Capri Holdings Limited ($CPRI)

All right. Thank you for joining us at the Consumer and Retail Conference. We are joined in the room by Capri Holdings. Take it away, Paul.

Thanks for being here, CEO, John Idol, Capri. Really appreciate your time and the support in the conference.

A lot of things going on in terms of your strategies. There's a lot to turn around. Maybe give us sort of an update on the strategic initiatives, what's working, what's not working? And maybe we'll start there and build from that.

Sure. Thank you, and thank you for having me down here today. At Capri, we feel like we're in a very good place right now. Number one, we have 2 incredible brands. We have Michael Kors, 45 years old, Jimmy Choo, 30 years old. And these are brands with -- rich with heritage. And good brands will always go through different cycles. And we feel like we've identified the opportunities for us, and we really started about a little over a year ago in particular on Michael Kors, and maybe we'll talk about that a little bit. But where we saw the opportunity was to take both of these heritage brands and to start to look at the marketplace as an opportunity to grow with younger consumers. And that's both with the Gen Z and with millennials as well. And how could we take more market share with that consumer? So we looked at that -- both brands through that lens. Michael Kors in particular, we looked at the Jet Set and our heritage of that. And we didn't want to give that up, and we certainly saw that the consumer was responding to that. But we just looked at it through a more modern lens. With Jimmy Choo, same story, where we saw a brand that has this deep, deep engagement with consumers, how could we modernize it? Along with that, we looked at both of the brands, and we thought there was an opportunity to reset our strategic pricing architecture and to look at the product and focus a bit more on the trend that really was happening around the world in fashion and make sure that we are on top of that. I think we've been able to do that in both brands in a very short period of time, better than we had done in the past. And then the last thing is, when we looked at both of the brands, we knew there was an opportunity to change the way that we were marketing, in particular, with both brands, we're utilizing influencers in a much more significant way. And we're also looking at the channels that we're marketing in, primarily social media channels. And we're leveraging those channels and spending a lot more of our capital, our financial marketing funds in those channels, and it's really starting to pay off for us. And the additional -- the last piece of all of this is, and really more of a Michael Kors issue is we've reduced substantially the amount of discounting that was going on with the business. And that was a result of really having the wrong product out and much higher prices than the consumer was responding to. And I'll talk more about that later. But having us really reset that in Michael Kors has helped us dramatically with full price sell-throughs, having less markdowns. And in Jimmy Choo, it's created a really big opportunity for us, in particular, in the accessories world. So we feel great about these 2 heritage brands, luxury brands. The consumer is responding to our new initiatives in terms of marketing, product. And then the next thing is we -- I think as you know, late November, early December, we sold Versace, which put us in a fantastic position because we ended the quarter with $80 million in debt. And for a company our size to have that very small amount of debt, our leverage has dropped almost in half and will continue to go down given our strong free cash flows in the company, gives us the opportunity to make significant investments in Michael Kors, in particular, a little less so in Jimmy Choo, talk about that shortly. And it gives us the opportunity to reinstate our share repurchase program, which I think, you might have seen that we announced a $1 billion share repurchase program, which is quite significant, shows the -- our belief in the companies that -- our Board of Directors' belief in the 2 brands that we have, and our ability to generate free cash flow and invest in the company and return capital to shareholders.

You mentioned Jimmy Choo. I'm curious if you look at that brand, we obviously saw decent results last quarter. I'm curious if you look at that brand as having turned a corner. Can we kind of look forward and think that, that brand is going to achieve consistent growth?

