Capri Holdings Limited (CPRI) Earnings Call Transcript & Summary

Hi, everybody. Welcome. So great to see you all in person. I'm Jennifer Davis. Thank you for joining us today for our 2022 Investor Day. Before we get started, I wanted to share a quick reminder about forward-looking statements. So in today's presentation, we may make forward-looking statements, which are subject to risks and uncertainties. Our disclosures are up on the screen now or you can refer to our filings on our website for more extensive risk factors. 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 charges, the war in Ukraine, charitable donations, ERP implementation costs, Capri transformation cost, impairment charges and inventory step-up adjustment and acquisition, foreign currency effects, restructuring and other charges. Unless otherwise noted, all financial information during today's event will be presented on a non-GAAP basis. To view the corresponding GAAP measures and related reconciliation, please view the appendix at the end of the slide presentation. In terms of our program for today, we'll start with our Chairman and Chief Executive Officer, John Idol; and Chief Financial and Chief Operating Officer, Tom Edwards, to discuss Capri's strategy and outlook. We'll then hear management from Versace, Jimmy Choo and Michael Kors. We'll then take a 15-minute break, and you can go grab lunch, come back and we'll finish up with Q&A. And with that, here's John.

Thank you, Jennifer. Welcome, and good morning to everyone. Today, we will be reviewing the strategic initiatives of all 3 of our luxury houses. Capri Holdings is a global fashion luxury group, consisting of 3 powerful iconic brands: Versace, Jimmy Choo and Michael Kors. 5 years ago almost to the day, we announced our intent to become a global luxury fashion group. I believe we have successfully made that transition. We decided to move from a mono brand to a multi-brand portfolio company with an emphasis on luxury because luxury companies have historically had consistent growth over multiple years. So the industry has basically grown at a mid-single-digit CAGR over the last 20 years. In 2021, sales actually exceeded pre-pandemic levels, showing the consumer's strong desire for luxury product. The industry is expected to grow in the mid- to high single digit on a going-forward basis. I'd like to review with you now our Capri Holdings strategic pillars. First, we plan to maximize the full potential of our 3 distinct fashion luxury houses; second, we will continue to create the most innovative and exciting fashion luxury product led by the design visions of Donatella Versace, Sandra Choi and Michael Kors; third, we will deepen consumer desire and engagement with each of our luxury houses through exciting and impactful communication, and you're going to hear a lot about that today; fourth, our seamless omnichannel capabilities will be used to accelerate our revenue growth, again, you're going to hear a lot about that today; and fifth, we're going to build upon our corporate values with communities both internally and externally. Capri Holdings is proud to drive environmental and social change within our organization and around the world. We have formed a solid foundation with our 3 luxury houses: Versace, Jimmy Choo and Michael Kors. I have to tell you, we are more confident than ever right now in our 3 luxury houses and what these brands stand for and what they mean to our consumers. And you're going to hear about that in today's presentation significantly emphasized by the growth in the database at all 3 of our luxury houses in the double-digit range. And we think that's one of the key indicators of the success, health and desirability of our brands. Now I'd like to turn the presentation over to Tom Edwards, our Chief Financial Officer, Chief Operating Officer, to review our financial goals and our initiatives around corporate social responsibility. Tom?

Thank you, John, and good morning, everybody. It is a pleasure to be here with you today. I am extremely excited to share our group's long-term growth outlook. The fundamentals across our luxury houses remain very strong, and we're more optimistic than ever about our potential. Starting with future revenue. I am pleased to share our expectation has increased to $8 billion over time. This increase is led by higher expectations for Michael Kors to reach $5 billion. Revenue has recovered faster than anticipated and we are very confident in the strength of Michael Kors and the further elevation of the brand. We have clear and compelling growth opportunities from the retail channel and Asia that John will be highlighting later this morning. For Versace, we continue to expect the brand to be our fastest-growing business and reach at least $2 billion in revenue. This is led by the strength of the brand and broadening customer engagement. We expect rapid progress in growth initiatives such as accessories. And Jimmy Choo has steadily performed of our expectations, further increasing our confidence in our $1 billion revenue target with a return to glamor, growing the accessories business and maximizing the casual opportunity to look forward to. For future operating margin, we are maintaining our target of 20%. This represents a significant improvement in performance from our pre-COVID results, and it balances investment and growth with strong profitability. By brand, this reflects low-20% range at Versace, mid-teens at Jimmy Choo, in the mid-20% range at Michael Kors. From an earnings perspective, we expect adjusted EPS to increase annually at double-digit rate, reflecting strong revenue growth, margin expansion and the effective use of cash flow. Capri's future revenue, margin and EPS opportunity is clear and compelling. With the combined power of our 3 iconic founder-led fashion luxury brands, we are confident in Capri Holdings' ability to achieve $8 billion in revenue, a 20% operating margin and double-digit EPS growth annually. Now looking back at fiscal '22 for a moment. We're extremely pleased with performance, which sets a very strong foundation and momentum for future growth. For the year, we achieved our highest annual revenue gross margin and EPS in company history. Results were also above expectations for all brands and operating margin expanded significantly, nearly reaching our long-term target. Finally, while the purpose of today is to focus on Capri's long-term opportunity I'd like to take a moment to comment on our fiscal '23 full year outlook. Underlying fundamentals across our luxury houses remained strong. And despite additional FX headwinds, we are pleased to be holding our earnings guidance for the year. For revenue, we now expect $5.85 billion due to an additional $100 million of FX headwind. This reflects the continued strength in the dollar since our last earnings call. And in total, FX is negatively impacting revenue by approximately $350 million or over 600 basis points versus prior year. Excluding FX, our FY '23 outlook is tracking well ahead of expectations we outlined at our Investor Day last year. For operating margin, we're maintaining our expectation of 18%. And for adjusted EPS, we're very pleased to maintain our expectation of $6.85. We look forward to reviewing fiscal year '23 in more detail at our Q1 earnings call on August 9, and we remain confident in our Q1 fiscal '23 outlook. Turning to brand revenue. Our 3 luxury houses position Capri to deliver strong annual revenue growth. At Versace, we're maintaining a future target of $2 billion, which reflects strong double-digit annual growth, and we expect future revenue to nearly double fiscal '22 levels. At Jimmy Choo, we expect revenue in the future of $1 billion, which results in annual growth in the low double digits. For Michael Kors, $5 billion longer-term target results in mid- to high single-digit annual revenue growth. Together, we're confident in our ability to resume double-digit revenue increases as we move beyond the impact of current macro headwinds. Looking at revenue by geography. We expect growth in all regions as our brands continue to resonate with global consumers. We're very excited about the potential in Asia, which remains our largest growth opportunity. Capri has tremendous untapped potential across all our luxury houses and is underpenetrated relative to peers. Over time, we'll be adding an additional $1 billion of revenue in Asia as we look to the future with penetration growing from 17% to 25%. For EMEA, the region has rebounded faster than anticipated, and we expect continued growth with momentum driven by robust local consumer demand and further support as international tourism recovers. In the region, we expect an incremental $400 million and penetration in approximately the mid-20% range. For the Americas, recent growth exceeded our expectations, and we expect continued growth led by e-commerce and omnichannel development resulting in an incremental $550 million in revenue. We expect all 3 brands to contribute to Americas growth and penetration to be eventually approximately 50%. Now looking at revenue by channel. Our focus is to expand our retail business as we enhance customer engagement with retail penetration ultimately reaching 76% of total revenue. E-commerce within this represents an incremental over $1 billion in revenue opportunity as we leverage our large and growing databases and make significant investments in e-commerce capabilities. Retail store sales increased from a combination of new stores and higher sales densities. Our new store openings are coming primarily from Asia, but will be in other regions as well. And higher store densities are driven by our product initiatives, clienteling, store renovations and other actions that you'll hear more about shortly. Wholesale remains an important and profitable channel. It is complementary to our own stores, providing additional points of access. And over time, we anticipate some growth in the channel as travel retail resumes. As we look at our overall store base, we plan to open an additional net 130 stores targeting 1,400 stores ultimately. We'll be located in the most fashionable cities and sought-after shopping destinations in the world, and our store plans include renovations across our fleet to ensure the most engaging and relevant customer experience. For Versace and Jimmy Choo, we continue to expect 300 luxury stores over time. And for Michael Kors, we now anticipate 800 stores. This reflects a significant growth opportunity in Asia, better performance in the Americas as we saw over the last years, and we'll continue to selectively optimize our fleet. Turning to investments. we plan to spend $300 million annually to support growth and strategic initiatives. Over half of this will be spent on stores. And as we just discussed, stores will remain a critical and compelling part of our brand and customer engagement. This spending includes both new store development as well as renovations. We plan to continue strong investments in digital technology, supporting the $1 billion-plus growth in e-commerce. And continue to expand our e-commerce and analytics capabilities across all our brands as well as enhance our omnichannel capabilities. We'll also build common IT platforms for a strong base as a global luxury group. And finally, we plan to invest and expand European luxury manufacturing. This ensures quality, capacity and flexibility for our luxury brands. We will be increasing our luxury footwear production capacity for our already acquired factory and looking to acquire and build capabilities in accessories. Now turning to our capital allocation. Capri generates robust cash flow and has a very strong balance sheet. We are a very careful steward of cash and debt over time. Balancing investment in the business and return of cash to shareholders. As our business grows, this supports further increase in our free cash flow levels. In terms of priorities, our first priority is always to invest in the business, as we saw on the prior slide. Our second priority is to return cash to shareholders via share repurchase. This is supported by our strong cash flow and low leverage, and we also believe our share value is compelling. Third priority is to repay debt, which we will do over time. We're very comfortable with our leverage ratio and longer term, we continue to remain interested in a fashion luxury acquisition. At this time, we're focused against delivering against our 3 amazing luxury brands and believe the growth opportunities with our current portfolio are extraordinary but we'd certainly like to be in the conversation of other fashion luxury groups with a heritage and European heritage come up. Now I'd like to take a few minutes to discuss our corporate social responsibility strategy, which is divided into 3 areas: our world, our community and our philanthropy. Our world is changing faster than ever, and we are committed to doing our part to protect it. Our environmental commitments are centered around 5 key areas: first, we are focused on reducing our carbon footprint by striving to achieve carbon neutrality and sourcing 100% renewable energy for our direct operations by 2025; we're also setting science-based greenhouse gas reduction targets across Scopes 1, 2 and 3 this year. Second, we're committed to sourcing lower impact materials for our products and are working to trace our entire supply chain to the raw material level by 2030. Third, our goal is to source at least 95% of our leather from the leather working group gold or silver tanneries by 2025. Fourth, we're working to reduce our operational waste by 2025, starting with a focus on our packaging. And fifth, we are committed to partnering with our supply chain partners to reduce water use and eliminate hazardous chemicals by 2025. Enhancing our community and taking action to drive diversity and inclusion is at the heart and soul of our company. We are proud to have created the Capri Holdings foundation for the advancement of diversity in fashion and have contributed $20 million to support the foundation's mission of driving diversity in the fashion industry. Recently, the foundation announced a new scholarship program with Fashion Institute Technology, Howard University, Pensole Academy and Central Saint Martins, University of the Arts London to help students from historically underrepresented communities pursue degrees in fashion and merchandise. And philanthropy is also at the core of who we are at Capri. Each of our brands is committed to aiding our philanthropic partners. At Michael Kors, we continue its fight against hunger with its long-standing partnership with God's Love We Deliver, and the United Nations World Food Program. To date, in partnership with the United Nations World Food Program, Michael Kors has delivered over 30 million school meals to children in food insecure regions of the world. We recently announced a $10 million commitment to the newly formed Versace Foundation, which is dedicated to promoting the advancement of quality, wellness and safety for the LGBTQIA+ community. The Jimmy Choo Foundation formed an ongoing global print partnership with Women for Women International to further the foundation's mission of empowering women and improving their quality of life through education and enterprise. We are pleased with the progress we are making against our CSR strategy, and we look forward to continuing to share the work we have done to create a more sustainable and equitable future for all. I would like to take a moment now to introduce Cedric Wilmotte who will kick off the Versace presentation. Cedric has been with the company for 15 years. He is the long-term CEO of the Michael Kors Europe business, where he built that into a major presence for the company and is now our CEO for Versace. So it's a pleasure, Cedric. Thank you.

Thank you, Tom. Good morning, everyone. My name is Cedric Wilmotte. I'm the CEO for Versace. It's a pleasure to be with you this morning and to give you a little bit more details as to how we're going to get to our exciting $2 billion coming very, very soon. I will be supported by Jenny Pham, who is our Chief Brand Officer. We will take you through several aspects of our business going forward. The agenda of the day for Versace will be, first, we'll give you an update from a brand vision perspective. Then we'll talk about product, what is our product strategy going forward. We will also discuss our customer experience focus and what are the initiatives that we're putting in place in order to support the $2 billion marker. And then finally, I will hand over to Tom, who will talk to us also about the financial outlook for Versace. But I'm pleased and honored to introduce you to Jen, please. Thank you.

