Good morning. My name is Kimberly Greenberger, and I'm the specialty softlines department store and branded apparel luxury core analyst here at Morgan Stanley. We're very pleased you were able to join us for the third day of the Morgan Stanley Global Consumer & Retail Conference, and we're equally delighted to welcome the management of Capri this morning. Capri is a global luxury powerhouse managing three global brands: Versace, Michael Kors, and Jimmy Choo. Today, we're joined by Capri's Chief Executive Officer, John Idol, and Chief Financial Officer, Tom Edwards. We're going to spend the session today in a fireside chat question and answer style format, where we'll explore some of the investor questions that we've heard most recently and also reserve time to answer your questions. For those of you joining us via the webcast, please click the Ask a Question button on the webcast to submit your questions. Last, as we always do, I need to remind you that for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. With that, welcome to you, John and Tom, and thank you so much for joining us today. Thank you for hosting us, Kimberly. We're thrilled to be here, and we look forward to sharing a lot of the opportunities that Capri has in front of it with you and all the investors on the call. Fantastic. With that, let's kick off the fireside chat session. John, I'm wondering if we could start with what's happening in luxury accessories. How would you characterize performance in these categories since the onset of COVID last year? Kimberly, as you know, the luxury category has really had consistent compound annual growth kind of in that mid-single digits range for year after year after year. I think that's kind of commensurate with the growth in the higher wealth in the economy as well as the middle class. We see that across the globe, and we see that continuing. Clearly last year, the luxury category, along with many different categories, was contracted due to store closures and lockdowns, et cetera. You know, we believe that the category is back to pre-pandemic levels this year, and we see future growth happening. As you know, also certain parts and regions of the world actually grew during the pandemic, in particular China, as you know, travel restrictions meant that more money was happening or more spending was happening in the local areas. You know, we see what's happening in the United States and the strength of luxury in the United States, where you know, a few years ago, people were only pointing at China and Asia as growth trajectory. Now people are looking at the U.S. and seeing how wealth has been created, seeing the middle class consumer really aspirationally move into this category. It's been thrilling actually to watch. We believe that luxury and in particular accessories and luxury footwear has been growing faster than the total category. We see this continuing, and we see the consumer, you know, remaining pretty engaged with that category for the foreseeable future. We think that having Versace for sure with our accessories expansion is perfectly timed. Then if you look at where we're going with Jimmy Choo, where we over time want to take that brand up 50% accessories and of course Michael Kors, that is our lead. We think as a company that we're really focused in the right areas. The tail question as we look out here over the next few years, you're really bullish on the outlook for luxury handbags, footwear, and accessories. You know, you talked about certainly into next year. Would that outlook, John, continue, you think, for multiple years, you know, as we exit this pandemic? Do you think the category has sort of a new level of life to it? Yeah. I think what you have in the category is the power of brands, you know. If you look at some of our very key competitors, who are European-based, their growth has been extraordinary. You know, some of them growing at 40% and 50% rate during this period of time. I think that this area of luxury is something that will continue well beyond next year. But that being said, the competition is getting better and you have to be prepared, in particular, with always design first leading the excitement. With Versace, there's nothing more exciting. With Jimmy Choo, I think we've really put a lot of glamour back into that company, in particular with Hailey Bieber now as our key campaign. And Michael, if you look at what he did with his fortieth anniversary, I mean. We've got a lot of energy around all three of these brands, and we think we can compete. Along with that, I wanna say that you've heard not only us but many other companies say marketing is critical. If we don't continue to invest deeply in how and communicate with our consumers how and what our brands mean, we won't be successful. I think that's gonna be one of the cornerstones to our growth in a category that will continue to grow because it's competitive. Yeah. Obviously strong cash flow strength to Capri Holdings really allows for some of that investment into the prior brands. Maybe we could just reflect on your acquisition of Versace and Jimmy Choo for a minute. How have you taken brands which were already very strong when you acquired them and really helped to strengthen the brands and the voice in the marketplace, in the global luxury marketplace? Kimberly, great question. I wanna take not a victory lap, but I wanna smile for a moment because I know when we bought Jimmy Choo, and then we bought Versace, the investment community as well as the fashion community didn't understand how an American company could acquire two European luxury companies and be successful. I think there was a lot of people who doubted our commitment, doubted our ability to be able to do that. As you saw from the last two quarters at Versace, we're well ahead of what we had anticipated in terms of our revenue and our operating margin performance. Jimmy Choo is really