth potential.
We are encouraged by the progress, we're making towards our goal of growing revenue at Jimmy Choo to $1 billion over time.
Now turning to Michael Kors.
Results were also ahead of our expectations with revenues increasing 20%.
As we continue to elevate our product.
And our brand.
During the quarter Global AUR has increased in the high teens versus prior year.
Signature remains a core growth strategy.
And we continue to believe penetration will eventually grow to approximately 50%.
Of our overall product assortments.
Which will drive a higher AUR and margins.
In the quarter overall signature represented 41% of the assortment compared to 35% last year.
And accessories signature penetration was even greater.
Accessories sales in our retail channel increased double digits globally.
As consumers responded to fresh updates for holiday, including new novelty signature techniques.
Such as a pleated.
And color pop diagonal logo.
He collections for the season included Carly Satchel.
Greenwich Cross body.
Soho shoulder.
And Hamilton legacy Sachin.
Chain look details logo taping and high Shine studs infused the collection with a modern meets classic Coors appeal.
Moving to footwear, we saw strong performance in boots and booties.
Featuring iconic branding elements and signature detail.
Fashion active also continued to perform well driven by seasonal updates featuring signature color combinations.
Similarly in women's ready to wear signature logo styles were among the top performers.
We also saw a strong consumer response to fashion outerwear.
Men's remains one of the strongest performing categories in retail and we remain enthusiastic about our opportunity to expand the accessories collection.
Growth in the third quarter was led by signature product.
With gifting backpacks, small leather goods and outerwear performing exceptionally well.
Now turning to brand awareness and consumer engagement.
In October Michael Kors partnered with the James Bond film franchise to launch the brand's first global collaboration in partnership with the film no time to die.
For the debut of the collaboration capsule collection, we hosted a series of global Getaways and glamorous destinations around the world.
Action packed trips to Miami, Florida, Ricky Vic Iceland.
And Hainan Island in China, each showcase their own bond inspired highlights.
Additionally, guests at each destination took part.
And a spirited tictoc challenge to emerge from the water in double O seven style.
Globally.
The tick Tock bond hashtag challenge went viral.
<unk> 7.4 billion video views.
And one and a half million user generated videos.
A trip to Hainan Island with our bond collaboration included prominent guests such as Chinese brand Ambassador Wang Fay Fay.
And 15 other key influencers.
Combined these influencers had over 65 million followers across their social media platforms.
For holiday, our consumer communication and body, Michael Kors signature glamour and optimism infused with the joy of the season.
The campaign captured the jet set chic and easy glamour of Bella Hadid and friends as they journey to New York City, the spend the holidays and ring in the new year together.
Our marketing initiatives continue to underpin our jet set brand pillars of speed energy and optimism.
This helped contribute to a 20% year over year increase in Michael Kors Global database.
Demonstrating the continued strength and desirability of the Michael Kors brand.
Finally, I'd like to take a moment to congratulate Michael for winning the Instyle designer of the year Award.
Which celebrated the notable achievements.
He has had through the course of his impressive 40 year long career.
Overall, we are extremely optimistic about the future growth of Michael Kors.
The strategies, we put in place prior to the pandemic have been generating strong consumer demand as well as attracting new.
And younger consumers.
Additionally, we are driving higher profitability as we continue to elevate the brand positioning.
In total Capri holdings third quarter results exceeded our expectations with a sequential improvement in revenue trends, despite the pandemic and further supply chain pressures.
Our performance demonstrates the strength of our brands.
The execution of our strategic initiatives.
And the hard work and dedication of our teams across the globe.
The power of our three iconic founder led fashion luxury houses.
Position Capri holdings to accelerate revenue and deliver multiple years of earnings growth.
Now I'd like to turn the call over to Josh Schulman, the CEO of Michael Kors and future CEO of Capri Holdings.
I'm delighted to have Josh joining us on his first quarterly earnings call with Capri Holdings.
Thank you John .
Good morning, everyone.
I'm thrilled to be here at Capri holdings in.
In the five months since joining I've had the opportunity to spend time with our amazing Michael Kors teams across the globe and visit many of our beautiful stores.
The level of energy across the entire organization is inspiring.
And I'm extremely impressed with the level of the talent and the exceptional work. The teams are doing to implement our strategic initiatives.
I would like to take a moment to congratulate and thank the entire Michael Kors team for their outstanding execution and performance over the holiday period.
The better than expected revenue reflects the success of our strategic initiatives, including elevating the brand positioning and capitalizing on our recognized both signature style I look forward to building on this success as we continue to innovate and elevate the product and further increase AUR.
The time I have spent with the teams combined with our strong holiday results.
Further reinforced my belief in the future growth potential of the Michael Kors brand.