Thank you, Cedric. Thank you so much. I'm Jenny Pham, and I'm the Chief Brand Officer, and I got the pleasure today to talk to you about brand marketing. First of all, I've been here 2 years and in the short amount of time that I've been here, I've already seen such tremendous and impressive growth. So let me start by sharing our 3 brand objectives. First, we're going to focus on brand heat. We are and always have been one of luxuries most talked about and relevant brands. While we maintain our brand heat, we will capitalize on this momentum to engage and to convert. A second objective is product desirability. This past year, our product has been seen on fashion's most influential people, whether it's been red carpet, Instagram, you name it. We will continue to do so with impactful product placement. Last but definitely not least, our last focus will be on client acquisition. We're going to continue to build our already fast-growing database. We will be laser-focused on luxury clienteling and loyalty building. Up next, I will share a special little video, which give us a preview of our exciting fall/winter '22 collection in the new Greca Goddess bag. Versace stands for fashion, it stands for culture and Italian attitude. At the heart of it all is Donatella Versace. So who better to tell us about her inspiration about the new It bag and the seasons collection. [Presentation]

To Donatella, unlocking your own inner strength and dare I even say, Goddess, is the ultimate luxury. So next step, I'm so excited to show you our amazing fall/winter '22 campaign. It stars Lilly James and was shot in beautiful Rome. Some of you may recognize her as the English rose from Downton Abbey or Pam from Pam & Tommy or even as a Disney Princess, but one thing is for sure. Nobody has seen her like this. In true Versace form, once we put Versace on her and unlock her inner goddess and confidence. Alongside Lilly, you can see the new Greca Goddess bag also starring in the campaign. Here's another image from our campaign that shows off our platform heels. They're both chic and bold, and our footwear has been one of our fastest-growing categories. And actually, one of the most talked about products in social media, it has its own TikTok following. Versace likes to make a statement and our footwear is no different. And in this image, we're really living up to one of our pillars that we stand for, fashion. Rounding out our fall/winter 22 campaign, here's an image with a focus on our ready-to-wear. And of course, we cannot forget our super strong men's campaign. We recently launched Men 2.0, where we evolved our men's image to capture more sleek and modern opulence. Now over to something that's incredibly important to us in our growth, which is obviously attracting a new audience. We're hyper focused on a true luxury consumer besides product-centric marketing tactics, we also have an emphasis on building loyalty and building advocacy. Whether it's in group settings or one-on-one Clienteling, we have tailored our tactics in order to give better services and allow us to truly create a higher value relationship with our clients. And in order to effectively roll out our 360 plans, we have combined powerful storytelling data with analytics. We will continue with brand-building activities, whether that may be runway shows or A-list casting that Versace is already known for. And on the other hand, we're continuing to gather data to make better decisions to help with engagement and conversion. The combination of this will help us in increase acquisition, drive active consumers and also cultivate loyalty and again, to keep growing the value of our client relationship. The 360 marketing plans that I've just shown you is leading to one of our key KPIs, and that is the fast growth of our database. Over the last 5 years, we have seen an average growth of 25% year-over-year, even seen as high as 40% year-over-year recently. We're so excited to have already achieved $4.5 million in the database so far as we've celebrated recent wins with CRM, communication, social media and other powerful acquisition tactics. With the power of Versace's marketing, we're confident our plans will lead us to our long-term goal of $20 million in our database. And now I'll turn it over to Cedric. Thank you so much.

Thank you, Jenny. What an exciting moment for the brand. Thank you. So another aspect of our business. Let's talk a little bit about product. Obviously, product is at the core of our strategy. And I would like to spend a few minutes with you in order to tell you more about this strategy. So the strategy is based on 4 pillars. Today, the first one is really about reinforcing and amplifying the iconic brand codes that we have built over the past few years. The objective is to build a $1 billion accessory business while continuing increasing also the growth of our footwear business to $300 million. And we will also capitalize on those last 2 growing the handbags and the footwear for women in order to establish our authority in the men's accessories. How are we going to do that and what are our brand codes? So from a women's perspective, you can see that there are 3 areas where we're really, really performing extremely well. And our goal is really to work on amplifying those iconic goals going forward. So the Greca is our new and elevated hardware, and it's soon to come in the launch of our new -- Greca Goddess bag, sorry, that Jenny just talked about. The Medusa is our evergreen symbol resonating throughout all our collections, whether it's in men's or in women. While the Barocco V was launched with our Virtus bag and expanded to other departments as well. This brand codes inform everything we do in terms of design and in terms of merchandising in a company. And they are the iconic and luxurious foundations of Versace. On this slide, you can see the translation of these iconic foundations into our product. These 3 pillar lines appeal to different customers, allowing us to provide a complete and diversified offer to our audience. Our new Greca Goddess bag due to launch next month, clearly appeals to a more sophisticated audience and clearly shows the essence of our brand and our luxury stake on women's handbags. The Medusa available in a diverse set of colors and shapes, is perfect for those looking for a very Versace bag. While Virtus is our elegant translation of luxury classism for more timeless client customer. So how are we going to grow this $1 billion business? We're going to continue strengthening our authority in the luxury segment for leather goods. We will focus on the existing pillars I just presented to you, and we will expand our assortment and capitalize on the launch of Greca Goddess. With the bags, I'd like to talk to you also a little bit about our footwear. We're very, very successful. We're very proud of this product category as well, and we're very confident that this is going to help us to continue growing our business going forward. As you can see, our shoes follows the same logic and consistency, whereby the codes that I mentioned before are consistent and present in all products, including shoes. Our footwear strategy stands on innovation while continuously refreshing and reinforcing the iconic styles. The chain, as you can see on the left side is the expression of our glamorous style. The Medusa is really our iconic Versace code. While Virtus is our beautiful [ barrack ] embellishment that adds luxurious element to the brand. We also have a very strong sneaker business, and I'm proud to say that we've just launched the new Odissea that you can see on the left. It's our newest futuristic slip on design, it has been very, very successful. And you can see on top, again, we consider Medusa. We've also built a very, very strong business on what we call the Trigreca. It is the middle sneaker. And Trigreca has shown for us consistent contribution to the business, thanks to his iconic Versace element, constantly reinterpreted the relevant manner. And then finally, we have our more classic low-top and lesser design, La Greca, that appeals to a broad and diversified audience, thanks to its versatility. So same as handbags, we're going to take that business to $300 million. We're going to continue also capitalizing on the success of the formal footwear. We will amplify the success of the existing sneaker lines, and we will maximize our new platform, which is the Odissea. Finally, with regards to men's, we will follow the same strategy and recapitalize on the successful development of our women's business in order to anchor the men's leather goods assortment and gain the authority in that category as well. Let me spend some time out to talk to you a bit about customer experience. John mentioned before, but it is really at the center of everything we're doing. It's the balance between brand and consumer. And I'd like to take you through some of the initiatives that we're working on as a brand. So first and foremost, besides our product, we want to continue creating customer engagement. We got great marketing coming up, okay? But one of our top priority is really how do we stay relevant and engaging with the consumer. So we will be working on strengthening our customer experience and we will do that by reinforcing our customer experience by enhancing our current technology. We'll be looking at launching a new clienteling app. We will implement virtual assistant in our stores. And then finally, we're going to roll out our store -- in-store order fulfillment into more locations. We believe strongly in stores. Tom has mentioned how the store fleet within Capri is going to grow. It is the same for Versace. We believe that we also have a duty to bring the traffic back to our stores. And we're going to work very hard on increasing our customer insight in order to know more about them and be relevant and delivering the right messages to bring back into the store. We're going to be looking at doing more geo marketing and serving them messages that are relevant. While we are also going to continue physical engagement, driving emotion connection with our customers through pop-ups and events in our store. What you see on the right is actually one of the pop-up we had in Dubai following the very successful collaboration we had with Fendi called Fendace a couple of weeks ago. One of our largest opportunity is also to drive store density. Currently, our store productivity is about $1,000 a foot. We want to take that productivity to $2,000 a foot. In order to do that, obviously, we'll have all the initiatives that were mentioned before that are going to support that increase in productivity in our stores. But we're also going to work within the four wall of our stores, and we're going to elevate our retail experience. We're going to drive a stronger culture of performance and we're going to enhance also our in-store capacity. Lastly, as Tom mentioned, we currently have 225 stores across the world. And our objective is to grow to 300 stores, how we're going to do that. We're going to leverage global luxury retail locations. We will also continue focusing on key cities. We will continue rolling out our new store concept. And then as Tom mentioned as well, we have a big renovation program, which should take us by 2025 to about 90% of our fleet fully completed, renovated or new. Just 2 minutes. This is our store in Saint-Honore, one of the most luxury streets in Paris. We're surrounded by some of the best and most luxurious brands as well. This is a ground floor. You can see the focus that we have on bags. We're very proud of this store. This is our footwear and you can really see the element between women's dress, shoes and sneakers. This is our London store on Bond Street, same as in Paris. We look at it with all our competitors. This is our women's wear floor. And this is our exciting menswear floor as well. Let me finish now on e-commerce. As you can imagine, if e-commerce has grown very, very quickly for all of us here at Capri, including Versace. We closed last year at about $140 million. And our objective is to take that business to $0.5 billion in the next couple of years. To do that, we're going to continue, what Jenny talked about is really about accelerating our database and our knowledge about customer through driving more customer acquisition, but also retention. We're going to continue looking at our UX on our .com and really figure out how to improve and really have one of the best of the e-commerce site and user experience. And then we're going to focus on making sure that the content we're serving on the site is actually strongly linked to our objective to grow our lever good category. On that note, I would like to pass over to Tom, who's going to talk to us about the financials. Thank you very much.

Thank you, Cedric. As you heard, we're extremely excited about the momentum and growth opportunity for Versace. Longer term, we continue to see strong double-digit revenue growth with an expanding operating margin. And for revenue, we continue to anticipate, again, at least $2 billion in our future. Versace is resonating with consumers as one of those prestigious coveted and highly recognized names in luxury. We have an opportunity to expand women's accessories to $1 billion over time. And I would point out that since last Investor Day, revenue targets now incorporate FX headwinds of around $300 million. So our forecast of $2 billion actually reflects an increase in expectations on a constant currency basis from our prior discussion just a year ago. For operating margin maintaining the future target below 20% range, and we're confident as the business grows we can expand margin. Accessories growth will help that as well as expense leverage on higher revenue, including the increased store sales densities. But it's important to note that we will continue to invest in Versace to sustain profitable growth for the brand. Touching briefly on Versace's fiscal 2022 results. The brand had an amazing year. Revenue was well above expectations. We're thrilled with the progress we're making in accessories where revenue increased 90% over prior year. So it is certainly the future forecast, but it is also something that is happening right now. Operating margin expanded significantly this past year towards our long-term target. For FY '23, we're slightly adjusting our guidance. Revenue, we now expect $1.175 billion due to additional FX headwinds and for operating margin, we're maintaining our expectation of approximately 16%. Now looking at regional revenue. We expect strong growth in all areas. In the Americas, growth has significantly exceeded our expectations. It reflects the initiatives that Cedric spoke about and it's capitalized on the high brand awareness and engagement of Versace with consumers. We have an opportunity to continue to expand in the Americas with this growing database and to appeal to a broader customer by reinforcing our brand codes. We now believe the Americas will be the largest region for Versace, with sales increasing $350 million from fiscal '22. In EMEA, we anticipate solid continued growth. This reflects increased store sales densities and higher e-commerce. In the region, we expect over $200 million of growth from fiscal 2022 to the future. And in Asia, we couldn't be more excited about the future growth opportunity for the brand. Versace is really untapped in the region. It's dramatically underpenetrated relative to peers where many luxury peers generate over 40% of their revenue from Asia. So as we look at the region, Versace is expected to add $350 million of revenue in Asia from fiscal '22. And generate strong double-digit annual growth in the region going forward. Now turning to revenue by channel. Nearly all of Versace's future growth will be from our own retail channel. E-commerce is expected to grow strong double digits annually. Retail stores will also grow double digits, led by both new store openings, particularly in Asia and significantly higher store sales densities. As a result, retail penetration is expected to increase to over 80% of sales over time. For wholesale, we plan to continue to focus Versace's wholesale business on the pure luxury positioning. And ultimately, wholesale will comprise approximately a low teens percent of total revenue. In conclusion, for the financial part, we are confident we can continue to grow Versace revenue at a strong double-digit rate to at least $2 billion while expanding operating margins to the low 20% range. Now I'd like to turn the presentation back to Cedric for some closing remarks.

Thank you, Tom. All right. Our last slide, just to remind everyone how we're going to get to $2 billion. So first and foremost, we're going to continue leading with Versace runway glamour. We'll continue reinforcing and amplifying our brand code. We will significantly grow our accessory business across men's and women's. We will double the size of our footwear. And then finally, we will continue focusing on driving retail and e-commerce to its full potential. Thank you very much. And now I'd like to pass to Hannah, who's going to talk to you about Jimmy Choo. Thank you very much.

Good morning. It's very nice to be here in person this year. I'm Hannah Colman, and I'm delighted to talk to you about Jimmy Choo. I've actually been with Jimmy Choo for over 25 years as one of the first employees. Over the years, I've developed a deep understanding of every aspect of the business, and I have been CEO for over 2 years now. When I first started as CEO, I went back to the DNA of the brand. We bought back glamor. We built out our brand codes, and we focused on what our clients love and on delivering with consistency. I'm looking forward to sharing future growth opportunities with you today, and I'm more optimistic than ever about the growth potential of our brand. I'm going to turn over to Helene Phillips, who is our Chief Client Officer, to take you through the brand vision. Then I will cover product and customer experience before turning it over to Tom to walk through Jimmy Choo's financial outlook. But before that, I'm going to show you a video that I think really reinforces Jimmy Choo's brand identity. [Presentation]

It's a pleasure to be with you today. Let's start with brand vision. As you just saw, Jimmy Choo is glamorous, daring and confident. We lead with glamor in everything we do. Here's a quote from Sandra Choi, our Creative Director, "Glamor underpins the essence of Jimmy Choo. Our glamor is dynamic from day to night. It is the magic ingredient that unites our collections and community, sparking joy and desire." Last year, we launched a strong visual identity that we call Time to Dare. All our marketing campaigns reinforce our DNA of glamor, daring and confidence. We capitalize on our brand heat through our lead talent strategy as seen here with Hailey Bieber and supported by our wide community of influence. Since the launch of Time to Dare, we have seen high double-digit increases in traffic and engagement originating from our digital channels, fueling brand heat. This is our summer campaign. It was shot in Miami earlier this year. Here, you see Barbara Palvin, with our iconic VARENNE bag, exuding confidence and glamor. This image celebrates the Jimmy Choo glamorous luxury lifestyle, featuring Precious Lee. Jimmy Choo's consistent visual identity is playing out. This time casual through a confident and glamorous lens. We translate glamour across multiple product categories, including footwear and accessories. Not limited to a time or a place, glamour every day, anytime, anywhere from formal to casual. Our database has grown at a CAGR of approximately 25% since fiscal '18, increasing to 30% last year. We have a future goal of $10 million. We have seen consistent growth across all regions and all customer segments. This gives us confidence that our 360-degree marketing strategy is not only attracting new audiences, but also reinforcing the core. Our communication strategy combines storytelling with data analytics, driving acquisition and engagement. We speak to the new Gen Z and young millennial client through our rich collaboration strategy, digital innovation and a balanced collection architecture. To engage our core clients, we continue to elevate the product offer, introduce new product categories and expand CRM programs. We leverage brand heat to accelerate regional potential. We have increased investment in regional marketing. We have built a regional ambassador program and community of influence. Here, you can see Victoria Song Qian, our ambassador in China. Last year, we took on Son Na-eun in Korea. And this year, we have a new brand ambassador in Japan, Ayami Nakajo. Our globally-tiered influencer program is well balanced across regions and reaches over 475 million people worldwide. To support our local client focus, we have a robust regional event program, which is delivering very positive results. A majority of our store fleet now have a full suite of clienteling tools. Clients who we touch and interact with through these tools deliver a 25% higher average spend. We grow our customer loyalty through engaging client outreach, inspiring brand storytelling and enhanced client services. Underpinning all of these initiatives, we're fostering a client-first culture across the organization. We are very pleased with the results of our time to their strategy, and we're excited to continue to build on the success. Now I'm going to hand back over to Hannah. Thank you.