Yes. So we've had 2 quarters of comp store sales increases for Jimmy Choo. We are having -- we are comped up right now in this, which is our fourth quarter, but it would be our third straight quarter of comp store increases. And I would say, yes, we are on the right track with Jimmy Choo. So I'll start with, first, once again, the marketing of Jimmy Choo. We've really have a new vision of who the Jimmy Choo woman is and she is effortlessly alluring. That's slightly different than where we were before, which was runway ready and glamor, et cetera, and stuff that she's not still those things. But we think that the way the consumer is looking at brands today and how those brands fit her lifestyle, this was a bit more of a relevant positioning for Jimmy Choo. You can see that in our new marketing campaigns. And what's also exciting is the way we're marketing with the consumer with shoes in the casual category, again, you think of Jimmy Choo for a glamorous event to a party or a wedding, and we really had an opportunity to lean into her whether she was going out on the weekends with her friends just having a great time or dinner or whatnot and not being so kind of one dimensional. And that marketing has really been incredible. That category of casual is starting to bring us a lot of new customers. So it's not just we're selling to existing customers, but our new customer acquisition is going up very nicely at Jimmy Choo. And then the second thing is after the casual shoe success that we're having is accessories. And right at the same time, we looked at the strategic architecture of Michael Kors, we decided to look at that for Jimmy Choo in accessories. And we had seen that the more pure luxury players had really gotten to almost $3,500 on handbag opening price points. We thought there was a very large category at $1,500 and below. And we introduced 2 new groups about 6 months ago, one called Bar and the other called Curve. And both of these groups are doing fantastic for us, both in our own distribution and in our wholesale partners' distribution. And we're really filling a niche where many players have kind of left. Again, we make all of our bags in Italy, so it's all beautiful quality. And then we have other bags that are in the $1,500 and higher category, bag called Cinch, which we've had for some time, doing very, very well for us. And then lastly, our Bon Bon Group. So we now have 4 categories inside of Jimmy Choo in handbags that are really showing very strong increases. I think we said last quarter that we saw double-digit increase in all that full price category of bags, and that's quite exceptional. So when you look at Jimmy Choo, and I've said now we're on our third quarter of comp store increases, I think we're feeling very good about that brand. We've publicly said we think it's about an $800 million business. I think if we can continue to get things moving at the current rate, it could be bigger than that. We also believe that Jimmy Choo will return to double-digit operating margins, somewhere between 10% and 15%, $700 million, $800 million business. That's a lot of money for a company like ours. I want to reiterate Jimmy Choo is not for sale. We think it's a phenomenal asset for us, and we look to continue to grow that brand.

It's great. It's great to see the inflection of that brand. And I think what everybody wants to know though is like when is the inflection coming in the Michael Kors brand? Anything you could provide in terms of how you're thinking about that inflection?

