Hi everybody. For those of you who don't know me, I'm Alex Straton. I co-lead the branded apparel, footwear, and softlines retail team alongside Kimberly Greenberger here at Morgan Stanley. We're super pleased that you all joined us today for the first day of our conference, and we're equally delighted to welcome members of the Capri management team today. Thanks for joining us. Kicking off with a brief overview. Capri is the parent company of three growing luxury lifestyle brands. That, of course, includes Michael Kors, Versace, and Jimmy Choo. Joining me today are John Idol, Chairman and CEO, Tom Edwards, CFO and COO. Starting with John, I'll give you guys a brief intro. John has been the Chairman of Capri since September of 2011, and the Chief Executive Officer since December of 2003. Previously, John served as Chairman and CEO of Kasper A.S.L. from 2001- 2003, and as CEO and Director of Donna Karan International from 1997- 2001. Keep going here. John also served as Ralph Lauren's Group President and COO of product licensing, home collection, and men's collection from 1994 until 1997. That is quite the resume here, so great. Moving to Tom. Tom is the Executive Vice President, CFO, and COO of Capri, and has been with the company since 2017. Previously, Tom served as Executive Vice President and CFO of Brinker International. Prior to that, he held numerous positions within finance at Wyndham Worldwide from 2007- 2015, including having served as Executive Vice President and CFO of the Wyndham Hotel Group from 2013- 2015. Tom has also held a number of financial and operational leadership positions in the consumer goods industry. That intros them entirely. Thank you so much for joining us, and welcome. I'd like to point out we're both only 26 years old. We've accomplished that in a very short period of time. Quite the resume for 26, I will say. Today, everyone, we're gonna spend the session in a fireside chat, question and answer style format. We're gonna explore some of the most recent investor questions we've been hearing. Before we dive into that, I do need to remind everyone that for important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. That's a mouthful. We're done with it. Let's move to the questions. There's been a great deal of volatility in consumer trends this year, Capri has managed to grow revenue, mid to high teens on a constant currency basis, which is quite impressive for the first half of the year. How would you explain this resilience? What are the drivers there? Well, first off, thank you very much for hosting us today. Maybe just before we start, I would like to also thank Kimberly Greenberger for covering us since we went public as well, and we wish you all the best in your future. Thank you. You know, what's exciting about Capri is we made a decision probably about six years ago now that we wanted to transform the company into a luxury group. We had the good fortune of being able to acquire Jimmy Choo, and then not too long after that, the good fortune of being able to acquire Versace. What I feel is really strong about our company is we have these three powerful brands and three luxury brands. Three brands that really are positioned in the consumer's mind from a lifestyle standpoint, and from an ability to excite consumers. That's what we get the opportunity to do every day, is to get people excited and feel great about themselves. Capri, I think, has shown, number one, that we were able to integrate two additional companies into our portfolio. I think we've done a reasonably good job, in particular with Versace, in terms of taking that brand, growing it, and growing it profitably. We've done a, I think, a reasonably good job of growing Jimmy Choo. We need to do a better job of growing it more profitably. I think we've also done a very good job of turning around Michael Kors, and really beginning to position that brand on a much more luxury and elevated level. And I think that the results are showing through. I think we're also doing a very good job as an organization with our digital and our communication in general around the three different brands and the lifestyles and the codes that these brands have with inside of them. You can really see that with our database growth. Our database growth, which is not just for e-commerce, it's really for the entire group, for stores, etc. We're really excited about the strong double-digit growth that we've shown quarter after quarter. Obviously, during the pandemic, many companies showed that, but even post-pandemic, we've really been showing that we've been able to acquire additional consumers. I think it's about our brands. I think it's about our management team, and I really wanna call out the 17,000 people around the world who got us through COVID and who are taking us and propelling us post-COVID, and the great job that they're doing. Of course, our three founders, which Donatella, Sandra Choi, and Michael, for their great vision and leadership. We feel good about what we have today and how the consumer's responding to that. That's a super helpful overview of kind of what's driven the trend so far this year. I wanna ask you a question we're asking most people here at this conference, a very topical item, which is: How are you assessing the health of the consumer as you look at your business, and have you seen any signs of strain or any pressure there? I think we've all had a very interesting last three years, again, going through