Thanks, Helene. I'm going to go over now the product. So our product strategy is anchored across 4 key pillars. The first, reinforcing our brand codes, expanding our accessories, maximizing our casual footwear opportunity and building on lifestyle. We established our brand pillars last year, and our product strategy is really centered around reinforcing these codes across all categories, the JC Monogram, Crystal and the Pearl, a Jimmy Choo's definitive design details that are at the core of our brand DNA. Our second pillar is accessories. We will be expanding our accessories mix to 30% of the business. This means doubling sales in this category within the next 2 years. We will amplify the collection visibility through repetition of our key icon bags. We are seeing significant double-digit growth in our VARENNE and Bon Bon families, and we will consolidate our leadership in evening while further building on the growth we are seeing across all functions here. Here, you can see our JC Monogram in a signature repeat pattern on a black leather tote. Next to that, our Madeline handbag. This family ties back to our Crystal pillar with the iconic Crystal C buckle. And on the far right, you see our newest icon, the VARENNE Quad, shown here featuring our Pearl brand code detail on the strap. What we're really demonstrating on this slide is consistency. Consistency in which we are reinforcing the brand codes across product in order to reinforce those in the mind of our customer. Next, we will be capitalizing on the casual footwear opportunity at Jimmy Choo. We will double this business in the short term by reinforcing our product offer and leveraging brand codes in this segment. We have a significant opportunity to grow sneakers to be at least 25% of footwear sales. Beyond sneakers, we have the opportunity to build on our casual boot assortment as we reinforce our authority in off-duty boots, such as our iconic combat silhouette, one of which you see up here. Additionally, we're expanding our casual footwear offer with new functions such as pool slides, rain boots and snow boots. Jimmy Choo is a luxury lifestyle house. Between our fragrance and eyewear licenses, we generate sales of approximately $160 million a year at retail, reinforcing the power of the Jimmy Choo brand beyond the core product categories. We launched jewelry and beauty within the last 12 months and sales are exceeding expectations in both categories. We are committed to providing best-in-class customer experience across all of our channels. Jimmy Choo has over 240 stores in leading luxury locations around the world. We are rolling out an enhanced store concept across stores in select cities to allow us to showcase our complete product strategy. We have empowered our stores, as Helene mentioned before, with a full suite of omnichannel and clienteling tools and services, and we are expanding and elevating on our retail excellence program. Let me transport you to Italy. Here is our Milan flagship store on Via Sant'Andrea. We recently refurbished this store with our elevated concept. We applied a new visual merchandising and category zoning program, both here and in all of our stores worldwide to reinforce our product growth strategies. Here, you can see a section of the store dedicated to glamour. On the next slide, we are showing you a strong focus on accessories with a dedicated room to this key growth category. This section of the store is fully focused on showcasing the casual product of the house with a strong focus here on sneakers. In order to drive traffic to our stores, we consistently roll out 360-degree global marketing campaigns. We leverage the clienteling tools that we have, along with compelling and high-touch point loyalty programs. We deliver a strong calendar of retail store animations, which successfully attract new and existing clients back to our stores. And on the right-hand side here, you can see an example of a retail animation program that we created last year. This was for our Jimmy Choo and Eric Haze collaboration. We installed 10 pop-up animations globally with a focus on Asia. We coupled these animations with a digital-led marketing campaign, which saw the launch of our first NFT. This collaboration was a great example of how we drive traffic, new client acquisition as well as brand heat. We expect sales densities to increase to the mid- to high teens over time. Key drivers of this growth will be accessories and expanding our casual footwear assortment. Coupled with the work that we are doing to enrich our omnichannel services, enhanced CRM and the elevated retail excellence program. Jimmy Choo has a world-class luxury retail locations around the world. And over the next several years, we plan to strategically expand our retail footprint with the greatest growth opportunity coming from Asia. Globally, our e-commerce business grew nearly 50% in fiscal year '22 after increasing strong double digits in fiscal '21. We have a number of initiatives to drive future growth from our elevated site redesign to the continuation of our localization strategy, and we will continue to enhance our use of data analytics and client insights to increase both traffic and conversion. I am extremely confident in Jimmy Choo's path to $1 billion as we continue to execute on our strategic brand initiatives across product, brand and channel growth. And with that, I'm pleased to hand over to Tom, who's going to step you through Jimmy Choo's financial outlook.

Thank you very much, Hannah. Jimmy Choo has great momentum and really exciting future growth potential. So longer term, we see continued low double-digit revenue growth with an expanding operating margin. For revenue, as we've noted, we continue to anticipate approximately $1 billion in the future. And we're going to achieve that by leading with glamour and capitalizing on iconic brand codes, growing the accessories business and maximizing the casual opportunity. For operating margin, maintaining a future target of approximately 15%. We are confident that as business grows, we can expand margin. The primary driver of this will be expense leverage on higher revenue, including increased store sales density. Accessories growth will also help margin, but we will continue to invest to sustain profitable growth for the brand as well. Touching briefly on fiscal '22, Jimmy Choo significantly exceeded our expectations. Revenue was $100 million above expectations. And we generated operating profit that was 1,500 basis points above the prior year, so significant leverage on that change. For fiscal '23, we are maintaining our guidance for the brand. For revenue, we expect $650 million despite some additional FX headwinds and for operating margin, maintaining our expectation of 5%. Now looking at revenue by geography. Jimmy Choo's strong regional marketing focus is expected to drive growth across all 3 regions. In the Americas, growth has already significantly exceeded expectations, and we continue to see our opportunity with sales increasing by over $125 million towards the future. Our goal is to significantly grow e-commerce revenue in the region to strategically expand our store network and increase productivity with select wholesale partners. In EMEA, we anticipate continued solid growth with sales increasing by $100 million over time. And growth in the region is expected to come as we roll out enhanced store concepts and increase store productivity. In Asia, we're incredibly excited about the future for Jimmy Choo, tremendous untapped potential and underpenetrated as well relative to luxury peers as who generate over 40% of the revenue in the region. Asia is expected to be the larger contributor to growth, adding an additional $150 million over time. And this will be driven as we strategically expand our store network in both China and across Southeast Asia as well as our already large business in Japan. Looking at revenue by channel for Jimmy Choo. The vast majority of the brand's future growth will come from our retail channel. Approximately half of that growth within retail should come from e-commerce, which we expect to grow rapidly as you saw. But we also expect revenue growth from new store openings and higher sales densities. As a result, retail penetration is expected to increase to over 80% of sales over time. Wholesale remains an important channel, and we anticipate wholesale sales will increase at a lower rate than retail. In summary, we're very optimistic about Jimmy Choo's future growth opportunities led by expansion in accessories and casual footwear and confident in our future revenue target of $1 billion and at mid-teens operating margin. Now I'd like to turn the presentation back to Hannah.

Thanks, Tom. So just in summary, Jimmy Choo's path to $1 billion. We will achieve this by engaging and exciting both our new and existing customers under the creative direction of Sandra Choi. We will drive retail and e-commerce to their full potential. We will reinforce our brand codes, significantly grow accessories and double the size of our casual footwear business. I am more optimistic and confident than ever about the future brand potential of Jimmy Choo. Thank you so much for your time today. And with that, I'm going to hand over to John for Michael Kors.

Thank you, Hannah. Thank you, Helene. Thank you, Cedric, and thank you, Jenny. Now I'm going to talk to you all about Michael Kors. As Tom mentioned earlier, we're very excited about the opportunity that Michael Kors has for this company. As you know, during -- prior to the pandemic, we really reset our strategic initiatives for Michael Kors. We looked at the business and we decided to actually shrink the business to be able to look at it more on a profitability basis and a bit less on its revenue growth. Those strategies have turned out to be very successful. We focused more on the consumer, and that has resonated, and we've seen a much quicker rebound than we had originally anticipated. So today, when we go through the presentation, we're going to describe to you why we think Michael Kors can reach a level, that's quite frankly, will be at historical high. And that provides great opportunity for the group. And we will do that while maintaining our profitability objectives. So I want to be very clear that, that still remains the underwriting -- overriding principle for the group is to maintain our profitability objectives, which again, Tom will talk more about in his portion of the presentation. We're very excited about the future. And again, I'm going to speak to you about that in a minute because as you've heard in all of our presentations, we've been growing our database double digits. And this really again, we think is an underwriting KPI for the company on how is the consumer responding to our brands. You've heard about how that is happening at Versace, and how that's happening at Jimmy Choo, and at Michael Kors, the same type of reaction is happening. And I really want to applaud the people who are giving your presentations today, in particular, from our marketing areas, being able to use the tactics to really raise consumer awareness, and then to take the data analytics and convert that into revenues for the company and customer acquisition and engagement. I also again want to complement Michael Kors, my business partner, who's done an outstanding job. We went through a very difficult period, as you can all imagine, during the pandemic. And I -- in my concluding comments talk to you about the great resiliency that our teams and our brands have really delivered. But first, let me turn -- I'm going to go through today our brand vision. Obviously, I'm going to talk to you about product and why product is so important and what we're doing on that front. Our customer experience, as you've heard from the other brands as well. And lastly, we'll turn it over to Tom for his financial outlook for the company. But first and foremost, let me turn it over to Francesca Leoni, our Chief Brand Officer, who will talk to you about the brand -- the Jet Set brand vision of Michael Kors.

Good morning. My name is Francesca Leoni and I'm the Chief Brand Officer for Michael Kors. Today, I'm here to share with you our brand vision, which is all about Jet Set. Jet Set has been part of our brand from the very start, and we will continue to own it as we move forward. When we say Jet Set, we talk about glamour, movement and excitement. We often describe it as a lifestyle, which it is but it's also feeling, a feeling of confidence and optimism, and it's about creating desire. Here's a short video that captures that spirit. [Presentation]

We travel for fall to London to capture the glamour of this magnificent city. As we continue to work with Bella Hadid for the past 4 years. She embodies the ultimate Jet Set and has over 53 million followers and fans. The images we capture with her in London, featured the best-selling Hamilton bag, which you can see here in this image, which continues to be covered globally. In this next image, Sora Choi, our Korean ambassador model, is featured with our Parker bag. It's a new handbag that introduces the new Empire hardware, which will also be the focus of other digital campaigns this fall. With this image, we continue to highlight the SoHo handbag here seen in a new iteration of sleek ginger print. And in this image here, of Alten in London under the London Bridge. We have our iconic and signature patterns, excuse me. And to further reinforce our -- sorry, I'm so sorry, my thing is going too fast, our men's business. This has been significant because our men's business is increasing very strongly. And Signature, which you see here in this image, comprises of 50% of our accessories business. To further extend the reach of our brand, we collaborate with partners who reinforce our Jet Set heritage. We were very excited to partner with James Bond and No Time to Die last year for a collaboration that was sleek, thrilling and universally embraced. With this partnership, we launched our TikTok platform that reached over 500,000 followers in a matter of days with an influencer-led challenge that went viral globally. Today, in order to reach different consumers, we take a layered approach to messaging. We tell our brand story in ways that deliver the right message to the right consumer at the right time. Using data analytics, we're able to segment our audience and personalize our marketing to deliver the most relevant messages based on behavioral insights. We are also refining the consumer experience on our e-commerce site and e-mails creating big bold brand moments that are integrated throughout the shopping experience. The same combination of brand storytelling and data analytics has allowed us to increase the lifetime value of our customer. It starts with the Jet Set brand vision and our ability to create desire and brand awareness, then through layered storytelling and personalize messaging, we move consumers from the desire to the purchase. Then we continue to engage with these customers in the places and the ways they want to engage with us. It's a relationship that builds brand loyalty and turns occasional purchasers into our most valuable customers. Our Kors VIP loyalty program, which we launched 4 years ago was an investment in that relationship, and it's been a huge success. The program has now reached 7.4 million members in the U.S. alone, far exceeding our initial expectations. Now I'd like to turn to our database. We continue to see tremendous success in driving global database growth. Since 2018, we've averaged over 20% compounded growth annually, which is extraordinary. In fiscal '22, we reached 61 million consumers, and our goal is to build that to $100 million in the near future. We're really excited about the success we're seeing and the plans we have for the future. I'm extremely proud of all the work our teams have done to take us to this point, the power of our Jet Set storytelling to create a dream and the database to leverage and to share that dream are an unbeatable combination. Thank you, and now I'll turn it back to John.