It's tremendous success is in large part due to the fashion icon, Michael Kors himself his design vision and his ability to create timeless fashion that embodies jet set glamor.
I believe we have an incredible opportunity to capitalize on the strong foundation that John Michael and the team have built over the years I look forward to sharing my vision for the future direction of Michael Kors at our Investor Day.
Looking at Capri Holdings.
I am impressed with the incredible portfolio of luxury houses.
Each with their own rich heritage exclusive DNA and.
And strong consumer loyalty.
Capri is unique.
With three brands led by the design visions of Donatella Versace.
Virtually and Michael Kors.
Each of these original founders are iconic figures and have powerful voices to communicate with their fan.
I am confident in the strong growth potential for Capri holdings, and look forward to partnering with John and the board in the future to lead the company through our next chapter of growth.
Now, let me turn the call over to Tom.
Thank you, Josh and good morning, everyone.
Starting with third quarter results.
Revenue of $1 6 billion increased 24% versus prior year exceeding our expectations.
<unk> was driven by better than anticipated result across all three of our luxury houses net.
Net income was $339 million, resulting in diluted earnings per share $2.22.
This was above our expectations, reflecting better than anticipated revenue and operating margin as well as a lower tax rate.
Turning to revenue performance by brand.
Saatchi revenue was 251 million, a 29% increase to prior year and above our expectation.
Global sales in our retail channel increased over 20% with double digit increases in both E Commerce and store sales.
By geography total revenue in the Americas increased 56%.
Revenue in EMEA increased 30% and revenue in Asia increased 2%.
Such a ended December with a global luxury fleet of 212 retail stores, a net decrease of five from prior year.
For Jimmy Choo revenue was 178 million, a 47% increase to prior year and above our expectations.
Global sales in our retail channel increased over 40% with strong double digit increases in both E Commerce and store sales by geography total revenue in the Americas increased 59% revenue in EMEA increased 73% and revenue in Asia increased 18%.
To meet you ended the quarter with a global fleet of 240 retail stores, a net increase of nine from prior year.
And Michael Kors revenue was 1.18 billion.
A 20% increase to last year and above our expectation.
Similar to last quarter revenue growth would have been even greater if we had more product available to meet consumer demand.
We estimate inventory constraints at a mid single digit impact on Michael Kors third quarter growth rate.
Global sales in our retail channel increased in the mid teens with double digit increases in both E Commerce and store sales.
Wholesale revenue increased over prior year, but remains well below historic level in line with our strategic intent to have a smaller wholesale business and improve profitability.
By geography total Michael Kors revenue in the Americas increased 21%.
And revenue in EMEA increased 30%.
Revenue in Asia decreased 2%, reflecting growth in Japan, Korea, and southeast Asia offset by decline in mainland China.
During the quarter, our sales in China were impacted by Covid related restriction, including store closing travel restriction and select city Lockdown.
Michael Kors ended the quarter with a global fleet of 834 retail stores, a net increase of three from prior year.
Now looking at total company margin performance.
Gross margin expanded 40 basis points to 65, 1%.
This improvement reflected the strong ongoing benefits of our strategic initiatives offset by approximately 400 basis points of higher supply chain costs compared to prior year.
Supply chain costs were approximately 100 basis points greater than the forecast we provided on our second quarter earnings call.
Operating expense as a percent of revenue was 42, 8% compared to 45% last year.
This reflects expense leverage on higher than anticipated revenue.
On an absolute basis operating expense increased approximately 17% or 100 million versus prior year.
This increase primarily reflected higher variable expenses and reinvestment in our business.
As a result total company operating margin of 22, 3% was more than 200 basis points above our expectation and 260 basis points greater than prior year.
By brand Versace operating margin expanded 600 basis points to 12, 7%.
Jimmy Choo operating margin expanded from negative $6 six to positive 9%.
And Michael Kors operating margin was approximately flat at 28, 4%.
Our tax rate for the quarter was eight 1% this was lower than our expectations, reflecting discrete items associated with the COVID-19 related net operating loss carryback claim in the U S.
As a result, we were able to realize the benefit during the quarter.
Now turning to our balance sheet and cash flow.
We ended the quarter with cash of 261 million and debt of 1 billion, resulting in net debt of approximately $740 million.
Total liquidity at the end of the quarter was $1 3 billion.
During the quarter, we repaid approximately $150 million of debt.
As part of our ongoing commitment to return cash to shareholders, we repurchased 200 million worth of shares in the quarter.
This also reflects our strong belief that Capri holdings equity represents a compelling value given the momentum and future growth potential of our three luxury brands.
Looking at inventory, we ended the quarter with 978 million, 24% above prior year, reflecting a significant increase in transit inventory.
During the quarter shipping delays were even greater than we anticipated as a result on hand inventory levels were lower than expected, which constrained our ability to deliver higher revenue in the quarter.