the pandemic, coming out of the pandemic, and now, we have a whole nother set of headwinds in front of us. As Tom and I look at them, you know, first is obviously interest rates are rising, and that's not just a North American situation, that's a global situation. What effect is that going to have on the consumer? It has to have an effect. We don't exactly know how big of an effect that will be, because simultaneously to that, you have wages that are rising very quickly. Secondly, you know, we see some FX headwinds that are definitely impacting us as well, and that's less per se about the consumer, but it obviously impacts our business on a global basis. Inside an additional issue is the energy costs, which again, that's gonna impact the consumer. We know that is already impacting the consumer. Of course the geopolitical situation, and in particular the war in Ukraine. We have all these various things, and I think maybe the best way for me to describe it is by region. North America, we still see the consumer relatively healthy at this point. Which he and she seem to be holding up well. What does that mean? We definitely are concerned about next year, and we don't think we're gonna see it probably in this quarter or maybe a little bit into next quarter. We think kind of the back half of next year, we've gotta be cautious about what happens to the North American consumer, which has been very resilient. Second, in Europe, I think we... And we said it during the earnings call, we were quite surprised at how strong the business was in Europe. Again, we just have this anticipation that that consumer is gonna be even more impacted than the North American consumer in particular because of energy prices are much higher in Europe, and they didn't have the stimulus that came into the economy. That consumer obviously showed tremendous resilience during the summer season and even post the summer season. Then in Asia, we are very pessimistic on China. I'll start with that. While we do see certain measures being pulled back on the COVID zero-COVID policy, we think that's gonna take a lot of time. I think we've been one of the companies all along saying it's gonna take longer, and we don't think there will be a recovery in China until 2024. At this point, we're still anticipating negative impact throughout next year. We hope that that's not the case, but I think from a prudent planning standpoint, because none of us can really assess what's happening there clearly. The balance of Asia has grown very nicely. Japan's reviving very nicely. Southeast Asia is quite strong. You know, for many of the people in the luxury business, we need China to get back on its feet and start to have a robust recovery. You spend a lot of time talking about China. Your more pessimistic view certainly feels prudent given what's going on there and the uncertainty. Have you all changed your strategy at all in the region, or how have you kind of shifted how you think about it as you navigate this? That's a very good question. You know, because of the inconsistency of what's happening in China, it makes it very difficult for us to plan our business around that. In the last week alone, we had more stores closed in China than at any point during the pandemic period. This is just because cities keep closing and reopening. Again, we think some of the measures they're taking will alleviate that. It's very hard to plan your business, plan events, plan, you know, how you're gonna communicate with the consumer when, you know, they're having difficulties traveling, getting out to shopping malls, you know. I think many of you've seen the travel figures on airfare being down... I'm sorry, air travel being down around 40%. I would say we're just gonna take a very wait-and-see approach and not try and push too hard. We need China and Asia in general to work. It's a big part of our growth strategy across Capri and even more so in Michael Kors. We're gonna be patient just like You know, if we learned anything through the pandemic, it was to be patient, stay focused, just keep building and doubling down on the core values of the great three brands that we have. You know, this too shall pass. It's probably, as we said, gonna be more of 24. Okay. Feels like we've covered kind of revenue trends for the most part. Maybe we move down to total company margins. How are you thinking about gross margin and operating expenses, and what are the puts and takes around your longer term goal to hit that 20% level or so? Sure. I'll be happy to speak about that. First we're really pleased with the progress of both the company and the brands on margin coming out of COVID. It's all due to strategies that were put in place actually prior to the COVID situation. We've been executing and they have been executing against them, and our guidance as of last quarter of 18.3% operating margin for this year with a long-term goal of 20%. When we look at the pieces in terms of getting there, the things that are gonna support gross margin are what's been driving it in the past. First and foremost, the strategic initiatives. It's driving accessories at Jimmy Choo and Versace, building out additional beyond signature into hardware for Michael Kors and managing tightly inventory to drive full price sell-throughs. We see brand mix helping the overall margin, as well as the ultimate return of China, which as we know, Asia and China in particular are structurally higher. At some point, transportation may