Thank you, Francesca. So I'd like to talk a little bit about the product because that's a big part of what we do. And again, just reflecting on what Francesca just showed you. Jet Set is something we started when we launched this company or bought this company back in 2003. And it's been a part of our DNA. And when you think about Michael Kors, think about 40 years of being in the luxury business. We just celebrated that last year. When you think about Versace, 40-plus years of being in the luxury business. And think about Jimmy Choo, 25 years of being in the luxury business. And what makes these companies so successful is first, the brand DNA, and you've seen that reflected in the various presentations about product. And as we say at Michael Kors, Jet Set storytelling can't happen without great product. And so what we started to do about 3 years ago prior to the pandemic was we made a decision that we were going to elevate the product in Michael Kors. So what does that mean? That means, first, we were going to reinforce our brand codes. Second, we were going to raise prices and quite frankly, raise the quality of our product. And thirdly, we were going to reduce the SKUs inside the company by a significant amount. And to date, it's been over 30%. We wanted to deliver better product, more focused and create an exciting engagement with the customer. And that has clearly happened for us. So we talk about product, as I just mentioned, we're going to go through the brand codes here in a minute. We're going to expand our accessories business to $3 billion. Now many of you may say, well, what does that mean? Does that mean in North America, are you going to start discounting again? Because I'm sure at some point, we'll have that question today. No, that's not the right answer. What you're going to hear about in this presentation is how we're going to expand our business, in particular, in Asia, where there's massive growth opportunity for all 3 of our luxury houses. And that will be driven by accessories. Second, we have a very, very strong footwear business. And I'm going to talk to you again during the presentation about how we're actually going to reset the formats of our stores to increase the footwear presentation inside of our store and create a much more luxurious environment. And I have to say, we learned that from our friends and the family at Jimmy Choo. We've learned quite a bit. What a spectacular job they do, and I think you saw before from Cedric's presentation about how powerful that is in Versace. So we think this is a great opportunity for not only Michael Kors but for the group. And lastly, we know we are underpenetrated in men's. And this is a category, while we believe the growth is $200 million from where we are today, it has much more upside than what we're even going to present to you in this presentation. So as I go through this, I think you'll understand why we feel comfortable with this longer-term goal of $1 billion additional revenues for Michael Kors. So first and foremost, signature logo. We stood in front of you many years ago and told you that signature logo was going to become 50% of our business. I know that many of you were concerned, what does that mean? And what that meant was actually brand loyalty, consumer engagement. And really a belief in this signature for our company, our group. We've achieved that today. In accessories, it is 50% of our business. So where do we go from here? We now believe that hardware, and you can see it displayed in the current bag that's up in front of you with the MK hardware is an enormous opportunity for the company. And we're going to be doubling down on hardware, whether it's in accessories, whether it's in footwear, whether it's in jewelry, whether it's in belts, et cetera. This is a category where the consumer once again engages with your brand codes. We're going to do that from a fashion point of view. But we think that, that will become 25% of our business. And the thing that I want to point out to you about signature and the MK hardware is this provides much more consistent product where we will have higher gross margins, and we will have more sustainable replenishment with our own retail stores and our partners. And then lastly, we started again, prior to the pandemic, we started something called MKGO, which is really embracing the fashion active wear, a lifestyle that we think many consumers have today, and we think we are a lifestyle company. Thank goodness we had that during the pandemic because it really was quite strong for us. But we think even post pandemic, where we see people dressing up, much more socializing, going out, having fun. This is still a very important business for us, and it's represented a significant amount of revenue for the company. And it's another way for us to engage with people in their lifestyle. And you can see that also with the taping on the bags and the shoes. Okay. So as I said, we're going to grow accessories about $600 million. We're going to continue to create excitement around our new fashion platforms. And again, we've had many of them since we all got together even in the past year that have been very, very successful for the company. We're going to reinforce our brand codes, and we're going to elevate our product assortment. And yes, we are continuing to take price increases. Footwear brand codes. Again, Signature, it represents approximately 50% of our business today in footwear, and that's both regular footwear as well as active product. Secondly, hardware. This is a real initiative for us. It's new. It's smaller today, but growing very, very quickly. And again, we believe that we can create 25% of our revenues in footwear from the hardware. And again, this is where brand codes, this is when people buy into your brand, in particular, around the Jet Set attitude and Francesca presented before. And this is the way people can show that they believe that being a part of the Michael Kors world is something that's exciting. And then lastly, we've always been very strong in the sneaker business, and we're going to continue to drive this as a key platform for us inside of our assortments. So our goal is to take footwear from its current $500 million today to $750 million. And again, we're going to create excitement through new fashion introductions. We're going to reinforce our brand codes, but even more importantly, we're going to upsize the space committed to footwear. We'll talk about that in a minute in our retail stores. And we'll also increase our presence and offering online as well because we think there's a huge opportunity in e-commerce in this business. And then men's. Again, we have a goal to grow this by approximately $200 million, which I'll talk about in a minute. But here, we've started to see some real exciting results in this business. We've upsized certain areas of our stores. We're taking a more aggressive approach to our online and in particular, our database growth around men's and how we're activating and engaging with that consumer. And where we've seen the greatest strength is in our leather goods offering. And again, here, you see it with Signature, which in men's is accounting for 60% of the revenues, which is -- and that's happened very, very quickly for us. So -- and we honestly haven't even really put our foot on the accelerator on this side of the business yet. And so this is going to be a category that I think the next time we get together, we'll be talking about a bigger number than what we've presented here again. So again, we're going to reinforce our brand codes. We're going to also take the hardware and leather and make that a bigger piece of our assortment in men's. And then lastly, MKGO has been particularly successful for us in sportswear in men's. We're going to grow this business from $300 million to $500 million. We will reinforce the brand codes. We will lead with accessories because that's where we're getting fantastic results and again, very high margins for the company. We're going to grow this e-commerce penetration. We're significantly underpenetrated in men's on e-commerce, and that will be really driven around our data analytics and the way that we're prospecting with customers and how we're marketing to them. And then we're also going to be expanding square footage in our stores. So you're going to see women's footwear upsized and you're going to see men's upsized inside the stores as well. Now I'd like to talk about the consumer experience. We are very excited about doubling down on Jet Set. If we learned anything during this very difficult period that we went through is consumers wanted more information about brands. They wanted to understand why am I spending money on your brand. What does that mean to me? And Michael and myself and Francesca, we all sat down and said, Jet Set's even more important than it's ever been. Also, when we launched Jet Set 2003, 2004, this is a whole different generation of consumers who don't even know what that means, who don't even -- who haven't even embraced what this can mean for them and how excited they are to be a part of it. And I think that's one of the reasons why you see our database growing so quickly is because they are excited to be a part of this experience. We also strive to offer customers an exceptional luxury experience. And that's part of the really -- we've been taking the brand, and we've been continuing to elevate it. And you're going to see more of that. I'm going to talk about that in our retail presentation in a minute. And then lastly, because of our data analytics, and you've heard the different teams talk about it, we're able to curate a personal experience. Whether you're a shoe customer, and we want to now be able to engage with you on accessories, whether you're an accessories customer, we want to engage with you on jewelry. Having 60 million people in your database, you're able to do so much more in terms of cultivating that consumer. And what we've actually seen is a much higher level of reengagement with either lapsed consumers or with consumers who might have shopped with us every year to 1.5 years, coming back and shopping with us more often. And again, we think that's a lot around our marketing, our product and, of course, the way that we're serving up the information to our consumers. Tom mentioned it earlier, we have a world-class fleet of stores. You know that we optimize the fleet at Michael Kors. We're just slightly north of 800 stores today. So we have a very focused fleet of stores. We're going to, and I'll talk to you about in a minute. We're going to continue to optimize a little in North America, expand in Asia, but we are now focused on productivity inside of these buildings. So it's a great place to be right now because you can really put your time and efforts to the right issues. I'm going to talk to you about global flagships. We're going to open a few more very sizable stores where we're going to be able to show the complete lifestyle of Michael Kors together. But we're not doing that for that particular reason. We're doing it also to be able to create a much more significant volume as the major cities come back around the world. We think there's a very big volume opportunity for us in those cities. We're going to implement the new store concept in 100 locations around the world where we're going to renovate and also increase certain space categories. And we think those are going to significantly increase the productivity of our stores. In terms of flagships, we will be opening a new one in New York City. I can't tell you where it is right now, but it will be sizable, approximately 14,000 square feet. We'll be opening a new flagship also in London, about the same size on very prominent street. You all know the name of it when we announce it. And we'll be opening a new one in Milan. And that's going to go along with our stores, our flagships in Paris, Madrid, Dubai, Tokyo and Shanghai. And from that concept, you'll see the new renovations that we'll be doing based around the store renovations that I talked about. And we'll do about 100 of those in the next 2 years. This happens to be some pictures from our current Paris store, which was recently renovated. And you can see there's actually less product in the stores, and it's more focused on a luxury approach to how we present and this happens to be the accessories department. This happens to be our footwear department in Paris also. And this actually will be doubled in space in the new store format. This is our women's collection business, which in our flagship stores, we will be introducing and expanding. And again, many of you know this is the luxury collect -- portion of the Michael Kors line. And then lastly is the men's business. Where did that go? Here, which, again, we've talked about and we're seeing great results from its performance. And actually, this is our London store, which Cedric actually opened up a few years ago. Store traffic. So we are laser-focused on store traffic. As you know, the last few years, we've all seen incredible growth in e-commerce, which we are going to continue, we believe, to enjoy. But now people are back, people are shopping, people are in stores. They want a personal experience. So how do we get them there? First, through our iconic marketing campaigns. And again, this is where we think Jet Set becomes even more important that we show up in the right places for the consumers in exciting moments. Second, I dare say that the teams in our marketing and analytics are doing a great job with our digital marketing. Today, that probably accounts for about 80% of our initiatives is digital marketing. And we're able to do that in a much more targeted and tailored way to create efficiencies, not only for us, but also for the consumer. And everyone has served up so many different forms of content today. We want to be relevant for the customer. We don't want to just show up with them often. We want to show up in a relevant way. And lastly, on this slide, you can see is our exciting store window presentations. Again, people are back in the shopping centers. We are seeing significant increases on a year-on-year basis in traffic globally, with the exception of China, obviously, for right now. But -- so people are shopping, and we want to excite them when they come past the store and then come into the store, which brings me to the next slide. Clienteling. Again, if there was any things that we learned coming out of this very difficult time is the clienteling and localization is more important than ever. Communicating and connecting with the clients. Not only do we want that because we want to engage with them, but that's what the client wants to. They want service, and they want to feel that we are tailoring our messaging and our communication to them. And in many cases, they want to talk directly with the sales associate. They don't want us to come to them through certain forms of marketing communication, they want one-on-one. And our clienteling apps, which are fully up and running throughout the entire on Michael Kors fleet worldwide and I think Jimmy Choo were almost there as well, and we're installing in Versace, has really taught us an enormous amount and exciting our consumers and our sales associates. In Michael Kors, we have approximately 9,000 sales associates across the globe. And they're able to talk to the 60 million people in our database on a one-on-one interaction. And they like that and the consumer likes that. Lastly, you've heard all of our teams talk about pop-ups and pop-ins. This is a fantastic collaboration that we did with [ Odissea ] and Francesca and her team did a marvelous job creating the excitement, not only externally but internally around these collaborations. You saw the Bond collaboration that we did. And this is just another way of animating the Michael Kors brand with different customer segments. Store productivity, I mentioned this earlier. Currently, we're running about $800 a square foot, and we have a goal of $1,200 a square foot. Believe it or not, historically, we were at these levels. And as many of you in this room know, that changed when e-commerce changed. Our store productivities went down. And the business was redistributed between e-commerce and stores. Now that we've optimized the fleet in Michael Kors, and yes, we will open some additional stores in China, which creates opportunity for us. But the main place that we see significant opportunity for us is in the existing stores that we have today. So we're going to drive more traffic through those stores, as you just saw from the different traffic builders I mentioned. We're going to create a real Jet Set interaction with that -- with the consumers, in particular, with clienteling. We're going to continue to elevate AURs. And you know that we've taken significant price increases over the last 2 years, there'll be more, not just for the sake of taking price increases. If in the end, we end up being the most expensive company in the more contemporary portion of the accessories market, we're okay with that. Michael Kors is a luxury brand, and that's the positioning that we're going to take. And as we elevate AURs, we also think that creates actually a higher level of engagement with the consumer because it's a more significant thought process that goes into that purchase, and we have to have talented people to be able to execute on that. Store renovations are going to become very important. The upside that we've seen in the store renovations from Versace is really just nothing short of breathtaking what we've been able to do. And there, we added accessories and footwear. And in this particular case, in Michael Kors, we're going to upsize the categories of footwear in men's. And we think that will create a much different engagement with the consumer inside of our existing stores. That's quite exciting for us. Again, we've talked about the fleet. You can see most of the new store openings are going to take place in Asia where we're going to go from approximately 315 stores last year to 375. And that's not just China, but that's all throughout Asia. Secondly, EMEA, we really are going to kind of stay about where we are right now. We have phenomenal locations. Again, on the most world-class streets and locations. And then lastly, in the Americas, we will do some additional fine-tuning. And that's kind of going to go both ways. In some of the major cities, you're going to see us show up in a bigger, bolder way. And again, that we believe is actually a very strong revenue opportunity for us. And in certain cities where stores may have seen their leases expire or where we think we're actually covered from some of our wholesale distribution. We'll be exiting those stores over time. E-commerce. Again, we've grown the e-commerce business very rapidly. It is the most profitable segment for the company and actually all 3 of our luxury houses. And we believe that we can double the size of this business. And this is not just a North America conversation. This is across the globe. We see actual very strong growth in Asia in e-commerce right now, and we see an opportunity to continue to significantly increase that. Europe, the business is quite sizable and growing very, very rapidly. And then, of course, North America has always been the biggest e-commerce market for us. And we see significant opportunity, again, in footwear and in men's and e-commerce. Everything in North America doesn't have to come from accessories. And I want you to hear that loud and clear. That is not the place that we're only trying to drive the business for us. Again, we'll accelerate our customer database. I think we've done a really outstanding job of doing that. We're going to use the insights from our customer analytics, which has been extremely helpful for us. And then we're going to utilize the Michael Kors lifestyle authority to expand categories. And again, you can see that by what we've done with MKGO as a good example, very strong business for us online. We don't have it in as many stores because there's only so much product that we can put out. So this is a more centered online business for us, and very, very, very strong and very profitable. So on that note, I'd like to turn the presentation over to Tom to talk about the financial outlook for Michael Kors.