Now, let me take a moment to address our inventory outlook going forward, we expect inventory to increase relative to prior year for the following reason.
First we will continue to tightly manage inventory levels need to increase to support revenue growth and ensure we meet consumer demand.
Second we are initiating a new program, where we expect to receive core product earlier this will enable us to better meet consumer demand as well as reduced transportation costs.
As a result inventory growth is expected to outpace sales growth for the next 12 months.
Now turning to guidance.
For fiscal 2022, we now forecast Capri holdings revenue of approximately 556 billion, reflecting the better than expected third quarter performance.
Full year guidance assumes versace revenue of approximately 1.08 billion, Jimmy Choo revenue of approximately $600 million and Michael Kors revenue of approximately $3 eight 8 billion.
For the year, we now expect approximately 200 basis points of gross margin expansion.
Turning to operating expenses, we continue to forecast operating expenses of approximately $2 6 billion.
Taken together, we now expect a full year operating margin of approximately 19%.
For Versace, we now anticipate an operating margin of approximately 17%.
For Jimmy Choo, we now expect a positive operating margin of approximately 2%.
And for Michael Kors, we anticipate an operating margin of approximately 25%.
As a result of Versace and Jimmy Choo combined will generate approximately 20% of total company operating income both luxury houses are contributing to operating income well ahead of our anticipated timing.
Turning to our expectations around certain non operating items.
We now anticipate net interest income of approximately $17 million.
An effective tax rate of approximately 14% and weighted average shares outstanding of $153 million.
As a result, we now expect to generate diluted earnings per share of approximately $6 for fiscal 'twenty two.
I would like to note. This represents the highest earnings per share in the company's history.
Turning to fourth quarter guidance, we anticipate total company revenue of approximately $1 4 billion.
Including approximately $75 million associated with the 50 <unk> week at Jimmy Choo and Michael Kors.
We forecast for such a revenue of approximately $310 million Jimmy.
Jimmy Choo revenue of approximately $140 million and Michael Kors revenue of approximately $950 million now looking at operating margin, we expect fourth quarter operating margin will be approximately 13, 5%.
This includes 50 basis points of gross margin expansion, reflecting the benefit of our ongoing strategic initiatives.
More than offsetting higher supply chain costs.
Operating margin also includes incremental investments in marketing ecommerce and regional growth initiatives to support revenue growth as well as the additional expenses associated with the 50 <unk> week.
Looking at operating margin by brand for massage aim, we anticipate an operating margin of approximately 15%.
For Jimmy Choo, we expect an operating margin of approximately negative 10%.
And for Michael Kors, we anticipate an operating margin of approximately 20%.
Turning to our expectations around certain non operating items, we forecast net interest income up approximately $5 million and effective tax rate of approximately 38% and weighted average shares outstanding of 151 million.
As a result, we expect diluted earnings per share of approximately 80 cents.
Now I would like to take a moment to discuss our preliminary expectations for fiscal 2023.
We are sharing this outlook given the impact of the pandemic and ongoing supply chain challenge.
For full year fiscal 'twenty, three we forecast revenue of approximately $6 1 billion, an approximate 10% increase over fiscal 'twenty, two reflecting ongoing momentum across all three luxury house.
We anticipate full year operating margin of approximately 19%.
This reflects gross margin expansion of approximately 50 basis points.
Success of our strategic initiatives more than offset higher supply chain costs.
Operating margin also includes an increase in strategic investments to support revenue growth.
As a result, we expect fiscal year 2023 earnings per share to grow approximately 10% to $6 60.
Looking at full year guidance by brand for Versace, we anticipate revenue growth of approximately 20% to $1 3 billion, an operating margin of approximately 18%.
For Jimmy Choo, we expect revenue growth of approximately 13% to approximately $675 million and significant margin expansion with operating margin of approximately 8%.
For Michael Kors, we anticipate revenue growth of approximately 6% to approximately $4 125 billion.
We assume operating margin of approximately 25%, reflecting the ongoing benefits of our strategic initiatives elevated supply chain cost and increased.
<unk> investment to support growth.
Now to provide more color around the quarterly guidance outlined in our press release I would like to discuss our expectations regarding the cadence of revenue gross margin operating margin and earnings per share through fiscal 2023.
Starting with revenue, we anticipate strong growth each and every quarter of the year.
Turning to gross margin, we expect continued benefits from the execution of our strategic initiatives throughout the year, However supply chain costs, the highest year over year in the first quarter, resulting in gross margin contraction.
We anticipate trends will progressively improve as cost begin to normalize and we realize the benefit of multiple supply chain initiatives designed to both mitigate costs and reduced delay.
Therefore, we expect gross margin expansion in the third and fourth quarters.
Now moving to operating expenses.