become a tailwind as well for those costs. On the gross margin side, those are some of the drivers. On the SG&A and operating expense, it's really leverage as we grow the business. That's twofold. Leverage of our fixed costs, but very importantly, our store sale densities have a significant upside for all three of our brands. We see that driving margin long term. We've talked about a lot of things that support it. The one thing we're gonna continue to do is invest in the business. We want to grow in different categories, we wanna grow in different regions, we wanna talk to the consumers in our large and growing database. Investing in marketing and communications is gonna be critical. That's how we look to balance out the margin growth from where we're at today to the 20%. Okay. Those are great building blocks for kinda how to think about this. Maybe you mentioned some of the brands and your excitement over them, perhaps we drill down into them, starting maybe with Versace. It's continuing to outperform the group, great performance there. Maybe can you talk us through what's driving that, and what are the key learnings so far as you've been building it, and then the path to, I think, that $2 billion target or so? When we bought Versace a few years ago, as many of you probably are aware, it was a privately owned business, and it had a lot of operational issues. I think one of the great things that Capri has done is we've brought tremendous structure to the organization and really cleaned up a lot of businesses inside the company. Very importantly, we've renovated 60% of the store fleet worldwide now. You know, across the group, we're in a very good position with our, with our store network in terms of the locations and our leases, et cetera. You know, one of the first priorities for us is to increase the store productivity. What we're seeing, as we had kind of set out on our mission of trying to make accessories 50% of the business is we've gotten just tremendous traction, and we've been showing strong double-digit growth in that category every single quarter, almost since we owned the company. It's something obviously we have a little knowledge of. And that is really changing the profile of the way the consumer thinks about us. If you had a chance to get to any of our newly renovated stores, you'll see that usually the first 30% of the store is now all accessories, where in the previous formats it might have been in the middle, and it might have been 10% of the store, and it was really a ready-to-wear run company. Surprisingly for us, our footwear business has gone much faster than we had anticipated. And as you again are aware, in the luxury industry, footwear is a very key component and can run up to 20% of your, your business inside these stores. We're starting to get our productivity levels. As a matter of fact, our many of our stores that when we bought the company originally were unprofitable, and now we're starting to get the opposite, which is quite good. We have a lot of stores that are now profitable and can really, to Tom's point, create enormous leverage for us as we take these stores and drive up the velocity. Many of these stores, we can do 4x as much business as we're doing today, and then we'll be somewhat close, not even exactly close to our luxury competitors in the marketplace. Accessories, footwear, renovation of the stores, and then of course clarifying what our marketing communication is with the consumer. We're probably on that piece of the journey right now, where we're trying to get a bit more consistency about what does Versace mean to a consumer. As we've been doing that, the other thing that's happened is we've started to really bring in a much younger customer into the business, where when we took the business over originally, it was a much older customer. Again, the company really didn't have a way to draw that younger customer, and of course, accessories is one of the great ways to do that. We've got fabulous brand codes between the Medusa, which is quite famous. We have the Greca now, which you see coming out, and then we have our Barocco V, which we actually created right after we bought the company. Now very identifiable icons driving the accessories business, footwear, renovation of the store fleet. All these things are coming together that really are starting to propel the company in a very nice way. That's certainly a very clear foundation in kind of how you're gonna push to that longer term revenue target. Let's turn to margin now for that business. I think it's about 16%-ish now, and the path is kind of a low 20s% number longer term. I get the revenue piece. How do we get to that margin target? Sure. I'd be happy to comment. First, before we purchased Versace as a private company, they were making about mid-single digits operating margin. As John mentioned, refocusing the company on the luxury element has helped propel it this year guiding to 16%. We're really pleased with how the company has progressed and the opportunity in the future. As we look at that, I break it down into gross margin and SG&A and leverage. I think we have opportunities as gross margin, we drive the accessories business. That helps support strong margin performance. The brand has done a great job and will continue to focus on broadening or democratizing its offering and tightening inventory, we drive full price sell-throughs as well on the gross margin side. On SG&A, it's really about leverage