Thank you, John. I'm extremely excited about Michael Kors' future opportunity. For our revenue target of $5 billion, as John was mentioning, it's going to reflect the continued elevation of the brand and the majority of growth will come from the retail channel and Asia. By product, accessories will be over half the increase. But as you saw, we'll also have footwear in men's contributing to these -- to the growth. On an operating margin basis, we're maintaining our future target of 25%. And I would just like to reemphasize that profitability and margin remain a key long-term focus as we build and drive revenue growth. It provides for a balance of investment and growth, and it represents a very strong margin compared to our pre-COVID timeframe. Touching briefly on fiscal '22. Michael Kors significantly outperformed our expectations. Revenue well above where we thought it was just a year ago, and operating margin expanded significantly and reached our long-term target. As a matter of fact, it expanded over 500 basis points over the last year. So we're very, very pleased for that. For fiscal '23, we are changing our guidance moderately. For revenue, we now expect $4.025 billion due to additional FX headwinds. And for operating margin, we're pleased to maintain our margin of 24%. This is only slightly below our long-term goal even with the impact of higher supply chain costs, the war in Ukraine, China restrictions and the FX headwinds. Now turning to regional growth. In the Americas, we're very encouraged by the recent performance and future growth will be driven by the retail segment. This includes strong growth from e-commerce, as John mentioned earlier, as well as increased store sales, reflecting the higher store sales densities and driven by initiatives like clienteling and the new store concept. So overall, we expect the Americas to increase by over $400 million over time. In EMEA, we're extremely pleased with the rebound in the region over the past year and expect solid future growth. Strong momentum will be driven by the robust local consumer demand, and we do expect international tourism when it begins to come back to provide a longer-term tailwind. And with the region, we expect about $200 million of sales over time. Michael Kors has the largest growth opportunity in Asia, tremendous untapped potential, and we expect to double our revenue in the region, adding $500 million in sales. And this will be across all of Asia. It's in China for certain as well as Japan and Southeast Asia, which is also robust. This will be driven by store expansions, higher store productivity and e-commerce growth and broadening our product or expanding our product offerings in men's as well as accessories. Looking at revenue by channel. Nearly all of Michael Kors future growth will be from our own retail channel. As a result, retail penetration will grow to over 70% of revenue. Within retail, e-commerce is a strong growth driver. We'll capitalize on the current database of over 60 million names, but also the future target of $100 million and leverage expanded data analytics capabilities to reach consumers on a much more personal level. Stores remain the largest part of retail, and our growth is supported by the new store openings and higher sales density strategies that John mentioned, with most of the new store openings in Asia. We also expect the sales densities to increase, driven by the renovation program, clienteling. But as noted, we'll also selectively close unprofitable stores, particularly in the Americas. Wholesale will remain an important and profitable channel and we expect revenue to remain relatively flat, and stable over time. In conclusion, given the strength of the Michael Kors brand and our future growth initiatives, we are confident we can continue to grow Michael Kors revenue in the mid- to high single digits on an annual basis while maintaining strong operating margins in the mid-20% range. Now I'd like to turn the presentation back over to John.

Thank you, Tom. So in conclusion, Michael Kors, we believe that we have the opportunity to reach $5 billion. I want to remind you again some of the things that Tom just said. First, we see almost half of the $1 billion growth coming from Asia. Second, we see an increase in our footwear business of about $250 million. And third, about $200 million from men's. So we really think these are opportunities in front of us that we haven't maximized, and they represent, not all, but for the most part, new opportunities. And additionally, I would remind you that over the past few years, we've also lost almost $150 million in revenues in travel retail, in particular, in stores that we operated inside of airports or in different duty-free locations around the world. We do believe that, that will come back in calendar 2023, more towards the tail end. And I think we've been pretty consistent about that messaging that we do think that that's going to come back. We're actually seeing some of it back right now in Europe as traveling has resumed at very high levels. Again, the complexity of who that traveling consumer is has changed, but we do think that's a big opportunity for us. So what are we going to do? We're going to continue to elevate our brand positioning at Michael Kors. And I think we've been very successful at doing that and the consumer is really responding to that. Secondly, we're going to continue to excite and engage our new and existing customers, and I think you saw that through our marketing initiatives, and we talked about many of the data analytics that we're working on that with. We're going to continue to reinforce our brand codes, which we think is a very important part of who Michael Kors is in the Jet Set story. We're going to drive our retail and our e-commerce to its full potential. Again, you saw store productivity being one of the most important parts of that, but we also intend in doubling our e-commerce business. And we think we've got the teams in place to be able to execute against that. Double our revenues in Asia and then significantly increase our men's business. So let me now conclude and talk about Capri Holdings. We've got headwinds in front of us. I don't want anyone in this room to think that we're not aware of the various challenges that are out there. We all know that China continues to remain a very significant challenge. And while we, I think, gave some very clear guidance previously of our businesses across the group being down about 40% last this quarter and about 20% the next quarter. We think that it will start to rebound in our -- would be our third quarter or fourth quarter of the calendar this year, although we're watching it very carefully. And so we think things are still going to be challenging in China. Secondly, we think there's continuing currency headwinds. We've hopefully identified that in some of the new guidance that Tom has put out. But we've been able to mitigate that, and we'll talk to you more about that in our first quarter call and still been able to hold our guidance. And I think we've done that twice by the way. I think we actually even raised the last time we had headwinds against us. And of course, there's economic challenges out there as well. So we're not -- we don't have our heads buried in the sand. We understand what those things are in front of us. But why am I confident? Why would I stand up here and tell you I have confidence? Because Versace's got 40 years. And I am really proud of what Capri Holdings has done with that business. Many of you in this room, many of our competitors, many people around the world didn't think we could really build the Versace business. And I'm here to tell you that we're very proud and we're excited about what's happening at Versace. And Versace's business is even more healthy than you can see here, given the financial headwinds that we have going against us. So we're far ahead of where we had anticipated that we would be at this point. And really, we've got an excellent management team in place. And they are just doing an incredible job. And I also have to give a big shout at to Donatella because she's been a wonderful partner and created a lot of excitement. And this brand is recognized around the world in the same levels, and I won't say who the big, big brands are, but you know who they are. So when you look at brand recognition of Versace versus our revenues, it's so distortedly different that we know where this ultimately has the potential to get to. So it's not whether Versace has the potential, and I've said this to you before, it's whether we're going to execute against that potential. And right now, I'm feeling very good about what our teams are doing. Secondly, Jimmy Choo took us a little longer than we would have liked to get the trajectory that we're on right now. But I have to say it's the strongest brand in the company right now in terms of its performance. And I really want to applaud Hannah and the team's leadership on what they've been able to execute. And Jimmy Choo has brand heat right now. There were a few breathtaking moments when you saw some of the pictures that were up there, but that is what Jimmy Choo is about. It's about glamour and we're going to lead with glamour. And then lastly, Michael Kors, we've only been around for 40 years. That's all, just 40 years. And we've seen some ups. We've seen some downs. And right now, the consumer is really resonating with us. And we are going to remain consistent. And this is what I'm so proud about for our company is that we started out with strategic initiatives before the pandemic happened. All of what you're seeing up here today was before the pandemic happened. And we didn't blink going through the pandemic. We stayed with it. We kept to our visions. We kept to our core values, and the consumer recognizes that. So I'm really proud of our teams for what they've been able to accomplish. And the last thing I just want to say is that we have 16,000 people around the world, and we would not have done it without those 16,000 people. We went through a lot together. But more importantly, we're coming out the other side. And we have one of the best senior leadership teams in the luxury business today. We have some of the most incredibly dedicated loyal sales associates in our stores. When I get to travel the world, and I've been doing it all through the pandemic and you sit down and talk to the people who had to put their masks on, who had to open the doors during the pandemic, who are really the heroes of our company. And many of them -- I've met people who've worked for Jimmy Choo and Versace and Michael Kors for 30 years. We've got less than that 25 years, I think, 24 or whatever it was. These are people who are so dedicated to the brand, and they have incredible relationships with the consumer. And now those relationships are even more enhanced by the technology that we're able to provide them, I think our storytelling and our consumer engagement is only going to get better. And there are going to be bumps in the road as we go forward. But I know you all -- many of you are shareholders sitting here in the room. We have 3 powerful luxury brands today very deeply engaged with the consumer. We're going to stay the course. We're going to stay focused on what our mission is and our strategies, and I look forward to answering many of your questions after we take a short break. So if you'd all like to maybe take a short break, we'll be back up here in about 15 minutes, and we'll take all of your questions. Thank you. [Break]

All right, everybody. We're ready for Q&A. John? Laura and I.

Could you close the back doors?

Yes. Let us know if you have a question, we'll pass out the mics. Laura, you can take it.

Okay. I got it.

Can you say your name first before you give your question, if you don't mind?

Jay Sole from UBS. John, my question is about M&A. You touched on it in the slide deck. Would it be possible to put some parameters around how you're thinking about that, what kind of size the deal you'd be interested in? What kind of categories...

If you could just slow down speaking a little bit, we can't hear you up here. So start your question again.

Sure. So my question is on M&A. Interested in if you could put some parameters around the size of the deal that you might be willing to do, the type of categories you might be looking to invest in and maybe where the brands that you might be interested might be located, whether it's Asia, Europe, United States?

As you all heard Tom speak to before regarding our capital allocation, always first and foremost is to invest in the business. And I think we've done that consistently whether it was a Monogram company with Michael Kors and our distribution centers and all of our IT and in terms of building stores and renovating stores. I think we've made very significant investments in both Versace and Jimmy Choo. Versace, as you know, we're renovating the entire store fleet. And hopefully, I think a lot of you live in New York. So if you've got a chance to go see our store down in Green Street. We've got a new store that's going to open up on Madison Avenue here in September, October. And I think in North America, I think we've renovated -- I think it's about 70% of the store fleet. So we're going to be probably as far ahead anywhere as in North America, and we're seeing these incredible results from those renovations. Jimmy Choo, we were very fortunate in probably 75% or 80% of the store fleet was renovated prior to our acquisition. But now we're going back in. We're upsizing certain stores. We're renovating stores. And actually, even in Jimmy Choo, we were able to reallocate space to accessories without actually spending much money at all because of the way the stores are designed. So we feel good about that. And then a lot of investment in systems as Tom has spoken to in past calls that we're implementing across the group. And then lastly is manufacturing where, again, as a true operator of luxury businesses where we make a significant amount of our product. It's probably 80%, 90% of our product for Versace and Jimmy Choo in Italy. We are taking our current factory. We're going to basically triple the size of that in footwear, and that's accessible for the entire group. And then we are also going to be purchasing accessories manufacturing. So just reminding everyone, that's the first part of our capital allocation. The second part is, we think, to return money to shareholders. And we've been doing that through a very consistent share repurchases. We obviously halted that during the pandemic, but resumed that post the pandemic. We have very strong free cash flow in the company. And we believe that there is tremendous upside for us to acquire our own company and again, it's a personal opinion, but what we think are significantly undervalued multiples of our company today. So to me, that's the best acquisition we can make right now is in our own company, especially these multiples. M&A. I recall many people being surprised at what we paid for Jimmy Choo and for Versace. I want to remind everyone in the luxury business, that's what you pay. If you don't pay that, someone else will pay. So it doesn't really matter whether you like it or not. It's -- that's what the price is. We do believe that there will be some 3 companies over the next 2 to 5 years that will be available. Most of them privately-owned luxury businesses in Europe. So I would say, first, we believe that it will be a European company. We believe that it would be minimum $500 million of current revenues with the opportunity to go into at least $1 billion and hopefully much more significant than that. And again, I wouldn't tell you that, that company would be in perfect condition or not. I think that, again, when we acquired Versace, there was a lot of problems with that company, but the opportunity is just enormous. So I don't think anything is going to happen in the near future. You never know, but that's not what our current thought process is. And again, we have $2 billion of opportunities sitting in front of us, and we think to stay focused on that will provide tremendous upside. And if we continue to do our share repurchase and deliver on that goal over time, we think the share price is going to accelerate mainly because the earnings per share is going to go up pretty dramatically. And I think Tom made the comment that we believe over the next multiple years, we will have double-digit earnings increase. And again, even in the wake of what you're seeing in terms of us having to take the revenues down because of currency headwinds, and I can only hope that that's not 100% behind us, but mostly behind us that it's just going to create, again, more leverage for us. So I hope that answers your question. Why don't we go to Matt next?

Great. Matt Boss, JPMorgan. So John, 2 questions. At Michael Kors, the 50% increase in sales per square foot. How much of this do you see driven by pricing relative to expansion of the customer file? And then at Versace, how best to think about how high is high as we think about $2 billion plus revenues and the ultimate margin opportunity over time?