Sure. So again, we started our new strategies or new strategic initiatives in February of this past year. So we're basically only a year into this. I would say we focused primarily -- well, let me back up. First thing we did was we looked at our Jet Set heritage through a new modern lens. I think you've probably seen Suki Waterhouse as our main brand ambassador and campaign image lead, and she really embodies what the brand stands for. She's much more natural. She's, again, very, very comfortable and looks strong and powerful. And so that's a little bit different than the -- again, we had a very glamorous fast-looking image to the company. It's not that we want to lose that completely, but this is a more modern take on it. We believe that our consumer is traveling the world in style, and that doesn't mean that she's flying off to Saint Tropez, which is our current campaign, every weekend, it means that you might be going from Miami to Palm Beach to have dinner. It might mean that you're going from New York to Disney to have a great time with your family. And so it just means that you're on the move. And when you put on Michael Kors, we want you to feel confident. We want you to feel like you have what we call standout style. So what's important about that is we have great data analytics in the company. And we are now seeing that the customer engagement rates are rising very, very rapidly. The customer is responding to the new marketing campaigns. And we can see the rise even at some of our peak campaigns that we had with Bella Hadid, some of the new campaigns are higher than that, which is really quite interesting for us to see that happen. So that's the first thing. The second thing is, again, we had focused on our full price business about being much more focused on trend and what was happening in the marketplace. We were a bit behind on that. I think if you get a chance to see -- if you're here, go to see our Aventura Store, if you're in New York, go to see our new flagship in Rockefeller Center, et cetera, you'll see the new store concept. But the product inside of that store is much more on trend. The next thing we did is we looked at our strategic pricing architecture. Coming out of COVID, we raised prices as high as 25% in accessories. And the consumer said that, that's not the pricing that they wanted to see from us and so, therefore, we were taking too many markdowns to get back down to the pricing that we were ultimately selling the product at. Once we changed that strategic pricing architecture in February, we have had quarter-on-quarter of full price sales increases in our full-price channel, which is really extraordinary. And I think we also quoted that last quarter we saw AUR increases, which is also pretty interesting after we lowered prices. So we're really having a strong reaction to the strategies that we've put forth from a product -- from a marketing, product and pricing standpoint? And then lastly is, as I mentioned, the new store designs. We've talked about the fact that we're going to renovate 300 stores or half of our store fleet, 300, 350 stores, and we're going to spend $300 million doing that. We have the capital to do that. We also have free cash flows to do that, and we will do about 100 of those this year. So this is the year we really get going on that. Those new stores are seeing very solid traffic increases and very solid sales increases. So we know that it's working. We know that the new product, new marketing, new pricing architecture and store renovation program is working. And I'll wrap that all around the full-price business. And I know that you all saw us comp positive in our full price in Q2. In Q3, we did not comp positive, but that was by design, and that was because we removed a tremendous amount of promotional activity in our full-price channel. You'll see a little bit of bumpiness like that in our full-price channel. Sitting here, quarter-to-date, we're actually positive in full price. I don't know that we'll end the quarter that way or not, but we're positive right now. And that just shows you that the consumer, again, she's reacting very strongly to the activities and the way that we're positioning the brand. In terms of outlet, that's where we need more work. We had -- when we went off on this new strategic architecture, we had to get the full price piece right first. When the consumer is responding there, they are definitely -- you'll see that trickle down into the outlet channel. The outlet channel has been an issue of the product really being off trend. And we, in Q3, had to clear a lot of that product. We're almost out of it at this point. So when you go to our outlet stores, the new floor sets have really just started to hit. We have a little bit coming in, in our fiscal Q3. And the sell-throughs on that product have been excellent. They've also been at higher AURs. We won't get the full range of product that we need in the outlet stores until the fall season, really sort of starting in August. A couple of things to note. In outlet, we've had 2 big pullbacks in promotional activity. So that's just the amount of sale days, the amount of discount that we did. Secondly, we've had a very, very big pullback. Around October of this past year, we eliminated what was referred to as daigou sales. And this is where we sold to certain buyers. You can no longer, inside of our stores, transact on that. We do have an app that you can see. But even on that app, we reduced the discount by 50%. So that is costing millions of dollars a quarter. We know it's the right thing to do. That will no longer be a headwind from us -- for us after October. So we'll -- really, after October, a lot of the reduction in promotional activity as well as the daigou sales will be behind us. We'll have a tremendous amount of new product. I used a number of about 75% in the outlet stores, that will really happen in July and August. So I think you're going to see similar things to what we've got happening in our full-price Michael Kors business start to happen in our outlet channel. Additionally, same thing in outlet that we're doing with Michael Kors in full price, very heavily use of influencers because the outlet channel is just like the full price channel. She wants trend. She wants to see fashion. It's no longer where you can just take an old product, bring it down after it's been a few years in full price because if you don't give it to her, someone else in these centers is going to give it to her as well as the fact that we have a lot of tourists traveling and they're looking for fashion trend. Additionally, in the outlet stores, we are now selling our full price line, what we call icons. We have 3 groups in that, it's Hamilton, which is one of our iconic bags for the last 15-plus years. We have a new group called Laila, and then lastly, Nolita, all 3 of those, when you walk in our outlet stores, it's highly identified. It's called icons. It's representing in those stores where it has gone in about 5% of sales. We think we can grow that business inside of our channel. So we're -- I would say, we feel, in full price, we have made a turn. It's definitely in place. It's there. In outlet, we've got a little more work to do. We're very -- we've gone from cautiously optimistic, which is, I think, what I said in our third quarter earnings calls, to we are optimistic. So that's the inflection change in where we are. The last thing is our wholesale business. Our wholesale business made -- I hope we emphasized it enough. We made a very big step change in wholesale during the holiday season. We were -- the wholesale partners were not keeping up with what we saw in our own full-price channel. That is now getting to be close to similar. Again, the assortments look good in the stores, consumers are reacting, and we have, not only in North America is our business getting much, much better in our wholesale partners, but in Europe, we have partners who we actually exited the stores who have come back to us and said, we would like you to come back in, we actually need you to come back in. And the reason for that is, many of you know, the luxury, the more top of the luxury market has slowed down, and we'll maybe talk about that a little bit later. And the more accessible part of the luxury market is actually doing quite well. So it's not just certain brands that might be associated with our company, but you see other brands, ready-to-wear brands also doing very, very well in this kind of accessible category. So all of a sudden, a lot of our wholesale partners around the world are going, we want not only Michael Kors back, but we want you in more doors, et cetera. And so we're very positive about what's happening in our wholesale channel. I want to remind everyone, the wholesale channel for next year, we are still planning it down. I think we've said that a number of times publicly. We are reducing our off-price business that we do today. It's predominantly a North America business. Over time, we will significantly reduce that business. We think that's right for the health of the company, which maybe is a good way for me to just give you a little color on. We believe that total Capri, we will grow low single digits next year. We think we're going to have gross margin expansion, and we'll talk, I'm sure, about tariffs and whatnot shortly. And we think our SG&A is going to be roughly flattish for the group. And we think there's going to be very significant operating margin expansion, 50%, 60%, maybe even more percent operating margin expansion. And when you look at that and you look at that where the EPS is, Capri is going to grow very quickly. Again, maybe it's off of a lower base, but it's going to grow very quickly. And I think we've got the pieces in place now to do that. And Jimmy Choo definitely has turned the corner. Michael Kors is, I think, what we had said to you, we were looking for this year to get on solid footing, I think we feel like we're now on solid footing.