starting to get some traction faster in terms of a rebound than we thought. We think we've now got the right positioning in place. You know what we did, again, just to remind everyone, when we bought Versace, it was an approximately $800 million business. We closed $150 million of business instantly. We took the company from making money to losing money. I know everyone thought that was not a very bright idea. For luxury, you have to invest for the long term. It just doesn't happen in a year or two years. It takes five, and it takes 10 years. We're a few years into that investment, and it's going extremely well. We're committed to luxury. That is what that brand stands for. When you think of Capri, think of us as leading with luxury first. I know everyone always loves to talk about North American wholesale, but that's becoming less and less of an engine for the entire group. Jimmy Choo, again, we've been on the road for five years. I don't think I'm as proud of what we did there as how quickly we moved with Versace, but I am proud of what's happened, in particular since Hannah Colman has taken over as our CEO. She's done a brilliant job, really has focused the company in terms of its marketing message and its product message. This company has got some significant traction now. I think the great one of the... If there was a silver lining in COVID, it made us at Michael Kors, as you know, kind of reset where we thought we were gonna go with the brand and have less aspiration for revenue, more aspiration for operating margin and profitability, and raise the quality of consumer transactions and our prices also, quite frankly. All of that has been resonating. I'm proud of the fact that Capri is really deeply invested in luxury, and we're committed to it, and we're unwavering about that. That's, you know, not an easy thing to do, especially in a competitive environment. We know it's the right thing to do, and we have three amazing brands, so that's not gonna be an issue for us. Whether we'll execute on all of them at the timing, I can't, you know, commit to that here, but I can commit to the fact that we understand what we have to do, and we'll stay true to that vision. That is super clear, John. Thank you for that. I wanted to just take a look here at what we've seen so far this year in progress since your Investor Day in June, which doesn't seem that long ago. You're now about halfway through your current fiscal year, and you're sort of blowing through your revenue targets this year. I'm wondering how we should think about the revenue growth opportunity from here, once we get past fiscal 2022, so into 2023 and beyond. How do you sort of view the total revenue growth opportunity by brand and understanding that it may differ in many cases by brand? Yeah, starting with Versace, again, this year we'll do over $1 billion with the brand. I think that's better. As I said to you, when we started by cutting $150 million from really a $650 million base, and you look at where we've come over two years, I'm so impressed by the management team and what they've accomplished, and Donatella's vision. Most importantly, you know, we bought a company that was not an accessories company. It was an Italian luxury company that did not have an accessories business. Our accessories business has been one of the lead stars in the entire company. When we focused on it and really are rebuilding our stores to present that as the most important part of the business and through our communications on social media as well as our own online store. I think the consumer is really responding to this, and it's natural for an Italian luxury company to be based in leather. We will still always have a ready-to-wear lead because of runway, and Versace probably is the most exciting runway company in the world. We said that when we bought, we'll always lead with our runway and our fashion, but now we have things that we can embrace a broader group of consumers with. The $2 billion projection for us, I think is very clear. I'm not ready to say it yet, but I'm getting close to ready to say we're gonna go beyond that number. We know it, we feel it, and if we can keep doing the things that we're doing, it's not a matter of if we're gonna break $2 billion, it's just a matter of when. I'm really excited about that. Of course, you can see what's happening with the operating margin. This is gonna be a very big contributor to our overall profitability. When I look at Jimmy Choo, we're starting to have a very, very strong top-of-mind view with Jimmy Choo. This company really got its groove, if I can call it that, on. You can feel it in the offices. The management team's excited and the product is really resonating. We have a good moment also, people are getting dressed again. People were dressing down during the pandemic. We got hurt badly in Jimmy Choo because of that. Now, as you've sort of been out, and many of you on this call have been out, women and men are getting dressed again, and that's a great thing. We are the go-to luxury brand for that level of footwear. We're starting to get some very nice traction on our accessories in both the Versace case, which we believe will be 50% of the business ultimately. That's $1 billion at Versace. We think at Jimmy Choo we will get to a 50% accessories penetration over time. That will be another $500 million. So that's a $1 billion business. We're also seeing profitability. Company was profitable last quarter. We think you're gonna see more of that going forward. Then lastly, I think we're very surprised at Michael Kors. You know, we had a $5.3 billion kind of projection rate. We're gonna go past that quickly. It's in our core category. Our accessories are resonating. We're having much higher AURs. We have other opportunities, in particular the men's business. Our big competitors are doing well over $1 billion in that category. We're only approximately $300 