Sure. So in Michael Kors, as I said, historically, we were at those levels previously, and it certainly shows us that we have the ability to do that. I have to say, and again, 90 days doesn't make a lifetime. But when you see people shopping again and I think the 2 years of pent-up not being able to go out or not having these social experiences is creating a different cultural energy for people to say, "I want to go out, I want to shop." I would give you a first interesting fact. We think that over time, we could be doing as much as 20% of the 4-wall business through clienteling. So that's interesting. We're not there yet today, but we think over time, that we would get there. And actually, let me back up. We actually have a couple of stores at Jimmy Choo or we're close to that today. So we're watching this inside the group, and we're saying, oh, if we can do that there, how can we do that in other places? And I think, again, culturally, I think consumers want that service. That is a luxury service. Communicate with me directly one on one of the sales associate bring product to my home. So that sale gets recorded in the store, but there's a whole interaction between the sales associates. Again, for us to reach those productivity levels, I would say the most important thing that we have to execute on is the shoe strategy that you've seen us present today. And some of the new stores will be in place. I think [ Aventura ] will be the first one, and that will open up in the next -- going to line you say 90 days. I don't remember exactly the date. But one of the first ones we'll open up there. So we feel that if we can prove out that concept that also takes less pressure off accessories. We don't want to keep trying to push accessories too hard. We don't think that's the right place for us to try and push the business. So I would tell you that's kind of how we see it inside of Michael Kors. In terms of how big is Versace, I wouldn't sit here and hopefully not sounding overconfident or boisterous. I think the $2 billion number is a very achievable number for us today. We're tracking in that $1.1 billion to $1.3 billion today. I think Tom mentioned a number on a 2-year stack basis. I think we've got almost a $300 million currency headwind. It's enormous. So without that currency headwind, of course, you can't roll back the clock. Versace would be sitting here at $1.5 billion today. And remember, our competitors in Europe are going the -- they're getting a currency tailwind and they're all reporting that. So this will all move over time and stabilize and go different directions. So the Versace business is really healthy. And that's also one of the reasons why we've said to you consistently. People have asked, well, why can't the Versace margins be much higher? We certainly have competitors that are running north of 30% operating margin in that. And over time, that's probably accurate. But right now, we want to continue to spend on really -- staying close with our customer and educating people about the fact that Versace is a luxury leather house. We come from a place where Versace was a luxury ready to warehouse and a runway house. I think you saw that video from Donatella. That was pretty impressive. And I have to, again, give her a big shout out because -- whenever I speak to her on the phone, she tells me that I've made her accessories obsessed, and she really is these days. And she came up with the concept for the Greca and the story behind it. And so she's a really big part of us connecting with our consumer, and I think the higher we take that engagement level, the more we teach people that we're a luxury accessories business and a surprise about the footwear part. I have to tell you that was a huge surprise for us. And I know when some of you looked at that giant platform shoe in the ad and said, I don't know that I can wear that. I have to tell you the amount of business we're doing on product like that in store is staggering out of stocks, et cetera, because it's different, it's unique. And so Versace not only has the brand recognition, but we have the right and you've heard us use the word bold a number of times, but to be a bit more exciting and a bit more fun for people. So if we can continue to connect all that, again, I'm not willing to commit to a total victory here, but we feel that there is a number that could be much more significant behind that.

Omar.

We do Kimberly next. Sorry. I'm sorry, next -- sorry.

It's Omar Saad from Evercore Partners. Two quick questions. Thanks for the business update. It's great to see you guys' underlying revenue growth so strong. Obviously, FX taking some of that way. Maybe talk about how you're able to maintain the margin guidance despite that kind of FX pressure. What are the offsets there? Is pricing and gross margin type gains one of them? And are you cutting costs on the SG&A side to keep that margin? And then quickly, databases were a big part of the presentation today across the brands. Maybe talk a little bit about -- it seems like a change what's inflected in your view on how to use these customer databases that gives you so much confidence to drive revenue growth across the brands going forward?

I'll let Tom start on that.

Sure. So Omar, thanks for the question. So for the year, for the latest guidance update of reducing revenue by $100 million in FX and holding both operating margin and as well as EPS. We're really just managing costs well through the business. And we've done that, and I think, shown the ability to do that through the whole last couple of year period and tightly managing that piece of our business. We're also using our robust and significant free cash flow to support the business, as we mentioned before, putting a priority on share repurchase. So we're managing below operating income as well. And we think that, that's something that, again, will continue to grow free cash flow as we move forward, giving us even more both flexibility and capability to invest in the business and in our own shares and return cash to shareholders.

I'll add one further thing to that. We've taken price increases across the entire group. So you're going to see some of that flow through. Again, I'll start with Michael Kors. Unfortunately, all the price increases that we took over the last 2.5 years have been eaten up by the -- really the logistics and transportation and some other costs around supply chain. I'm not saying that we're seeing that ease, but we're -- I think we're seeing it kind of cap at this point. So there could be some leverage there for us that we're crossing our fingers about. Secondly, in Jimmy Choo, we started the price increases a little 1.5 years ago. And there's more to go there. Again, we really are positioning that as right alongside of our other luxury competitors where we probably just historically stated our price because we thought that was the price we were stated, and everybody else moved up, and we didn't. And actually, it was the first question Hannah asked me when she became the CEO, she said, was that your strategy to keep the prices the same? I said I didn't have anything to do with -- so we kind of laughing each other about it. And so that you're going to see flowing through as well. There are some currency fluctuations between we buy in the pound against the euro. So there's things that are going on underneath the P&L. And in Versace, you heard me make a statement about Michael Kors that over time, we're the highest price in the contemporary world, I would actually be happy about that. And quite frankly, we're going to continue to move in that direction because Michael is a real designer. We are in some of the finest luxury stores in the world. He is one of the most prestigious designers in the world and, of course, in New York. And so we're going to continue to live up to those values. In Versace, we had an original goal of being benchmarked against a certain subset of luxury competitors. And we've subsequently decided really since Cedric came on board. But we're probably, once again, shooting a little bit too low. And so you're going to see some prices that are going to come in, in the fall season. Cedric, do you want to talk about that for a minute?

Yes, fall season. We will see the first real price increase coming up in the fall season across all product categories, whether it's in men's, women's, shoes and bags and so this is coming up, and it's part of the elevation in the brand, it's part of us establishing our authority within the luxury segment. And you'll see more coming up.

Yes. And the other thing you're going to see in Versace and Jimmy Choo, because when you look at the operating margins, obviously, Versace, we've been able to climb very, very rapidly. And I would add, we did that without really having great productivity in our stores. The productivity goal that you saw us give today, we would still be probably not barely at 50% of what the luxury industry is. So just for us to get there, we're still not really anywhere close to best-in-class. Jimmy Choo, our productivity levels are much higher. But as we really grow that business, the leverage will drop right through. That's really when you look at the Jimmy Choo P&L and say, well, why don't they make more money? That's a pretty sizable business. And I'll just let Hannah talk to that in terms of really the flow-through on that.

Yes. I think for us, as we spoke about in the presentation, the key focus is on driving that productivity within the stores and then really taking that leverage on the top line sales. The key to that is the growth in the product categories that we were talking about. So accessories, casual and then really building out on those brand codes. We feel really optimistic about what's in the pipeline on the product. We are really delighted about some of the results that we're seeing from the Time to Dare campaign and the heat that that's bringing into the brand. You spoke a little bit about clienteling before and why we're so focused on that. And I think one of the things that Helene mentioned in her presentation is important to note. So when we talk about those clienteling tools that we have in the stores, she mentioned that all the customers that we touch through that program are spending on average of 25% more. So that directly goes back to the productivity point where we're talking about the engagement of those audiences. And I also think -- I think it's tremendous what you see across the group in terms of that database growth and what that actually says about the health about the brands. And I don't know how many things she subscribed to you today, but most people are trying to desubscribe. So the fact that we're getting such high people signing up with the brands talks about the health, the engagement and the passion people have for them, which is exciting, I think.

And so Omar, to your second question, yes, we highlighted the database growth. And we think that's, again, as I said, a real KPI for us is, do we have new people coming to the brand? Because if you don't have new people coming to the brand, it's pretty obvious. And prior to the pandemic -- I'm just going to pull the Michael Kors number, I don't remember the Versace and Jimmy Choo. But 70% of that database growth actually came from the stores. It wasn't from prospecting online. It came from names, somebody purchasing and coming to us. Now it's not that high any longer because we've gotten very good prior to the pandemic, but even post pandemic with acquiring names through other digital tactics. But we use that as an internal KPI to say, we got to keep growing. Now obviously, Michael Kors at 60 million people can't keep [ growing ] double-digit every single time because [ a law ] of big numbers. But still, to see that growth happen means that people are engaging with us and means that we have the opportunity to quite frankly, sell them more product and to reactivate. And I mentioned right across the group, our reactivation rates with lapsed customers has gone up dramatically. And that's a KPI that we haven't seen jump like that in years. And that's been really more over the last 12 months. So that to me says that's product, that's marketing, that's what the consumer feels about our brands. So we will continue to use that. You can obviously do math on it. If that goes, you have an AUR, [ da da da ]. And so -- so we also look at that as we are growing our revenues. But as I again said, we're laser-focused now back on stores where the last 1.5 years. I'm not saying we weren't focused, but just there weren't consumers trafficking out there. And we're seeing really across the board besides China, traffic is increasing for every brand in every single market across channels and that's a really good, healthy sign for how the customer wants to engage with us.

Michael Binetti with Credit Suisse. I guess just one on the near term to honor the retail environment that we're in. When you speak -- maybe you could speak to some of the areas that you've seen some upside to offset the tougher FX on revenues that you mentioned, the $100 million of revenues recently just because we're seeing some volatility in the retail backdrop. And then particularly curious about the value customer for Kors, that's probably the outlet customer, maybe some of the wholesale, any pressure there that you've seen lately in some of the more value-oriented channels. But then, I guess, on a maybe more fun question for the long term on pricing as you think about the Kors brand. Can you help orient us where we are versus pre-COVID on Kors AURs today? How much of that is from the like-for-like pricing versus John, you mentioned, I think, 30% reduction in SKUs. How much maybe was from just culling some of the lower price points that weren't as productive and how much you see the Kors brand raising from here?

Sure. So I think I'm going to speak for the group on the traffic question. We somehow knew that would come up somewhere in today's presentation. So North America, we're seeing very nice traffic increases right across the board, and that's in full price channel and the outlet channel. So we're not seeing any issue on traffic as late as of -- as of last week. So people are shopping, people are out in the stores. I don't know whether it's their vacationing, their holiday, they're feeling good. I don't know what's going on, but it's good here. I would say the surprise for us is Europe. And I don't think you're hearing that only from our company. I think you're hearing that from other people. There's a real reopening surge where people are on holidays. It's not that they didn't take holidays last year, but I think they're now just -- they don't care. People don't care about the medical realities that still exist out there. They just say, I'm done with it. I'm going to live my life, and I'm going to have fun. And so what we're seeing in Europe is we're seeing European's travel, which is obviously generating income in particular cities and whatnot. Americans are traveling over to Europe and spending a lot of money because of the dollar change. It still doesn't take -- come back to what it was previously when we had high traffic levels in particular from Chinese travelers. But I'd say we're really excited about what we see happening in our own stores in Europe. And I'd say less in the department store environment, interestingly enough. I think the traffic hasn't quite come back. We've seen that both in the European department stores and the American department stores. So our own stores are leading a lot faster. It appears. I don't know why that is, but it just appears to be much, much healthier. Japan is quite strong. It's very, very strong right now. And so is Southeast Asia, again, reopening. And I think I've explained China, it's a concern for us. I think that there's over 20 cities in China from our understanding that have some version of testing, lockdown or something going on inside them. And I believe air traffic, at least from the reports that we saw, is down by 50%. So that's internal people traveling inside of China. Is it going to recover? Yes, it's going to recover. Is it going to recover in calendar Q3 or calendar Q4? We don't know. But we'll get through it. And again, when I look at Michael Kors, 40 years old; Versace of 40 years old; Jimmy Choo, 25 years old; we've got brands with legacy and history and the pandemic taught anything was people doubled down even more on [ known ] luxury brands. And of course, you can go through the list. There are some at the top that were -- had 50% increases in revenues during the pandemic. So that gives us great hope for what we're able to achieve from that standpoint. In terms of price increases, the culling and the SKUs really didn't have anything to do with that. That's across the group because we reduce -- how much was your percentage of SKU reduced?

We reduced by 40%. So we went from 4 collections a year to 2 collections a year. We reduced SKU count by 40%. So broadly in line with what we saw at Michael Kors. And as John said, we started our price increases 1.5 years ago now gradually, and we have more planned for the second half of this calendar year. And for now, we've seen no resistance from the customer at all.

And by the way, in Jimmy Choo, we've returned not quite to the historic highs of back in the [indiscernible] the City days, but we've reached sell-through -- full price sell-throughs that the company hasn't seen in probably 5, 6 years. And a lot of that is just because we were putting too much product out to have someone walk in and see the same single [ cell sandal ] done 4 different ways. We didn't need to do that. So we were doing it to ourselves and really was -- had nothing to do with it anything except for the way we were merchandising. And I think we saw that across the group. And prior to Cedric joining, we also reduced SKUs in Versace, and we're going to take it down again. Why don't you talk about that?

Yes. So we've currently reduced approximately 30% to 35% our SKU capacity. While we've been taking price increases, the objective was really to make the store more productive. I mentioned in my presentation that store capacity, remember that a couple of years ago, we did not have a presence as strong as we have right now in terms of shoes and accessories. And the format of our store for the existing one does not -- has not changed. So therefore, we had to make space. We had to make our ready-to-wear a lot more productive and be more concise. So we've got basically the long tail of products that we were not getting through really rationalized our assortments in general across all brands -- I mean across the entire branded product categories in order to make our productivities go up. So pretty much the same thing happening with us. Maybe more drastically because we have to make space for whatever goods. We have that $1 billion mark that we need to get to, and we're going to need the space in the stores to make that productive as well.

And also, I'll let Tom talk to the inventory turn up both for Versace and Jimmy Choo and what's been accomplished there.

Sure. And we've looked at inventory both historically and going forward, and the team spend a great deal of time managing that as part of our initiatives to drive margin, it's more tightly managing inventory, which you've heard about. And in both Jimmy Choo and Versace, they have significantly increased their inventory turns and the inventory that they are carrying is much more productive than when we were looking at the companies initially after we purchased them as well as getting more visibility into the future inventory turns and the buys that are associated with them. And those have been material positive changes. So we can see it in the inventory results and in our future outlook, where we expect it to turn even faster as we move forward.

And just one last point on inventory. I want to remind everyone that Michael Kors inventory was up significantly last quarter. It's going to be up significantly this quarter, and then you're going to see a pretty rapid deceleration. And that's really for 2 reasons. Number one, we took the position that on our replenishment product, we basically ordered 6 months upfront. We just said we got to get it in. We can't wait anymore. We missed a lot of business over the last year or so not being -- I mean this is just core product. So we don't see that as any inventory liability for ourselves. We also pretty much across the group accelerated the design calendars to be able to meet the needs of us getting it into our warehouses earlier just to ship it into the stores. So we'll kind of have anniversaried that by August, September. And then you'll see the thing get back down to, I'll call it, pre-pandemic historical turnovers. But -- and that's all been self-planned internally to really be in a position to service the business, in particular for the fall season.