And optimistic that next year can be an inflection or more optimistic...

Yes, I think that's right. I think we went from being very cautious in all of our calls and presentations with everyone. We didn't want to get ahead of ourselves or over our skis. And you know, in our world, what happens. If you just get a little bit of fire -- if you get a little bit of momentum it turns into fire. And again, we are still the second largest accessible accessories player in the world. We have a very large footwear business. I should comment on that on Michael Kors. Actually, the area where we need a little more work is actually our footwear business and sizable to us. And we do have competitors in that world, and they have taken market share from us. Very excited about the new product that's arrived in the stores literally just in the last 30 days, and we're seeing our business start to turn there. And so if we can get that category moving more quickly, that will also help accelerate our situation, both in our full price, outlet and in our wholesale channel. So that's kind of the next big piece that we're working on right now. And I think we'll be in a, not a perfect place by the fall season, but a better place.

Excellent. And you mentioned earlier, I think, spending a bunch of -- hundreds of millions of dollars on stores, and I think part of that is remodel programs. Maybe you can talk about what you've seen thus far in your store remodels, what you expect going forward?

That's right. Well, again, the great news is, after selling Versace, we have very little debt on the companies. And we are going to be generating much better free cash flows as we move forward. So we have the capital to be able to invest in renovating the stores. We have approximately 700 stores around the world, and our intention is to renovate half that store fleet in about 3 years. So we're a little -- we got a few of them done this past year, just a handful. And the early signs of that renovation are that traffic is up and sales are up even more than the traffic. So that's a very good result. Now obviously, part of that's the better product, better pricing, but consumers can feel that there's a change happening. The marketing campaign is changing. The stores with our new residential feel inside them is really looking exciting. I do have to tell you, we've got 2 or 3 stores opened so far with what we call a Jet Set Lounge. We put in, and we're offering, obviously, coffees and teas, et cetera, but we have nonalcoholic champagne. I think our European stores might have alcohol, I don't know. But we -- and it's -- and we are not charging for that product when you come into the stores today. That might change over time, but it's increased dwell time significantly, and it's a great experience. So we're going to expand that in a number of stores very rapidly and a lot of the remodels that are going to have this Jet Set Lounge. It's a wonderful Instagram opportunity, too, for consumers to come in. They have fun there. And so it's really turned into something that's a big plus, especially for our flagships. And actually, next week, I believe it is, we'll open our new flagship in Beijing, and it will actually have a full restaurant for Michael Kors inside of it as well. So we're -- in a shopping mall called China World. So we're very excited about that initiative as well. We'll open about 100 of renovated stores, and that's both full price and outlet. So if you get a chance, if you're in the New York, New Jersey area, you can see our flagship in Rockefeller Center. You could also go out to Jersey Gardens and see the new renovated -- newly renovated with the new format outlet store as well. And we think, again, the more the customer sees this happen, the more they're going to say, I like this shopping environment with Michael Kors. I want to be a part of this experience. And our salespeople are very excited about this. In addition to that, we've got a number of really exciting clienteling initiatives going on inside both full price and outlet. We have a tremendous amount of new technology for our sales associates to use. And so it's creating real strong momentum for the teams at the store level.

Excellent. And coming back to something you mentioned earlier, I think you said 10% to 15% on Jimmy Choo in terms of the margin. I think you also laid out a low double -- a low 20s margin for the Michael Kors brand. This was all at your Investor Day. How do you feel about hitting those targets? What are the drivers to kind of get you to where you want to be versus where you are now?