We plan to strategically invest in initiatives that will support long term growth.
This includes incremental investment in areas such as marketing.
Omnichannel initiatives and data analytics capability.
Now turning to operating margin with higher supply chain costs and increased investment, we anticipate lower operating margin in the first quarter.
We expect margins to improve in the second quarter and expand in the third and fourth quarters.
Taken together, we still anticipate fiscal 'twenty three earnings per share above the prior year every quarter with an improving progression throughout the year in.
In conclusion, we are pleased with our third quarter result, particularly in the face of the ongoing supply chain challenges.
This performance reflects the strength of our fashion luxury houses and execution of our strategic initiatives. We are extremely optimistic about our future growth potential and believe the company is emerging from the pandemic stronger than ever we remain confident that our three powerful luxury brands position Capri holdings to achieve.
Meaningful long term revenue and earnings growth.
Well as increased shareholder value.
Now we will open up the line for questions.
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First question is coming from Omar Saad from Evercore. Your line is now live.
Good morning. Thank you. Thanks for taking my question another great quarter guys. Congrats.
Welcome Josh.
My opening question would be for you I'd love to hear you know coming in on your first call here. What you know how are you thinking about your long term vision for the Michael Kors brand is a big brand that's already successful and profitable a what do you think is ahead for this brand and the biggest opportunities is that digital is it international is it Asia is at the premium is Asian effort would love to kind of get you.
High level thoughts on where do you see this brand evolving over the long term. Thanks.
Thank you Omar it's great to talk to you again, and it's terrific to be on the call and a terrific to be here with this team.
We have been so impressed.
With what Ive seen in the last few months.
With the brand and the team and I am particularly encouraged by.
By seeing how this team has continued to elevate the brand and as Tom mentioned is really emerging from the pandemic much stronger than our than than ever.
We can see that in the pricing power that the brand has and to your point about continued premium as Asian Ah Yeah clearly.
Continuing to elevate the brand.
Continuing to lean in to.
Two our authentic jet set DNA through a modern lens.
<unk> will be a big part of what we will be doing a wet with Michael Kors.
Of course.
I'll share more fulsome view of the strategy for Michael Kors at Investor Day in a few months, but just to touch on a few areas, where I see a significant growth.
So first.
A digital.
We have a database of nearly.
Nearly 60 million people that is growing accelerating very fast.
As John mentioned, we picked up.
20%.
To that database nearly 10 million people.
In the last in the last period and Theres, an opportunity to harness the power of this database at to drive the E. Com business are globally, and so that's something that I am.
Passionate about.
Asia is another point, it's almost as if you articulated.
Articulated some of my my thoughts are in your list there Asia clearly we are underpenetrated.
Versus our luxury peers, there and there is the opportunity to at least.
Double our revenue in Asia, and then on a category basis I think John .
John mentioned in his remarks.
The positive reception that we're having to our men's products and that's an area where we are also very underpenetrated relative to our peers are so those will all be areas of focus.
You will continue to hear me talk about specifically at.
At Investor Day.
And you know as we continue to.
Elevate the Michael Kors brand.
Thanks for the question.
Thank you in the interest of time, we ask you. Please ask one question and return to the queue. Our next question is coming from Matthew Boss from Jpmorgan. Your line is now live.
Thanks, Congrats on another nice print guys and welcome aboard Josh.
Yeah.
So.
Maybe John as we potentially exit the pandemic.
Could you maybe speak to your confidence in the underlying growth prospects for handbags and accessories as a category I guess do you believe your initiatives have now set a foundation for continued full price selling or is there any give back to think about and then just last on the double digit top line for next year does it isn't better return of travel and tourism.
Or how best to think about timing for that opportunity.
Good morning, Matt.
Thank you for the nice comments about our quarter quarterly results.
The first thing I'd like to say is we are.
Or.
Very pleased with our performance.
Performance of all three of the luxury houses.
During the quarter, we saw traffic in our stores accelerate.
During the quarter, which that's not something we've seen in a long time.
It really speaks to the health of the consumer.
Really across the globe.
And what we also saw was double digit revenue growth at all three of the luxury houses and accessories.
And as you know Michael Kors, It's obviously the biggest piece of the business.
Oh at Versace, it's the biggest opportunity for the business and then Jimmy Choo.
That will be one of the key kind of inflections for that brand to get towards those mid tier.
Teens operating margins that we've talked about so so I think all three houses.
We are really positioned well as it relates to product.
The marketing initiatives, where I thought Oh really.
Incredibly well executed over the holiday season.
We start out the spring.
And we're dropping our new campaigns.
All three of the houses I think you saw.
The wonderful campaign about loved and sisterhood.
And with Bella G G at Versace. Thank you.
Some of you may have seen the Maluma campaign also.