Kimberly Greenberger, Morgan Stanley. I wanted to ask about the store strategy. If you could touch first on Michael Kors, and then I have a separate question for Versace and Jimmy Choo. Michael Kors stores, 9 or 10 years ago were really small, very undersized. And then I think around 2016, you started increasing the size of some of your existing stores. And since then, you've gone through fleet rationalization. So if you could just update us on the state of the Michael Kors store fleet. Is it that you're happy with the size on 75% of the stores, but 25% you need to increase in order to accommodate some of the new strategies? So if we could just get a more fulsome update here, and then I'll ask the Jimmy Choo and Versace after that.

So the average size of a north of a full-price Michael Kors store should be around 2,500 square feet. I would say that's the kind of the goal for us. And what we are going to do is we're going to shrink the size of women's ready-to-wear inside the stores to accommodate, in particular, the women's footwear upsizing. And when you see these new stores, there'll be 25% of the space completely dedicated to women's footwear and what we were referring to as a salon environment. Today, most of the stores you are going to it's a wall or a small little kind of 3-wall niche. And honestly, we learned from our cousins. We kept going into the Jimmy Choo stores, so we're like, this is really beautiful. And then we saw women, in particular, lingering and shopping and having fun, and they're serving champagne and we're like, well, we're showing [ it to you ] on a wall. That's not exactly the most luxurious experience you've ever had. So that's the first thing you're going to see. The second thing is we're going to shrink the accessory space a little bit. And also, you might already see it in our stores, we have taken a lot of product off the floor. And we have taken a lot of [ T stands ] off the floor. It's a much more elevated experience. And we're -- and because of the AURs going up, we need less of this depth of inventory on the floors. You're going to see in the new flagships that you'll see gorgeous seating areas around small leather goods. We're going to create a very much a luxury experience inside the stores. So that's kind of where we'll be with Michael Kors, again, you heard me talk about the handful of flagships that we'll have that are in that 10,000 to 15,000 square foot space. One of the things that we're able to do in some of those flagships also is provide same-day delivery from the flagship -- so in particular, in the U.K., where our distribution happens to be located in Venlo and our Jimmy Choo business is there with Michael Kors. It takes a little bit getting in. There's this little thing called Brexit that happened in -- it's become a little more difficult getting products into the U.K. So it's a big market for us. And so to be able to service the consumer literally within 24 hours is quite an advantage that we think we have to have. So that goes back to some of this clienteling and localization. And when you take that perspective, then you better have facilities that can do that for you. So we're excited about that. Also, I have to say that in North America, in particular, the fleet has not been refreshed in a long time and we kept holding off and then pandemic hit. So we need to refresh these stores. And we're just excited that we now have a strategy besides just renovating the store but to really reallocate space inside the stores. So quite excited about that.

Great. Fantastic. And then for Versace and Jimmy Choo, both brands have a little over 200 stores currently in the fleet with a target of 300. Could you each talk about if you've got the ideal store size and the existing store base. I know that over the first couple of years, Versace was repositioning some of the stores to get them in more ideal locations. Is that all complete? And are you satisfied at this point with the fleet that you've got?

Okay. Thank you. With regards to Versace, first, I'll answer what's the ideal size for a store. It's about 3,000 foot -- feet, sorry. And the reason why they're slightly bigger than the Michael Kors store is because we have both men's and women's also in those stores. And obviously, we have to take into consideration the fact that we have that big number to hit in terms of bags and shoes. And we have to make sure that we can house those products and present them in a proper way like our competitors are doing. With regards to where we are today with the fleet, about approximately 50% of the fleet of the 225 stores have been more or less renovated. And as I mentioned in the presentation, by 2025, we'll be looking at about 90% of the fleet to be completely either new or fully renovated. And as far as are we done? Or do we still have stores that we're looking to relocate? There are a few ones, but it's really a handful of them. Most of the work has been done and where the biggest opportunity for us in terms of store opening, it's where you're going to be in Asia and in China going forward. There are a couple of things we still need to do within the North American market, within Europe as well. But really, the largest opportunity in terms of store opening is going to be through Asia and more specifically in China.

And I'll give you also one other example. You're going to hear the same thing from [indiscernible]. In the really key cities, most of them, we have phenomenal locations for all of our brands. Michael Kors, we're doing some repositioning. But mostly, we have phenomenal locations. When I told you before at Versace, if we hit that $2,000 a foot, we're still 50% below the rest of the competition. If I amplify that in a major market of London, Paris, New York, Beijing, Shanghai -- I'd say we're 1/10 the size of our competitors. So we can -- and we will open more stores. That's probably not even the most important thing for us to do. We have so much opportunity in these major markets to take these stores and create significant amount more volume. And we're going to do that by also really creating a lot more localized marketing. The same way that you do that in China and in Korea, you hear lots of brands talk about that. But the United States is the same kind of conversation. You're going to see a lot more Donatella showing up, and she's going to be very omnipresent. And Sandra Choi has been doing multiple presentations. Michael's on his way to Capri in a few weeks to do a super exciting presentation. So we're a founder-led organization, and these founders have a lot to say, and they have a lot to engage with people. And so we're going to be much more involved in probably the top 10, 15 markets in the world to really accelerate the business in those regions. And yes, we'll get to another 50 stores in each of these brands. That's not the priority. The priority is in the doors that we have existing today. [ Hannah ], do you want to speak to that?

Yes. I mean I really echo what John and Cedric are saying. Our #1 focus is around productivity and really optimizing the space and the stores that we currently have. I spoke in the presentation about the elevated store concept. I showed you the pictures of Milan. Jimmy Choo has 240 stores around the world at the moment, and we really have some amazing locations on some of the best luxury streets in the world. So I'm very satisfied and proud of that store network. As John and Cedric said, yes, there is some opportunity, particularly coming from Asia and not only Greater China, but more broadly across APAC for Jimmy Choo and select opportunity in the other regions. But the primary focus stays on productivity.

Lorraine Hutchinson from Bank of America. It sounds like you're not seeing too many signs of the economic challenges that you referenced. But can you walk us through any learnings you may have had from prior periods of consumer slowdowns? And then talk about what kind of scenario planning you're doing now in case things do start changing for your customer?

I'll talk about the current situation, and then I'll let Tom talk about scenario planning. We all read the same -- I can't say newspapers -- the same articles on our phones. I think everyone is waiting with bated breath about what is or isn't going to happen, we don't know. I think we are sitting in a good situation for the moment because there's a lot of reopening still happening. There's a lot of people saying, "I want to get out. I want to go to a party." I don't know about any of you, but the delayed wedding calendar of the [indiscernible] somebody invites you over for dinner. I'm sorry, I'm going to my fifth wedding this week is -- so all that's fueling great business for the fashion and the luxury industry. People are returning to work. I know in this city, it's a little less probably talked about. But we're seeing it, and I'm actually seeing it in our company. We're seeing especially a lot of younger people enjoying coming back, enjoying the comradery and finding and understanding that there's a reason to be back in because maybe I'm going to get promoted, maybe I'm going to learn something new by being in the office. So we're not seeing that same residents to coming in. Obviously, 5 days a week is not 100% there yet. And then people are getting dressed up which is really excited to come into the office. Now I'm looking around and saying, wow, look at the way these people are looking. So I think we're enjoying that kind of those multiple things happening. What happens in the fall season if energy prices don't come down to a reasonable level and some of the food prices and if interest rates go up by multiple levels, I think we're all very nervous. I'm going to turn it over to Thomas. But the good news about it is, we're in a very high-margin business. And we produce some very nice profitability. And we will get through whatever it is. We got through the pandemic, I promise you we will get through a recession. There'll be bumps. And I've said that on multiple calls. And I know there's going to be a bump somewhere, we just don't know where it is. But we're very conservative on the way we manage our cash. We are very focused on our profitability. And we do have certain levers that can come up and down as the business swings in different directions. I think what we're probably not sitting here, and thinking is there's a 20% drop in the business. That's not the way I would say we look at it. Could we not be up 3% or 4% or 5% in revenues and maybe it's a little less than that. I think that's more of our thought the way that we're going to look at things. And lastly, we're going to continue to invest. The more we invest in our consumer and our brands, the more loyalty we're building and the more the database is growing. And the more we have the ability -- and quite frankly, the right to have a conversation with our customer, and we think that's a really critical way to view the business long term. Tom?

Lorraine, we do a scenario plan and contingency plan with the businesses as well as at the corporate level. As John mentioned, how we use and deploy our free cash flow is also a very important thing to look at. But one of the best examples would be just this recent today's change in our outlook for the year, where even with what was a fairly additional and large move in FX and impacts it may have had, we're able to hold both the margin and EPS despite $100 million of sales coming off of the top line. So if we look, as John mentioned, going forward, if there is a pullback or a recession or some change in consumer behavior, we believe we'll have a lot more control around our gross margin and then we'll be managing very carefully expenses as we did very quickly and reacted very strongly during the COVID time frame. And that whatever this short period of time would be, I don't believe it would have any impact on how we look a little even -- not even long term, but medium term.

And again, I just want to make sure everyone in this room -- we don't have our head buried in the sand. We know what's happening externally. There's cost pressures all over the place. We still have supply chain issues that are -- we're all dealing with every day of the week. And I guess, again, we get up every day and say, 40 years, Versace; 40 years, Michael Kors; 25 years, Jimmy Choo. We're going to have some bumps. And we're going to have some bumps because we're a fashion company, too. We'll get a season right or wrong. But if you really believe in the long-term future of what the luxury industry is -- and then you look at our portfolio, that's what gives us this confidence that I hope we're expressing today.

Ali Alam with Riposte Capital. At the 2019 Investor Day, you guys provided a long-term target for Versace of $2,500 in sales per square foot. I think today, that was $2,000 is a long-term goal. Could you talk about what's driving the difference there? And what gives you conviction in the new target?

But to be honest with you, I'm not sure we look at the difference between that.

Yes. Today, everything has been normalized on gross square footage. That was on net square footage. So we're actually seeing -- yes, last year, we expected growth. This year, we expected growth. And I think the numbers are now consistent across the brands.

Yes. Versace used to measure the sales per square foot not on the gross square footage of the store. And we found that out not too long ago. So now we measure everything on the gross square footage. That includes stock space in the store. I forgot....

Hey, everyone. Good to see you. Simeon Siegel. John, so to your point about price units, inventory, just in terms of what we'll be able to see. So how are you thinking about buying inventory go forward? So that was a helpful comment with Kors. So maybe kind of just thinking about how to contextualize that. And then, Tom, you mentioned different channels for each of the brands, and that was very helpful. So any thought on how that impacts the margin structure as the channel delta happens?

I'll let Tom answer that. The inventory purchase, as I said, we've bought 6 months' worth of inventory in basics and core. We did a little bit of that at Jimmy Choo and a little bit of that at Versace as well just because we just wanted to replenish, and we thought that was a smart thing for us to do. And we will go back to a more normalized kind of owning it for 90 days type situation. And that will start to happen really in the back half of the year. We also did it because of transportation. And while transportation has certainly gotten better, it is by no means behind us in terms of, in particular, in our North American operations were predominantly bring things in through Port of LA. And now we've moved quite a bit to the East Coast ports. They're all still very backed up, and there's a lot of challenges to get merchandise out. So I expect that we will achieve our goals in the back half of the year. That might bump around a little bit as we either decide to accelerate freight coming in or not. So I think that we will get to a more normalized planning basis with the exception that we have moved our design calendars up to we just think in general, whatever the new normal is, it will be 30 -- at least 30 days longer than what the old normal was.

And then with regard to channel impact on the margin structure. So as we grow retail and you've seen in the presentations, we expect to grow it as a percent of the business across all 3 businesses that will support gross margin, retail stores and e-commerce have stronger gross margins. And we expect to see those margins continue to grow and productivity and profitability grow on the bottom line on retail as we get leverage, leverage on SG&A and leverage on greater store sales densities. As wholesale becomes a smaller part of the business, it does have a lower gross margin, but a higher operating margin. So that's a slight offset. But again, the extra productivity from the growth in retail and for instance, e-commerce, for Michael Kors just a few years ago was significantly lower in profitability than the rest of the business. And now it is leading in profitability. So we expect to see that continue over time.

Mark Altschwager from Baird. And thank you for the presentation today. A lot of great information. Maybe just following up first on the topic of kind of scenario planning, given the macro uncertainty here in the near term. How does the elevation of the Michael Kors brand over the last few years really affect your view on how it might perform in a macro slowdown scenario? That's number one and then actually I had another follow-up.

Well, I'd say in Asia, we're in a macro slowdown right now. I mean, the economy is -- has slowed dramatically in Asia. And of course, you've got that coupled with the fact that there's lockdowns happening everywhere. So I think for us, whether it's Michael Kors or Versace or Jimmy Choo, I think the bigger question is, when does all that settle down, both their economy and the growth when you take a look at something like one day you wake up and Macau's closed. At one point in time, the Macau store was the biggest store in the region for Versace, and that's just gone up and down and because of closings and openings -- of course, Hong Kong used to be the most -- the largest store at one point in time worldwide besides Bond Street for Jimmy Choo. Now that's gone down to being 20% of it. So I think we just -- I think we look at Mainland China as being a more stable business over time and growing obviously, dramatically. You look at the size of the population. You look at what the middle class will represent. I think they say by 2025, it will be the largest luxury goods market in the world. So we expect that to rebound. We just don't know exactly when that's going to happen. And I also want to recognize that there were some luxury competitors that outperformed us significantly. And they did that through clienteling. They're really, really good at clienteling, many of our European luxury competitors. Where that's an area you heard us talk about a lot today. And I would say Jimmy Choo is the best in the group at that. And we're working really hard with Versace to get that in place. And Michael Kors, it's something that's much more new to the organization. And I think that over time, that will become a real strength of our group. So I would just say Asia, probably the next 12 months, where you're going to see the numbers bouncing. But long term, it has to grow. And Tom mentioned it in his remarks, in the case of Versace, our competitors are 5 to 10x as large as us. In the case of Jimmy Choo, I wouldn't say it's quite because it's more unique business. In the case of Michael Kors, it's generally double. So that's upside. And in all the other markets, we are typically at competitive size or close to it or in the case of Europe, in Michael Kors, we're the leader. So I think that gives us great hope that in those markets, as we were able to put our plans into place, we'll be successful.