Right. So Jimmy Choo used to be a double-digit operating margin business, lot of reasons why that has come down to -- it's a small loss today. And I'd start out by first saying that Jimmy Choo, we have a store network of about 230 stores globally. We'll reduce that slightly, probably closer to 200 over time. But there, as a matter of -- as these stores increase productivity, it just drops straight to the bottom line. So for Jimmy Choo, it's about store productivity. So seeing us have 3 quarters of comp store growth, that's already going to lean into the concept of profitability. That's number one. Number two, I think you heard us talk about our wholesale sales results have been really quite powerful. In North America alone, the total brand grew over 20% in North America last quarter. A big piece of that was our wholesale business. We are we -- we occupy a very unique role in luxury with Jimmy Choo. Again, as many of our competitors have moved footwear pricing to $1,000 to $1,500, we have a lot of product, everything from sneakers that start for $550 to fun little jellies that we had at $495 to some of our opening price point, evening at $895, et cetera, et cetera, where we can be a very important part of our wholesale partners globally assortments so that they can offer their customer an opportunity to have luxury, but not everything is at this very, very high price. And consumers have gotten choiceful. And I don't care whether you're at the luxury level or the accessible luxury level, there's no question that people are a bit more careful about what they're spending. And Jimmy Choo is the beneficiary of that right now. And I mentioned before, the accessories piece, as we build the accessories category from its roughly 25% today, and we think we can get that to probably closer to 40% over time, accessories are just much more profitable than footwear. And so that's really a positive thing for Jimmy Choo. And the last thing is that Jimmy Choo store fleet is pretty much fully renovated at this point. We'll renovate, I don't know, 10 or 15 stores a year. But there's not a heavy capital lift for us there. And so again, Jimmy Choo is in a very, very good position to get to this 10% to 15% operating income and have a very steady positioning on that. As it relates to Michael Kors, we've been much higher than the 20% goal that we're talking about today. And for us, we first and foremost went through our fleet optimization program, which is pretty much done at this point. I think we've closed 150-plus stores, which were loss-making stores for us, a big drag on the company. And that's behind us. As I mentioned earlier, the SG&A for Capri is going to be roughly flat on a year-on-year basis. And by the way, that will go up and down based on currency. So sometimes we'll tell you it will be up slightly, sometimes we'll tell you to be down slightly, it depends on where the dollar is on any given day. But -- and again, we're in a similar position to Jimmy Choo. As we start to lever these stores, and we're clearly starting to see that in our full price channel, we're starting to see comp store increases. Well, that's just going to flow right through. So that's the first thing, productivity. The second thing is we are going to have gross margin expansion, and that will start next quarter. And tariffs are obviously heavily impacted us, I think, almost 300 basis points in Q3. We see that as an opportunity now to, let's hope, stabilize. We did take price increases in the first quarter, not anything huge, about 5%, 6%, and we took those globally to help offset some of the tariffs. Secondly, we've got some mitigation efforts going on with our suppliers. But that will help expand gross margin for the company. And so as you keep these SG&A fixed, the gross margin expands, and we get modest growth on the top line. You can do the math. It's going to have operating margin expansion for us. So we think -- we feel relatively comfortable that we will get there. Again, the most important thing we're going to do in this upcoming year is we're going to see profitability expansion for both brands. But we want to make sure we keep this as our feet on the ground and not try to do something that won't be sustaining and long term in its execution.

And what kind of market do you think you're going to be playing in over the next couple of years? Like talk to us about the luxury handbag market as a whole and just sort of what the backdrop is as you kind of achieve -- try to achieve all these goals?

Well, the overall luxury accessories market is pretty, depends on who you speak to, we think it will still be down again this coming year. And that's, again, the more expensive part of the luxury market is definitely suffering today. And I think that customers are choiceful. Secondly, there are aspirational customers who just can't get into that market at this point. It's just too expensive for them. And that's why you see our more accessible part of the luxury market really starting to get some traction. There are other players than the typical ones that you might talk about that are having great success, and the brand I'll give you is [indiscernible]. [indiscernible] is doing fantastic in the marketplace. So there's just more than us and certain other brands that are doing well. So that just says the category bodes well, which means we can take market share and market share from the overall global luxury handbag business. So even though I think the luxury handbag market will be down slightly this year again, I think we can grow market share. And I think we actually have a tailwind in that our category is fitting more into where the consumer is today and kind of what they're looking for there. And I also think that we're going to bode well with our footwear business in both Jimmy Choo and Michael Kors because of a very similar thing happening.

Got it. That's the market that you play in. How about the consumer in general, "the consumer." What's your view of the health of the consumer? I don't want to be blind to events in recent days and over the past week maybe tie into what's going on in the Middle East and your own exposure and any views on how that might impact your business?