Are very powerful.
Jimmy Choo this time to their marketing is really creating brand heat for us and.
And so we're seeing some strong reaction from the consumers around that.
And then at Michael Kors.
As Josh talked about.
Focusing on our jet set heritage through a modern lens.
You may see some very powerful marketing around that so I think when I look at the way that our brands have positioned themselves.
The way that we are handling prop.
Product and really not trying to introduce too much because that's when you get into the problem.
We're needing to clear product through that through the stores.
And so I think that's one of the things that are coming through Covid really helped all of us.
To reduce the skus across all of the companies by over 30%.
And some companies are gonna go further just to be more.
More focused.
And how the consumers responding to that so we find the consumer in North America to be extremely healthy.
Seeing that health already continue on so far in this quarter.
We're finding the rebound of the consumer in.
In Europe again also be quite healthy.
And then Asia in General is healthy there's some bumps in the road in China, you've all heard about it with.
Certain of the travel restrictions that are going on right now.
And in certain Lockdowns in the city, but again cities. We think that's something we will get through that.
I've said on multiple calls you're going to see bumps in the road in certain territories as we have flare ups with the with the pandemic, but the consumer is very strong from what we can see especially around accessories and footwear and then lastly are our forecasts are for or.
Outlook for 2023 does not include any return of tourists travel so that would be upside or tailwind for us.
Both in EMEA and in.
Our travel retail locations. So thank you very much for that question Michael.
Thank you. Our next question today is coming from Kimberly Greenberger from Morgan Stanley . Your line is now live.
Okay, great. Thank you so much a really fantastic results here John .
John I, just I don't want to start off with Versace because.
I was wondering if you could just reflect on the last sort of two or three years.
Saatchi has really delivered just incredibly and as you reflect on me.
The Rand investments you made and momentum of the business has now if you were to sort of categorize the top two or three drivers of just the long term you know what is it that's underpinning the inflection in financial results and a nice growth there and then Tom I.
Wanted to see if you could just unpack the inventory growth a little bit more a.
The core product growth that you're expecting in 2023 versus let's say core versus fashion and your inventory flow strategy.
In terms of receiving some of that core product earlier to say, Bob assuming airfreight. Thank you so much.
Thank you Kimberly so first and foremost I have to take my hat off to the teams at Versace, because they're the ones who are really executing on these initiatives. So when we bought the company.
As you know it had multiple lines, we have to reduce those shaved $150 million in volume when we were hit by the pandemic.
So we've definitely had an uphill.
He'll.
Walk or or or try to to try to.
Put our strategic initiatives in place, but we never wavered during all this time period.
We've never lost sight of what the goal is and I think I said on a previous call I'm going to reiterate it again, we have $2 billion clearly insight at this point.
That is that is it.
A milestone that we feel very comfortable in achieving the question now is not the $2 billion in my opinion will talk more about that at Investor day.
The real discussion, it's going to be around how much bigger is that gonna be them.
You know for such it belongs in the category.
Oh some of the most important luxury brands in the world the brand recognition.
And love for this brand is nowhere near the performance and so that is that we feel that we will now have products to be able to bring those two things together much.
Much more closely.
And fuel that.
I want to say one last thing before I get into the two or three drivers.
We need to manage this carefully though what we don't want to do is to have something that explodes.
And then comes back down off that trend. So so with luxury you'll have to invest you have to pace. It.
And let the consumer really desire it and not try to push too hard. So that's something we're going to be very cognizant of but we will be making significant investments are continuing in the spring.
So the two or three things first and foremost we are turning this not into just the luxury house driven.
Driven by runway in ready to wear but this is now a luxury leather goods house and we are.
Going to in the not too distant future.
B delivering well over 50% of our volume from those two categories again, we'll talk more about that at our Investor day. So leaning into that that's also going to help us with margins and.
And it also really acquiring additional consumers.
Good thing is that we are renovating all of our stores. Unfortunately, there was very little investment put into the stores over the last 10.
10 to 15 years, and so we renovated approximately 50% of the fleet, we hope to get the balance of that done in the next 24 months.
And again any of you have seen the new stores. They are quite stunning and and we are seeing increased productivity in these stores quite quite significant.
Well I've said to you before we could grow the revenues by four times in our stores and still not be its productivity levels of some of our biggest competitors in the world. So we have lots of room to go inside the footprints that we have so that's really the second initiative and the third is is the way that we are managing our digital.
Our consumer engagement and how we're handling them with an omnichannel.
Our experience and and I was very honest with you previously told you that this company was significantly behind in all of those initiatives two plus years ago, they've caught up very quickly and again take my hat off to the entire organization for such a everything from the way that we're.
Communicating with our consumer database growth and the way that we're handling them from an omni standpoint again, we only turned on omnia in the past few months, both in Europe and in.