of the store fleet. When we talk about increasing store sales density across all of our brands, Versace has the greatest opportunity. They're running at about $1,000 a sq ft per store, we gave a goal at Investor Day of doubling that to 2,000. I'll also note that compared to luxury peers, that 2,000 may be on the lower end of the scale. We think there's huge opportunity here as we move forward to really drive profitability through that means. At the same time, as I mentioned for the overall company, and I'll mention it again, investing in marketing communication is critical. Versace has a great opportunity in Asia where they're underdeveloped, but that will take time to invest and talk to consumers as well as build out some of the product offerings that we're focused on, like accessories. We feel really good about the opportunity here. That's great. I feel like it covers Versace in total, and now we can perhaps move to Jimmy Choo. Same line of questioning. Maybe talk me through the initiatives to grow that business to about $1 billion or so, I believe, in revenue. Jimmy Choo, I think growing the revenues has been fairly consistent since we've owned the company. I think the company's only had one year, and it was during COVID, where it actually was doing less than the prior years. The brand has always grown very nicely, even before we bought the company. Unlike Versace, the store fleet was in pretty good condition when we bought it. The only real major issue was that it didn't have space for accessories. We reduced the assortments by about a third in the stores to put accessories in, which has been a very strong success for us. Again, strong double digit growth almost every quarter since we've gone after trying to make accessories somewhere between 30% and 50% of the business. We actually didn't have to do any renovations in the stores to accomplish that, because of the way the stores are fixtured. What we learned was we started to get more profitable in the footwear business because we didn't need as many SKUs in footwear. During COVID, we reduced SKUs even further. Again, I think the stores look terrific right now. We have probably 50%-60% less SKUs in the stores today than when we bought the company, and we're doing more business, and we're more productive on those SKUs. We've learned a lot from that. With Jimmy Choo, the number one priority for us is to build the accessories business. They're, as I said, somewhere between 30%+ of the business, and it could get up as high as 50%. That will change the margin complexion of the company because when you have a purely footwear company, it always will operate at a lower margin because of the sizing inside that range. We're well on our way. Again, we have our new JC signature that we brought to the company some 2.5, three years ago, which is performing very, very well for the company. Then, of course, some of the traditional Bon Bon evening items that you've seen inside the company, and then the Crystal Madeleine. We now have three strong platforms, again, just like Versace, and we've done that very quickly. As again, you probably many of you in this room know, in luxury, it takes time. You don't just introduce a bag and all of a sudden it flies off the shelf. It takes time for the customer to understand it, desire it, purchase it, then to have their girlfriend see it on their other girlfriends, and then they all want the same bag, hopefully. In footwear, which is obviously the core competency of the company, we've been very underdeveloped in casual. A lot of people might say, "Well, what does that mean?" It's really sneakers. When you look at what sneakers mean today in luxury, I know it doesn't sound luxury, but it actually is a very strong component of most of the best luxury companies in the world, their business. In Jimmy Choo, we have not gotten that piece of the business going to the degree that we ultimately need it to go. We're working at it, we're working at it hard, but we're not where we need to be. If we can get the accessories going, which we feel good about, it's happening. If we can fix this last piece, I think we can increase the productivity of the stores dramatically. That will be the single key when Tom talks about, from a margin standpoint, that's the unlock in Jimmy Choo. If we can get the store productivity up, it's not about their size, it's not about their location, it's not about their leases. We need to do more business in the stores. Another reminder, in all three of our companies, we're very good at e-commerce and digital. That's not an issue for us. What we need to be better at, in particular, we'll talk about when we get to Michael Kors, is clienteling and how important that is. Our luxury competitors are much better at that than we are. That is gonna be a very, very high priority for us over the next year or two, is to really build out... Again, we have strong sales associates inside the company, but we need to give them better tools, and we need to create more of a clienteling atmosphere, which will, I believe, increase the store productivity. That's great. You mentioned kind of unlocking this margin opportunity here at Jimmy Choo. Tom, could you expand on that? What does that mean? Sure. I'll expand and emphasize. Jimmy Choo, we've got it to about a mid-single digits operating margin this year and a goal of mid-teen. In order to get there were two things that John mentioned that are really gonna drive it. First is accessories. As