And then maybe for Tom, just with the store productivity at Michael Kors, I think $800 per square foot. Curious how wide the range is there across the fleet. And I think you're planning to exit some stores, specifically in the Americas in the next few years. I'm wondering how those actions if you're able to isolate them impact the margin profile of the Michael Kors brand.

Sure. And it does vary in terms of store productivity because there are stores in -- primarily in North America that are unprofitable. So they'd be running at a much lower level. And we look to exit them over time. As we've mentioned before, oftentimes, we don't have the ability to exit. So as leases come up, we will take advantage of that and either move to a different location or just exit that entirely. We haven't quantified this or shared the quantification because we do know what it is in terms of the benefit of exiting those stores and then reentering into profitable stores in Asia is we're still going to have a decent sized fleet, but that would be a tailwind to our margin structure going forward for the Kors brand.

And also the productivity, actually, you can look at it by the size of the e-commerce business, and it's pretty much consistent in the group. So the e-commerce business is the highest penetration in North America. So therefore, we have the lowest sales per square foot and then goes to Europe and then Asia where the e-commerce business is the small, so we have the highest sales per square foot. So I think that our view is that as we optimize the fleet in North America from Michael Kors, we're going to get lift just from that profitability. And then as we kind of re-space these stores, that will also add to profitability. But I want to also mention that in Versace, when we bought the company, the store fleet was not in a very good place, in particular, in profitability. And all of a sudden, that's turned around dramatically. And interestingly enough, that's where we have the highest productivity is in North America, Versace. And we're seeing the same thing happen at Jimmy Choo, our fleet in North America, which was not really that profitable is all of a sudden starting to turn around very quickly. And that will be the biggest inflection for Jimmy Choo. No question. If we can get more store productivity, that will be the difference between these mid- to-high single digits and double digits. That's Jimmy Choo's clearly that one issue.

It's Camilo Lyon from BTIG. Thank you for all of the details. It's been very helpful. It was great to hear that you're starting to see some of the pressures from supply chain abate. I'm curious to know if we can isolate how much of pressure from supply chain freight costs you've absorbed. And more broadly, if we can get a rank order of the puts and takes on the gross margin line over the next 12 to 24 months, there's clearly benefits from accessories improving across all the 3 brands. You've got the retail mix that you outlined as well, Tom, but I'm just curious, how do we rank order the benefits? And where does supply chain easing pressures fall into that?

Sure. So over the past year, I think in Q3 and Q4 of last year, supply chain was a 400 and 300 basis point headwind. In the first half of the year, it wasn't as much. So you can kind of average that out to see how big of an impact it has had on the business. We expect those levels to continue into this year. Although, as John mentioned, there is some easing on the broker side and broker rates as we look forward. And at some point, that may actually become a tailwind as things normalize in the logistics space. But otherwise, in terms of the puts and takes for gross margin, I'd start with our fundamental strategic initiatives. That is really driving the great margin expansion across all the brands last year. It's full price sell-through of the pricing activities that we've taken as well as growing accessories at the beginning stages but still very significant percentage growth across the businesses. So those things, I think, will continue as we manage going forward. And then the takes really are some of the things that have happened just recently. That's the China being a bit of a headwind whereas Asia is structurally a higher-margin region. We did note in the last quarter that this year's margin came down a little bit for that. And for FX and for the war in Ukraine and taking another $100 million of revenue out of the business. So those are the type of things that we've held margin from our current guidance despite a lot of those activities and it's all due to the strategic initiatives of the business and how well they have performed in the past and our expectations for them to continue to deliver going forward.

Great. And just 1 follow-up on the Kors' remodel program. I think it was the Paris showroom flagship that you had on the presentation. I'm curious what have you been able to generate from that remodel? And does that serve as the key guidepost as to getting to that overall $1,200 per foot goal?

The answer is we did that right during the -- when the pandemic started. And so it's only been open for a handful of months. So early indications are great, but I can't -- I'm not going to sit here and say that that's the same way we can identify exactly what's happened inside of the Versace rebounds.

Ike Boruchow, Wells Fargo. A quick one maybe for Tom. It's on Jay's first question on M&A. Can you talk -- if you found an ideal target, where would you be comfortable taking leverage in the balance sheet for such a deal? And then maybe, John, you talked about with Michael Kors something to the effect of, we're not going backwards. You've made a lot of great changes to the brand. Can you just help us, especially on the wholesale side, given where -- there's -- the macro pressures and we're worried about a slowdown what's different between Kors in U.S. wholesale specifically today versus maybe pre-pandemic? And what kind of helps you kind of see the guardrails on the brand today versus back then?

So on the M&A and leverage question, first, we've done, I think, a very solid job after our last 2 acquisitions of paying down debt very rapidly and maintain a strong balance sheet. Our leverage is now well below 2x. And I feel for the type of acquisitions that we talked about, we believe we're investment grade and that we can sustain and spend a good deal without quantifying it and maintain that for the right luxury asset. In addition, [ it would ] then look as we've done in the past to leverage that free cash flow of both our business and the acquired to pay down debt and manage the balance sheet tightly.

So today, wholesale is a smaller business. And I've publicly said that -- well that sounds like a wonderful thing when you look at it on the financials, it's -- we like our wholesale business. It's extremely profitable, as Tom has mentioned. And we enjoy our partnerships, whether that's with Bloomingdale's or Macy's or Gallery Lafayette or Harrods, I mean we love our retail partners, and we think they're all excellent represent -- they all represent the Michael Kors brand in an excellent way. We have shop-in-shops in most of our stores. And we have sales associates that many times are funded by our company. So we think the consumer experience is one that we're proud of. During whatever it was 3, 4 years ago, we shipped too much product into stores. We did that. I don't put that on anybody, except for ourselves. We did that quite frankly, in Jimmy Choo. We shipped too much product into stores. And that creates markdowns and then that creates sale, and that creates a thought process in the consumer's mind. So we have actually reduced or sped up the inventory turns at all of our wholesale partners, and we've done that across the group. So there's actually less inventory, significantly less inventory in the department stores today. There's been a lot less inventory just in general because we weren't able to ship. So that's been a whole another issue for us. And [indiscernible] said before, if it means we're going to lose some market share, we're okay with that. We'll let our competitors do whatever they're going to do. We believe our brand comes first, and we believe that experience comes first. And we really walked away from 3 things. First, we walked away from our Jet Set [ inventory ], which you know we're doubling down on. You've seen more people traveling in the most glamorous places in the world with Michael Kors now, and we're doubling down on that. Second, 2 years ago, we walked away from our iconic brand codes. I'll leave that aside why that happened, but I'm the one who did it, and it was wrong. And bringing that back has been excellent for us and for our retail partners as well. And then thirdly, we really, across the group, allowed ourselves to be less expensive than what the brands really deserve to be. And so yes, Michael Kors is more expensive. You see $650 handbags in the stores again now, and people are going, what is that? Well, that's what Michael Kors is. So if you would like to be Michael Kors. We've raised our prices in accessories almost like 26%, 27% in the last 2 years. And there's going to be more to come. And that's both because of the particular transportation costs that have gone up on us dramatically. That's not why we did it at the time, but thank God, we did do it. And we also just think that the brand in our mind is in a different place. And so -- those are really the guardrails. And I want to be clear, if we lose a little bit of volume from that, that's okay, we're going to focus on profitability. That's the most important thing for us.

Brooke Roach from Goldman Sachs Research. As you contextualize the Michael Kors brand and that move towards the high end of the contemporary pricing scheme, can you contextualize the brand's presentation between value, collection and core. Is there any focus on moving away from outlet or value formats? And if that's the case, how does that play into your view on store productivity?

Sure. So outlet for us is a very important business. And I'd say in all 3 parts of the group. And in a funny way, it's even more important for Jimmy Choo and Versace because there's a very limited window of time that we currently mark the product down inside the store at the end of the season. Over time, we're actually looking at whether we do that anymore at all inside of our full-price stores. As you know, many of our luxury competitors have moved that all to the outlet channel. So as we've been able to kind of rationalize the way that we've looked at that. And in both Versace and Jimmy Choo, we also reduced the amount of sale time that happened inside of our stores. And this is not just a North America thing. This is on a global basis. That's always going to be an important channel for us because we have to do something with the excess inventory. I don't think that changed our mindset at all on productivity. We've -- across the group and 3 of us as the 3 CEOs of the brands view that as you've heard today, one of our primary initiatives and that really comes back down to the selling associates, a culture that we have inside the stores and how we build that connection with our consumer. And again, we have very limited outlet store exposure in both Jimmy Choo and in Versace, we're in the same places that our other luxury competitors are. And in Michael Kors, it's still compared to the total fleet, it's a very -- it's a smaller percentage. So we don't want our business to be driven off of that channel. We want our business to be driven off across the group, the full-price part of our business and fashion and fashion introductions and exciting the consumer. And yes, there's going to be times when you can buy something on sale because we're at the end of the season or were broken in stock or whatnot. And we'll continue to use that channel for that purpose. Okay, I think we'll do one more and then we'll wrap it up.

It's Tracy Kogan at Citi. I just was hoping you guys could frame the opportunity for hardware at the Michael Kors business. I think you kind of likened it to Signature. Maybe you can just tell us where it is now versus where you expect it to be and kind of compare it to the growth of Signature, please?

Yes. So I'm going to let each one of the CEOs answer that question. I'll start with Michael Kors. When we talk about Signature, that's an overall print that we will have either on a handbag or shoe. And we use it, we weave it into our fabrications in ready-to-wear as well. So that's what we refer to as Signature, and we have variations of that in Versace and Jimmy Choo. And in the Michael Kors business, that is very, very important. You know there are a few luxury competitors out there in Europe who run numbers that are much higher than that, who run numbers that could be in the 70%, 80% range. But what's happened recently in luxury is hardware has become kind of the new trended item that consumers want to show their value in terms of the brand and what it expresses. And so this is why we think that our -- we have multiple different versions of how we view the hardware. And if you go back initially, there was something called the MK Charm, and that's what launched the whole company. We didn't even have Signature back in that moment in time. So it's part of what's happening in fashion, but it's an iconic way for people to express themselves as being associated with the brand. But why don't I turn it first to Cedric and then I'll turn it to Hannah.

With regards to Versace, probably Signature is not as present. However, the investment we're making in having very clear vocabulary in language around the brand with the hardware is part of our strategy, as I mentioned before. You have to also remember that Versace comes from a culture of print. So print is a big thing. So I would say print becomes also part of our Signature in our DNA. But as part of balancing the assortment and really making sure that we're building a business that is both sustainable from a long-term perspective and profitable, we're working very hard on having a strong continuity program. So some sort of a carryover that's going to help us to really stabilize the business, but also build on the foundations of the fashion. So Signature will probably never be as present as we see it on Michael Kors, but elements of Signature will always be there, and it's all about the brand [ codes ] that we discussed before.

And interesting, we did a whole show about 2 years ago around the launch of the Greca Signature print. And we've done quite well with it in certain areas of the company. But then when we really looked at the leather goods, we said, how can we translate that more into a hardware. And that's when Donatella came up with the Greca and the way that we're delivering that. And we're really excited about what that means for the company because that says luxury, but it also says the brand codes of our house. And let me finish with that.

I mean, for Jimmy Choo, the history of Versace is in prints, then I think our history and DNA comes with Crystal and all things [indiscernible]. And so when you look at the brand codes of Jimmy Choo, you see us playing across Crystal, you see us playing across Pearl. We actually only launched our JC Monogram only 2 years ago. So for us, it's relatively new, this hardware. But what gives us a lot of confidence in this area is that we've applied it, yes, to the core category of footwear and the consumers responded really well to it. But in addition to that, we see 60% growth coming through accessories. We see above expectations growth coming through our jewelry line, which also strongly features those brand codes again in the JC Monogram. So I think it's, as John said, it's just a way for customers to be able to identify the brand, be able to wear the brand and something that we're very proud of, and we continue to reinforce that in the eyes of the customer.

And Jimmy Choo got to $0.5 billion without having any kind of a Signature iconic code, that's really quite extraordinary. And the way the consumer has responded to this. And as Hannah said, we only introduced it 2 years ago has really been -- I think has surprised the management team as well because it was a little bit like wow, what is this thing that you want us to do? But it's, I think, been done beautifully and the execution is quite strong. And if you look at that quad bag that we showed up before, I mean, we're having trouble delivering that right now, and that's a really good position to be in. Consumers responding to it, and it's obviously got the JC [ prominent ].

Yes. I'd just like to add one thing on Versace. I should have mentioned the men's -- the proportion of our Signature, as you envision it were probably bigger within our men's assortment that it will be into our women's, especially in the Men's Leather good, we think it has to be a very strong foundation in building that business as well.

So I'd like to conclude my first and foremost, saying thank you for everyone coming here today. It's nice to see you all in person. Hopefully, the world continues to rebound. Hopefully, the future is bright for us all and wherever you live in the world. And we're certainly excited again about Capri Holdings. We are a luxury global fashion group. I think we've done a very good job of executing on our strategies that we put in place really many years ago prior to the pandemic. We're going to continue to stay focused on those strategic initiatives. We've got, I think, a very, very, very big opportunity with Versace as everybody in this room knows, how big could it be that we're all going to find out. Jimmy Choo is going to become a very solidly profitable part of our group. We're on the way to doing that and particularly under Hannah's leadership. And Michael Kors has had a very nice rebound, and we're excited to tell you today that we see a very unique opportunity in the future for Michael Kors and one that we think is very realistic in terms of our ability to achieve it. So thank you very much for coming. Hope everyone has a good summer. I guess we'll be on the phone with you in a few weeks for our earnings call.