In North America. So just the upside we're seeing from that alone is quite significant. So this company is is getting very very close to.
Being able to be poised.
For.
Another leg up in significant growth and again I think you're gonna be quite impressed by what Donatella does with the upcoming February show I'll leave you for the surprised when you see it.
But there's some really powerful things coming around accessories.
One last thing before turning it over to Tom.
In terms of the inventory flow.
You know the supply chain situation is going to continue on for at least the next six months, we don't see it actually improving.
Many of the ports are quite backed up.
And so one of the strategies that we've used around the company is let's get some of our core products in earlier.
So that we can feed our stores, we missed a lot of demand in particular at Michael Kors during the holiday season.
And again when its core product its not going to be something we're concerned about whether we have.
You know a larger weeks of supply on that.
It will help us feed our stores.
And it will not do anything except for I think increase our gross margins are being able to support that core product. So I'll, let Tom go into more detail, but it's not just a Michael Kors initiative will do this across all three brands.
Where we think we will mitigate some of R. R.
We are still playing significant catch up in our own channel and we're very far behind still in the in the wholesale channel. So as you saw the wholesale numbers picked up a little bit in Q3, but that's just because we have not been able to ship that channel.
To the degree that the demand has requiring so there's still an imbalance between demand and supply and it's going to take us the better part of a.
Six months to really get ourselves fully caught up and in a good position.
That we can support our own stores as well as our our wholesale partners, Tom I'll turn it over to you.
Thanks, John and thanks, Kimberly so when we looked at Q3 delays as I noted in my remarks.
Increased during the quarter, so our delays on the water and getting product in that were extended and as John mentioned, we just didn't have enough product to fill our robust consumer demand looking forward Kimberly we expect that to continue so we've put in the program among other programs, but the key one is the core of what our core product earlier.
And that smooth out our product flow and allows us to maneuver and manage around these extended and variable lead times fashion is still key Google well, we'll have more core the fashion piece remains a critical component clearly of all three brands and that will not change as.
As a result of this we do expect over the next few quarter.
Quarters are spring timeframe to have significantly higher inventory, but would expect that to normalize after and again it allows us to manage and satisfy consumer demand and I would mention that over the longer timeframe up full year, saying, we're looking at tightly managing and continuing to manage our inventory.
This just gives us the flexibility short term to manage this variability.
Yeah.
Thank you and thank you Kimberly.
Thank you. Our next question is coming from Ike <unk> from Wells Fargo. Your line is now live.
Hey, everyone. Thank you I guess I wanted to ask this as a great detail, Tom John and Josh. Thank you for next year, just kind of curious on the balance sheet and the cash flows of the business which are.
Tremendously above 19 levels I guess.
Is there a buyback that's embedded in next year's EPS that you guys are giving us and then on the topic of M&A.
How do you guys balance M&A versus buyback with the stock as cheap as it is right now.
<unk> versus the potential you've obviously proven the ability to acquire and scale and acquisition with her Saatchi I'm just kind of curious how that discussion goes and internally. Thank you.
So Tom I'm going to take the M&A piece, just a tiny bit on next year, and then turn it over to you.
As it relates to M&A. We've stated publicly we're active in research are we don't see anything in the near term.
If something becomes available we will absolutely.
Be involved in those dialogues and conversations.
Again, we're interested in expanding our luxury portfolio.
That would typically mean that it's basically only European brands that we'll be looking at so nothing really to report there, except we will be active in that marketplace.
In terms of of of next year I just wanted to point out something we we gave.
I think early earlier than normal guidance or outlook.
Because of the fact that you know it's hard for you all to see what we're seeing in terms of supply chain costs that are impacting us. So I hope you appreciate that we're trying to be as transparent as possible to give you an all of the investment community a a a a feeling for how we see next year.
Flowing in particular in light of these transportation and supply chain challenges. So so that's really the rationale around that let me turn it over to Tom.
Just talking about the balance sheet.
Sure. Thanks, I can appreciate the comment on cash flow, because I love talking about the cash and the cash flow generation.
This company and our three brands. So that has been robust this year and that allows us to both pay down debt, which we've been doing across all the quarters and as you've seen it.
Kris our share buybacks up to $200 million. This quarter. So for next year with continued progress we'd expect to continue to generate strong free cash flow our leverage even with the debt. We have on our balance sheet is extremely low. So I feel we have a very strong position, there and buybacks again with the valuation.
And very important component of our capital allocation priority in terms of the actual guidance, we haven't provided that level of detail at this point.
While we don't normally include that in our guidance. When we provided at the end of the year will be more specific on shares and how buybacks may incorporate into that but I would say that's something that overall, we would continue to do.
Thank you Mike.
Our next question is coming from Oliver Chen from Cowen. Your line is now live.