million. So we see a huge opportunity there and some other opportunities in the brand. Again, we're not looking to push Michael Kors because we've got from a store platform standpoint, a pretty good footprint. We have a little bit in Asia, and can't track a little bit in North America. We're in a very good place now, where we can really gradually move that business forward and in particular its profitability. $2 billion for Versace, clearly in sight. $1 billion for Jimmy Choo, clearly in sight. I think $4 billion or north of that for Michael Kors is also looking to be more clear than it was probably three years ago. Super clear, John. I think if I reflect on our conversations here over the last couple of years, one of the things that certainly has surprised me, maybe didn't surprise you is from a regional perspective, is just the surge here in the Americas. When I look at the strength here that your business is experiencing for the last, you know, several quarters, it's been, you know, and I think not uncommon in the luxury goods industry. North America has been a real good news story this year. Maybe you can just reflect on how your approach to going to market in different regions may be evolving. Where do you see your biggest global opportunities by brand? I apologize. Apparently there's some hammering going on over my head. It's in our offices. Maybe it can fix itself. Sorry. First off, I think we're all pleasantly surprised at North America, and we know that the North American consumer is healthy. The consumer was locked down, and now they're out, and they wanna spend money, they wanna dress up. That bodes well for all three of our companies. I think the stimulus certainly helped. We saw people coming into stores, feeling more comfortable spending money, maybe than they might have been previously because of some of the underpinnings of their financial well-being. I think that was really positive. I have to tell you, in North America, those trends are continuing. We're seeing a very strong consumer this quarter. We're pleasantly surprised. We have said in the past that we had the inventory to do what we projected. We'd like to have more to surpass what we projected. That's a little tougher to do. Consumer is exactly where we want them to be and maybe in some cases even stronger. I have to say, well, actually three things. Versace is shocking us in North America, how strong this business is and how the customer is. You know, once we change the product, and I was with our president of North America yesterday, and the accessories and how the customer is resonating with accessories in this country is really way beyond what we had ever anticipated. So really good news there. I think the other is solid Michael Kors rebound here in the marketplace. You know, we have not. It's always been traditional for us, in-house promotional activity. We've really just backed out of that in such a significant way. I apologize for the hammering. The customer hasn't said no. So that means it's product and buying into this imagery of what Michael Kors stands for. So So very, very positive on that. Europe, very solid rebound. Reopenings are happening. Obviously, everyone's reading the news. There are lockdowns happening in Austria, certain parts of the Netherlands. We anticipate some things to happen in some other countries after the first of the year. I think I'll be consistent saying there's gonna be bumps in the road. We think that, you know, we're gonna have some of this. We've got the Omicron right now, which none of us know what that actually means. I think we're in such a solid financial position, such a good inventory position, that whatever these bumps are gonna be, we're gonna be fine. What I'm really excited about is what's happening in Europe. Even with some of those regional lockdowns, I'd say trends are continuing, getting better and better, every day, and we're looking forward to a great holiday. China and Asia, I should say. Reopenings in Japan are getting better there. China is probably getting a little remaining bumpy. You know, there was some more incidents that happened over the last few days, in Shanghai, et cetera. We're gonna see some bumps there. I think that consumer, while it's not quite the case that it was last year, you're not gonna stop the growth of China. It's too big. It's too powerful. You know, North America is probably gonna make up a little bit for some of the bumps in the road that are in China right now. Europe's on a good track. I think overall, we look across the globe right now, I'd call it relatively healthy. You know, some regions are not back to LLY, but we've kind of planned our business around that, and we know that the trajectory is gonna take some time. The consumer feels healthy, and they feel excited about the luxury business. We're also seeing some very nice rebounds in ready-to-wear. You know, where that had been the laggard for accessories and shoes kind of stayed strong through the pandemic. Now, people are getting dressed up again. They want, you know, that good feeling that a new dress or, you know, a new top or something gives you. We're definitely seeing that. Great. Understandably a little bit of unevenness globally, but that's kind of really been what we've experienced now almost two years, John, I mean. That's correct. That's just where we are. Okay. That is super clear. When I think about the overarching strategies for Capri, you know, one of the strategic rationale for some of the acquisitions that you've made is to create cross-brand synergies. You know, and in particular, I think in operations, back office, global distribution, a few of those areas. Can you talk about the strategic thinking behind the synergies? Maybe, Tom, if you could talk about some of the cost and operational synergies behind the scenes that Capri is realizing with this multi-brand strategy. I'll say one quick thing, then I'm gonna hand