we're selling more accessories, which are not sized, that's going to support gross margins for the brand. We're already seeing Jimmy Choo drive double-digit revenue increases on accessories. We're pleased with the start and think that there's more upside there, clearly with the revenue goals. That will support the gross margin e-expansion for the brand. I'd also mention, with the continued increase in accessories as well as the refocusing on smaller SKUs, they've done a great job over the past two years already expanding gross margin. On the SG&A side, it really is about store leverage. Jimmy Choo with accessories moving through the stores and continuing to do exactly what they're doing in footwear and building out casual, I think has a very big upside to leverage their store SG&A and increase store sale density as again, we noted previously on Investor Day. I think that's the opportunity for Jimmy Choo over the next few years to get to that mid-teens level. I forgot to mention one thing, too, in Jimmy Choo, which I'm very proud of the teams about is, I hope you've all seen our Time to Dare campaign, originally led by Hailey Bieber and then now led by Kendall Jenner. Again, you've seen the results of our database growth in Jimmy Choo. Again, strong double-digit growth in the company, we're getting a much younger customer to come into Jimmy Choo. You know, many people who didn't even know the brand existed. I think some of our marketing initiatives have really helped it. The company was quite quiet over the past few years and not really spending the money that it needed to. Tom's talked about this. You know, we've taken our marketing budgets up for every single brand in the company, and we're gonna continue to do that. You need to in this environment because our competition is very good at what they do, and they've got a lot of money. We need to make sure that we're out communicating with the consumer, and really making sure that we're a part of their luxury assortment. You've covered Versace, you've covered Jimmy Choo. Let's move to the big behemoth brand, Michael Kors. That one, same line of questioning, has a $5 billion revenue target out there. Maybe talk to me about the levers to get there, how much is gonna be driven by accessories versus other categories. Same line of questioning. Third one. Michael Kors is obviously the one we're most familiar with. You know, we made a decision about a year before the pandemic, we were going to change the profile of the Michael Kors brand. In fact, we had come out and said we were gonna reduce the actual revenue targets for the brand, and that was gonna be based upon profitability. We really wanted to get our operating margins back to 25%. We also wanted to reduce promotional activity, which by the way, is primarily a North American, more phenomena. We wanted to elevate the product experience for the consumer. We felt that Michael Kors, being that there is a real Michael Kors, he comes to work every day. He's very engaged. you know, we have our Michael Kors Collection line. We're typically the number one viewed designer brand in the fashion shows here in New York. We're in all the finest stores in the world. We wanted to leverage off where we originally came from, which was more of a luxury position. We started raising prices, and that was before the pandemic. It wasn't just the fact to raise prices. We changed the quality of the product. Again, we edited the assortments, and we saw the consumer respond. We saw the consumer say, "We wanna be a part of this Michael Kors experience." The second thing we did is we went back to Jet Set, and as many of you know, that's where we started. That was our original place of positioning in the consumer's awareness of us. We had walked away from that for various reasons. We went and doubled down on that. It was interesting, during COVID, we saw what did consumers line up for? Brands that had very clear messaging to the consumer, and they saw that as creating value inside of their own, luxury assortments. As you know, part of resale is people saying, "Well, I own something that means a lot, not just to me personally, but has value to it in the future." So that was the positioning that we wanted for Michael Kors. The customer absolutely responded to that. So much so that we originally had reduced our targets to three and a half billion, and we said we'll get to $4 billion over time. Lo and behold, we got to $4 billion, and we were doing that on less SKUs, prices, and accessories that were over 25% higher and really positioning the brand in a more luxury way, and the consumer 100% responded to that. At our last Investor Day, as you recall, we changed that target to $5 billion. Really, the purpose of changing that was to let our investor community know that we had three opportunities. Number one, we are significantly underdeveloped across the group in China in particular, but in Asia. We believe we can double that business for us. Again, that's not stressing or putting any pressure on the brand. That's just catching up to where our competitors are. Second, we have an underdeveloped men's business inside the company, and it's something that we're gonna put a lot of time and energy and effort into. We had started it before COVID and then had to turn it off. Lastly, we're gonna start to renovate our stores. The store profile will have accessories reduced slightly, but footwear reduced significantly. Now about 25% of the floor space will