Hi, Thank you everybody Joshua for Michael Kors brand would love your thoughts on local and signature innovation and what May happen in Mexico and also as you think about lifestyle and multi category of course is a very attractive footwear business, where do you see the biggest opportunities and priorities there as you can see.
For you to generate and amplify and simplified the portfolio as well. Thank you.
Hi, Oliver.
To speak with you.
So I think the team here has done a terrific job of amplifying our signature across categories and I think signature is something really interesting because it's.
A very clear reflection of our brand equity and brand heat and when when people are buying signature product, they're literally walking around advertising the brand and so the fact that it is.
Some of our most profitable product that sells at premium prices at full price.
Also is such a good indication of the brand and so I think you'll see more and more innovation.
And our signature using the signature pattern.
In in surprising ways, certainly one of the highlights that John .
Mentioned was the bond collaboration.
The team did in in October which was a.
Which was based in a metallic signature.
Iteration.
And then how that was marketed as part of this collaboration and how it was broadcast really.
Across channels globally and built the social following and also drove sales, it's almost a a virtuous cycle of <unk>.
How that works to help embed signature in the culture, and I think you'll you'll you'll see more of that.
I think one of the interesting things is you touch about with the Michael Kors brand is that this is a unique brand with its own narrative.
And that really starts with Michael Kors himself.
As a as deep pre eminent living New York designer.
Our fashion house, and so it really starts with the categories.
That that he has always believed in and how those reflect a jet set DNA of the company. So you know you mentioned footwear. So there are certain classifications in footwear, whether it's our trainers are dressed classification, our boot classification, where we.
Have real product authority, there and I think.
I'm getting to know the business and getting to know the brand spending time with the teams to understand how we can hero our most iconic products.
In new and refreshing ways across categories.
It's certainly a priority.
Yeah.
Thank you and thank you Oliver.
Thank you. Our next question is coming from Erinn Murphy from Piper Sandler Your line is now live.
Great. Thank you good morning, and congratulations on a great quarter. My question is around the 11 5 million new consumers do you reference John that you guys attracted over the last year could you talk a little bit more about the age versus the income profile of these new customers versus what you've seen historically in your base and then just a clarification Tom.
Are you how are you thinking about the potential impact from lapping stimulus in your fourth quarter and first quarter guide. Thank you.
So a couple of things number one I have to take off in my heart again to the teams around our company the Michael Kors team did a spectacular job and you've listened to Josh fastest comments before we had a 20% to our consumer database almost 10.
People in the quarter I mean, that's that's really incredible and that's while you know quite frankly, we didn't lap promotional activities of last year, our full price selling is up dramatically and.
And so and so what we're seeing is.
And the AUR is are up double digits.
<unk> of the consumer entering our brand are both new and existing is really quite strong and at all three brands. We not only grew new customers, but we also had the largest reactivation of lapsed customers that we've had in the company's history. So I think that says.
It speaks volumes to what we're seeing across quite frankly, it was all three brands, but Michael Kors again, I wont hopefully our teams are listening to this call I want I really tip my hat to all of you for what an extraordinary job you did.
And I think it speaks volume to the messaging that Michael.
And our creative teams are putting together.
As well as what you see a perception of Jimmy Choo.
So we're seeing definitely a younger consumer come to all three brands.
Which is is is in many ways not unusual to Michael Kors, because we've had that over the years, we've always had a younger customer, but it's a bit more unusual for versace, and Jimmy Choo, which.
Which tended to have slightly older customers.
Mainly due to the pricing of the product, but accessories in particular handbags and small leather goods really are a way to engage with consumers that someone might want to buy something as small as a little.
Coin purse or they might want to have something like a cross body or they might want to step up to two or more expensive handbag itself. So we really have many more entry points for the consumer.
To really engage with the three different brands and I think we've got.
Incredible people, whether it's the main offices of our grand campaigns or the Influencers that we're using to engage with us. So so I think it.
It was probably the best.
Most healthy.
<unk> quarter for us in terms of how we saw the consumer coming in across age and income.
All three brands.
I just want to.
Congratulate all of our teams up for such a Jimmy Choo and Michael of course for the extraordinary effort and also one other thing to remember that's all about digital.
Many of these consumers are engaging with us at the store.
So so the way that we are are I think also I'm looking at our client telling platforms and that's been a huge success for the company. So.
So when we talk about omni.
Getting recruitment from people at the store level local level is as important for us and sometimes even more than at the digital level. So again, a really really happy about that I will turn it over to Tom.
Sure Aaron regarding the impact of the stimulus and what's included in our expectations in the past as stimulus has come on and then there's the <unk>.
After that we have seen momentum only improved with our brands. So if you look across the quarters sequentially compared to the pre pandemic levels, we've seen great sequential improvement, even when there was or wasn't a stimulus impact.