that over to Tom. One of the great things about having a luxury group is you have three CEOs who talk to each other. They get to share a lot of information, whether that's about cost of product, whether that's about consumer behavior, regional successes. When you're a mono-brand company, you don't get that opportunity. You might talk to people in the marketplace, but here we get to see in living color with something like the Eric Haze- Poggy collaboration that we did in China with Jimmy Choo was so hugely successful. With our new [Rebecca pop-up in China with Versace and what that's done. Having that dialogue internal amongst the CEOs is really... I think gives us not a leg up, but it gives us the agility to have information about the consumer and how we are achieving success more quickly than when you're just a mono-brand company. I'll let Tom talk about the other synergies. John, thanks, Kimberly. To be clear, we think there are significant advantages to having a group and building one. In the first area is digital. Digital and e-commerce. We are re-platforming across the brands, you know, and digital analytics. Michael Kors has advanced capabilities, and we're bringing those along and to Jimmy Choo or Versace so that we can speak to our consumer and engage with them as we grow our databases and further expand all three brands. So digital analytics is critical. Then, of course, e-commerce. Platforms to the state-of-the-art omnichannel and things like clienteling. All of these activities that John mentioned, we talk across the group, and we look at best in class, and we then roll out. We are in the process of doing that, and we'll just see our capabilities and each of the brands' capabilities continue to improve. As you mentioned, the other synergies, there are numerous ones in terms of back of house and others. It starts with procurement. We're putting in common systems across the group. We're also looking to expand our capacity and capabilities in luxury manufacturing. We recently bought a luxury shoe manufacturer in Italy, which services multiple brands and looking to expand those capabilities from a luxury manufacturing point of view. We believe that there's a number of opportunities here as we, you know, work through and continue to build out a luxury and global platform for our three brands and then as we look forward, potentially others. Great. Tom, I don't know if this is an opportunity to just move slightly closer to the microphone. You're coming across still very slightly faint. I wondered if we could double click on the conversation on digital. How would you rank order digital performance and capabilities at all three of your brands? How does your operating margin compare between digital and store, and maybe how it's changed over time? Tom, go ahead and take that one. Sure. In terms of our capabilities, Kimberly, I would call it, Michael Kors is really highest. Jimmy, and we have very strong capabilities, as I mentioned, in digital analytics and the e-commerce platform. As you've seen this year, it's delivering tremendous results for the brand across the globe. So very strong. Jimmy Choo strong and improving. Versace, when we purchased the company and it became part of the group, I would say it was the furthest in terms of areas of opportunity. It was not omni-channel and had significant opportunities to build out. Versace has just come ahead in leaps and bounds. Still wonderful opportunities to continue to improve. What they've done in e-commerce has been tremendous in driving double digit and triple digit growth. That's how I would rank them at this point. The key to that is building out the common platforms and capabilities to bring all the three brands up to even higher levels. In terms of digital margins, all three brands now, our digital margins are very strong and above store margins. Jimmy Choo and Versace were always in this position, with the luxury price points and positioning. Michael Kors pre-COVID, maybe was not in that position, but as the significant increase, doubling in penetration for, from an e-commerce perspective has occurred. The e-commerce PNL has really responded and levered and now is very strong and above the store levels. We really think that that's a great positive for us as we move forward and expect to see continued growth and increased penetration from our e-commerce channels and omni capabilities. Okay, great. A conversation with global brands and retailers today is incomplete without a conversation on supply chain, inventory levels and how the slowdowns in global supply chain might be impacting the business. How are you navigating through what we're seeing out there in this environment? Happy to take that one. We have been impacted. As John mentioned, we could be selling more. We have seen increased delays in this quarter. We had the shutdown in Vietnam, which has now moved through. We expect to see continued delays into next year, as well as higher costs. However, we do have the product to sell, and as we mentioned, we increased our guidance for both the year and Q3, coming into our last earnings call. We believe we have the appropriate levels. As we look forward, we do expect to build inventory through the end of this year and in next year. As we look at next year for the first half, we were more conservative in this year as we were coming out of COVID. We would expect inventory to be building, and we have more visibility now through those delays and believe that will be the case. In the second half of next year, we'd be comparing against a year this year where we don't have as much inventory as we want. Again, we'd expect inventory to be higher as we look at next year in the second half. That's all both on a comparison basis compared to where we were this year, but also importantly to support higher sales growth as we look at the business going forward and expect to continue to deliver double