Sure. I'll start with the Middle East first, and then I'll talk about the general consumer. We have about 50 stores in the Middle East. The majority of them have reopened. We don't know what this is going to mean in terms of our revenues there. They're all -- not all of them, the majority of them are licensed. We do own, in a joint venture, a number of Jimmy Choo stores. So we just don't know what it's going to mean for obvious reasons. And there will be an impact. I don't believe it will be material for the company. I think that's the first place to start. And for anyone who's listening to this, our hearts and souls go out to those people who are being impacted in the region as well as any of our troops and people who have lost their lives. So hopefully, you will all say a prayer for people's safety. I think that if you would have asked me this question a week ago, I would have given you a different answer. But let me start with the consumer. The consumer that we see in North America is strong, and they continue to be involved in fashion and shopping. And I think if you have been into a shopping mall recently, shopping malls are back. They're especially with younger consumers. They find it phenomenal social experience. And so that's a really good thing for us. So not only is the e-commerce channel a great and vibrant channel, but the malls are back, and they've been back for the last couple of years. And so we see that continuing. Again, it's very social inside of malls. And many of our partners are doing even better job with restaurants and activities and whatnot. So we're very bullish on shopping malls in North America. And we also think the customer is in a good place. What happens now given with this rapid rise in oil prices, et cetera, we hope that this will be short-lived, but I don't think, for the moment, it's going to have -- for this moment, it's going to have a significant impact on us. If things continue on, obviously, that could be something we'll have to examine very closely. But the North American consumer is healthy. Interestingly enough, the consumer in Europe has been relatively healthy, at least for us. We've, again, had 3-plus quarters of very strong growth in Europe. It's been our best performing region in the world. And so we, again, before this conversation of what's happened over the last week, would have said we remain optimistic there. Oddly enough, I think if a region was going to feel more impact than any of the ones, I would think Europe would, just from a psychological standpoint. And then lastly, Asia, there's no question, Asia is rebounding, and we see it and in particular, China. The consumer is starting to shop again. I know that they have a lot of financial issues beyond retail and fashion, but we can definitely see the consumer is engaging. And again, this accessible category is very important. As he and she are coming back out to shop, they are probably even more choiceful than some of the North American consumers. And so we think we are setting ourselves up to be in a great place to really take advantage of that moving forward. So state of the consumer would have been pretty healthy. What happens from here, we're just not sure.

Yes. Certainly a lot of moving pieces on that front. And I guess, along those same lines, moving pieces, tariffs, obviously, we've seen some changes over the past several weeks, maybe talk about what that might mean for you, potential benefits?

Sure. So the tariffs, as many of you know, changed a couple of times. They are technically now about 15%. I think that's the global tariff coming in. And you could say, on the one hand that, well, they were 19%-ish average before, now they're 15%, shouldn't there be an advantage? We're not looking at that because we don't know what could happen in the next few months? Are there other areas where they could still get back to the additional tariffs? So we're not planning that there's any pick up. So any guidance we give you about the business will include as if it was what we thought it was before. I think the impact is about $125 million for us next year, something like that. That will stop being a headwind for us in a sense really towards the last quarter of this year. Because remember, even though we had -- we were selling more full price product, which had a bigger impact on us for tariffs in Q3, we still have a lot of carryover product that still has to move through the system. So tariffs become a -- I'd say, a zero headwind in Q4 of next year. But as I said before, we're taking price increases. We're having better full price sell-throughs with the reduction of sale activities, promotional activities. Our suppliers are working with us to help mitigate some of those costs. There will be a headwind, which we don't know what it is, but there's going to be fuel surcharges. You'll be hearing people talk about that momentarily. So that's why I say whatever we picked up in the tariffs, I'm sure we're going to give back in fuel surcharges.

Yes. Understood. We're getting close to time. You've had new CFO, COO. Maybe talk about who he is and what he brings to the table?

Yes. Sure. Tyler Reddien is a terrific individual, had a long career at United Airlines. He's got tremendous operational experience, which I think is very important for us. He's spent a long period of time at Hertz also and some other companies in between. His last position was at the Body Shop, spent a few years there and really help reorganize them and prepare them for sale, et cetera. And I think he's going to just be a terrific addition for our company, and we're excited to have him join and he'll join at the end of the month.

That's great. Thanks so much for your time. I appreciate you doing this.

Thank you very much.

And thanks, everybody, for tuning in. Thanks. Bye.