be done with footwear salons inside the stores. We really learned that through our ownership of Jimmy Choo and how the consumer wanted more dwell time. They wanted to be a part of a shopping experience. We think that's very important to how we position the Michael Kors experience with the consumer. You're gonna see that our first one will open in Aventura Mall here in April. Then we're gonna renovate about 100 stores, predominantly in North America, first to create this experience. We believe that that will actually give us another opportunity for Clienteling with the consumer and create higher dwell times inside the stores, create higher repeats for the consumer inside the stores. We're quite excited. We already have a very high penetration of footwear with Michael Kors today. We think this could be another calling card for the company. All in all, you know, the three areas of bigger growth are gonna be Asia, men's, and footwear inside the company. I want you to hear that clearly because we're not trying to put too much pressure on our accessories business. That's where if you go back three or four or five years ago and you say, "Well, what did you learn from what you did wrong?" When you're just pushing to drive a single category when you already own, you know, I think we peaked at almost 30% of market share in North America. Trees don't grow to the sky. We are a lifestyle brand. We have a lot of different categories and a lot of different ways we can communicate with the customer. We feel great about the way the consumer is responding to us. Lastly, once again, you know, the growth rates that we've had in our database, and I think you also saw last quarter on e-commerce, I believe we grew where many companies actually didn't grow last quarter. This is because the consumer is engaging with us and also our teams and the strength around their data analytics is all pointing to what we're doing is heading in the right direction. We need to keep ourselves focused and disciplined. I think we told you that we were not gonna get into some pricing battle during the holiday season. We are very happy that we've made it through probably the most challenging period of time, which is the Black Friday time period. We're very pleased with how our company did during that period of time, and we did it with integrity. We feel good about how our strategies are playing out. That's a great overview of kind of the revenue opportunity there. One thing I wanted to kinda click down on is it sounds like you're really repositioning the stores to increase sales density. I know you're opening a couple new flagships for Michael Kors. Can you walk us through how what the plans are there to increase those density levels in those stores? As I think most of you in this room know, we took the Michael Kors fleet, which is about 870 stores today. That was down from 900 and change. We reduced that by almost 150 stores. We opened some in China, but reduced most of those in North America and a few in Europe, because many of those stores had become unprofitable. In doing that, one of the things we found was we lost some of the, kind of the real strength in brand imaging in some of the key markets, in New York, in London, etc. In New York, we're opening a new flagship store about 11,000 sq ft on Madison Avenue. We're opening a new one on Bond Street, where we had closed many of those stores as part of our store rationalization program. We actually think these major cities can produce very significant volume for us, and it's also a way for us to showcase all levels of the business and men's in particular. Where again, we don't have it in a lot of stores today, and what better place than to start in the best cities in the world. There's more flagships that are planned. These are not being done just to be wonderful places to look at. Ultimately, we believe these will be profitable for us. We're gonna go slowly around this process. The second thing that these stores will do for us is, again, really serve as a training ground for our clienteling initiatives. Where, again, and especially in the major cities, luxury consumers want to be treated in a very special way. They want product not only to have the ability to shop, but they want you to bring it to their homes, and they want you to bring it to maybe their home in a different state as well. We need to be set up to service the customer that way. We think that these larger platform stores will give us the ability to do that, and again, show inside the buildings our Michael Kors Collection, our Michael Kors lines, men's and women's fully visualized for the consumer. Great. We are running down on time. Maybe is there anything we didn't talk about today or a key message you guys wanted to leave the audience with before we let you go? I think we just wanna, again, if you see a smile on our faces, it's because we really believe first and foremost in the power of the three great brands we have. There are gonna be bumps in the road next year. We all know that. They're coming. I think the way that we handled this company through COVID, we paid down debt, we came out more profitable. You know, we are from an earnings per share standpoint, I think we came off two of our best quarters in the company's history. Again, we are gonna continue to do the right things for the brands first. Ultimately, we think the consumer will respond to that. That's great. Thank you very much. Thank you so much for joining us today.