digit revenue growth. We do expect these transportation delays to continue to impact our inventory receipts in the near term. In the future, we'll look to receive product earlier to reduce costs of transportation, and our production teams are doing a number of activities to mitigate these lead time delays and ocean delays. Okay, great. It sounds like you're set up well for the holiday season this year, which is super encouraging, and obviously navigating that dynamic external environment that sounds quite well so far. I wanted to, John, think about on the last couple earnings calls, you talked about future potential acquisitions for this business. Maybe you can just share with the audience how you think about the potential for future acquisitions for Capri Holdings. What are the criteria that you're looking for in a potential target? Any update you can share with us on potential timing. Sure. I think I should take one second to tell you what our kind of priorities are in terms of our cash deployment. First, it's obvious to invest in the business always. Second, to repeat that I think we did an extraordinary job paying down debt during the pandemic. Our balance sheet is super clean right now. We're gonna be in a very good position, in particular by the end of next year. We'll also have very little debt. We're positioned for an acquisition. Simultaneously, we've said that we continue with our share repurchase program. We announced a $1 billion share repurchase program at the last earnings call. We will be active in the marketplace, in particular when we see our shares being undervalued. We continue to believe that our multiple is significantly below what our revenue. As we've said, we're gonna have double-digit revenue growth over the next few years and double-digit earnings per share growth over the next few years. Just to be honest, we don't believe that our multiple currently reflects that strength of these three luxury brands and our projections for revenue and earnings. Acquisitions, we're gonna be disciplined. We believe that we will continue to focus only on the luxury area, predominantly means, and I would almost say exclusively means European luxury companies that really have the ability to be, at minimum, $1 billion. Because it's not really worth our time, energy, and effort to do something that will only be hundreds of million dollars, even though it's a very sizable business. It takes kind of the same energy and effort to turn that into a few hundred million dollars as it does a billion dollars-plus business. We're active. We're actively looking now. We're actually even involved in select conversations. Nothing's on the horizon, but we are active. I think the investment community knows that when an asset becomes available, private equity backers are absolutely reaching out to us to have communications. We feel good that we will be in the hunt, in the conversation at least. We will have the balance sheet to support an acquisition when and if it's appropriate. Okay. Great. That is super interesting. Tom, we've got a question coming in from the audience on operating margins. Obviously, you've got a ton of momentum in margins here this year to date. How should investors think about the operating margin opportunity, beyond the current year, for Capri Holdings? How are you thinking about margins by brand longer term? Sure. Thanks, Kimberly. When we look at margins, first let's start with gross margin. We've already stated that we expect gross margin to expand an additional 100 points next year on top of a 250 basis point increase this year. The 250 basis points is, again, in the face of some headwinds on the margin side from transportation costs and others. As we look forward, we do anticipate continuing to improve operating margin in the future as we continue to see leverage and grow sales. We're moving along more quickly than we expected. We're at guidance that we provided previously of 18% this year, well ahead of just our Investor Day projections that you noted was in June of this year. The progress has been very fast. We still continue to target 20% longer term, in line with those earlier discussions and expect to see that come through. Okay. We have about one minute here. John, what's a question you wish I had asked you today that I did not ask? Well, I think the main question that we would love for you to ask is, do you believe that all three of these companies have significant growth opportunity in front of them over the next year, two years? I think the answer to that is yes. I think if you asked us that question two years ago, we would have probably been a little more tentative. I just have to take my hat off to the teams. You know, everyone from Donatella to Sandra Choi to Michael himself and how they've really continued to deliver exciting products and engaging marketing for our consumers, and the way the consumer is responding. If you see sort of a smile on my face and Tom's face and encouragement, it's because things are going well here at Capri, and they're going better than we had thought. To be able to do that in the face of, you know, what we're all living with today, is exciting. I have to just thank our entire organization worldwide because they have done an amazing job of executing against that vision. I think it's showing up in our earnings, showing up in our revenues. I thank all of our shareholders for supporting us. I think Tom has things to add. Well, that is a great note for us to end on today. John and Tom, I just want to say thank you both so much for joining us this morning and taking time out of your day. Thank you very much for hosting us. All right. Thank you, Kimberly. Happy holidays, everybody. Happy holidays. For those of you tuning in the audience, thanks so much for your time today. Stick around. We've got a great speaker at the conference, and we look forward to keeping in touch. Have a great day, everyone.