What we're seeing now is the consumer we believe is fundamentally healthy.
And the demand for our brands remains very very strong and robust. So as we enter into Q4, our trends are in line with Q3, we're bringing in new consumers and that's an important fact as well that will help shore up the demand and the continued success of our brands and all of this is incorporated in our.
Expectations.
Oh It is incorporated in the guidance that you've seen for both Q4 and the quarters next year.
Thank you. Our final question today is coming from Simeon Siegel from BMO capital markets. Your line is now live.
Thanks for slipping me in congrats on your ongoing strength, guys really nice job and welcome to the call Josh Great to have you back.
So just two quick ones for me really fantastic AUR growth, we've been seeing that in your comments about ongoing opportunity are also really encouraging so just any view on the order of magnitude opportunity there.
Then Tom I know, we talked about the go forward inventory can you just quantify the what the in transit inventory was within the embedded balance now maybe thoughts on the timing of that product and just so we know what is the in transit inventories or just whether we should think about whether their concerns over any way received seasonal goods sports or anything along those lines. Thanks guys.
I'm Gonna grabbed Versace, and Jimmy Choo, and then turn it over to Josh for Mike of course.
We're seeing very strong AUR.
Our gross at Versace, and that's really driven by the accessories business.
And the full price selling and sell throughs that are happening.
In that business, so AUR growth quite significant at Versace, and it's really driven by those two things accessories and much much better full price sell throughs, because we're not so reliant on ready to wear which always has higher markdown rates.
Number one number two.
Jimmy Choo, we talked about price increases, we're putting those have been putting those in place and more to come.
The brand has been or underpriced, if I can say that versus what the.
The consumer perception is.
We've seen absolutely no consumer resistance to any of the price increases that we take have taken and there will be more.
As well so we feel really good about what's happening at the end you are level at both of these companies I will also say to you that Versace will begin to take price increases we had certain target levels that we wanted to be at a width for such of which were competitive with certain luxury competitors all the luxury industry is amazing.
Prices and we will talk to you more about this at Investor day, but we'll be positioning versace at a higher price point than where it is today, which should long term bode well for the gross margin of the company I'll turn it over to Josh for Michael of course.
So in terms of AUR for Michael Kors as we noted we've.
We've seen consistent AUR growth in the high teens are specifically.
Specifically in the holiday quarter, and I think it's important to note that that was led by North America, which you know typically has been a a more promotional environment and as John said, we're not lapping those promotions.
And so that has translated into.
Very robust.
AUR growth.
And it has.
My hats off really to the to the North America team, because it's giving everybody a confidence our understanding that the consumer is willing to pay for the brand and the brand is demonstrating pricing power. So.
You'll continue to see.
More emphasis on.
Price increases.
And a specific focus on the best category as we think about the good better and best opportunities are within each classification.
And to add onto what Josh just said I want to be clear about one thing we're not just taking price increases we're improving quality, we're adding more to design.
And truthfully as we go back and look historically, we used to sell much higher our handbags in particular in the company over the years and so we're just going back to where we were before and wherever we were over the past few years. We don't think that's the right positioning for this company long term so.
Not only with prices go up, but it's really going to be the positioning of the product itself, which I think is it's really important for everyone to understand Tom you want to just finish up on the inventory and I'll give some closing remarks sure.
Sure happy to so Simeon with regard to the in transit it.
Significantly increase it was over two five times the prior year level and what that resulted in was our on hand inventory overall for the company was around the same level. It was in the prior year, even though sales were increasing.
And that was even more challenging in certain areas.
Of course, North America, which of course as John mentioned meant that we were not meeting our consumer demand. So as it regards to receipts. We wanted to make sure we're getting the product in and that's a result of that is the higher cost and supply chain that we noted over the next few quarters and we believe that will help us.
Meet consumer demand at the same time, we do expect in transit to be higher and inventory over the next few quarters as I mentioned would be significantly higher through spring a portion of that will be in transit and that will begin to normalize.
Past that time.
Thank you Sydney and thank you, Tom and Josh So first and foremost again I'd like to to welcome Josh to the team. He has been here for five months.
And I think the future is bright under his leadership at Michael Kors and ultimately for Capri, So again, Josh welcome to the team.
And lastly, I'd like to conclude by saying we were very pleased with our third quarter results.
We believe that fourth quarter is also starting off on similar.
So we see the health of the consumer continuing.
And we are thinking of as we had indicated in our outlook. This will be the highest level of revenues in the company's history. This year as well as at $6 a share the highest level of earnings per share growth.
Significantly from where we have been historically.
So so I think this company is really positioned.
For significant future growth and we look forward to sharing more about that at our Investor day in June .
Thank you very much for joining us today.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.