Michael Kors FY 1Q17 Earnings Call Notes

Michael Kors Holdings (KORS) John D. Idol on Q1 2017 Results

7.4% comp decrease in retail

“In our Retail segment, comparable store sales decreased 7.4%, due to a high single-digit comp decrease in North America and a low double-digit decline in Europe. This was partially offset by a high single-digit comp increase in Asia.”

Decrease in traffic

“In the Americas, retail stores’ conversions increased at a double-digit rate once again. However, this was more than offset by the decrease in traffic.”

Mentioned smartwatch but interestingly didn’t mention Fossil

“we are excited to be entering the growing smartwatch category with the September launch of our Michael Kors ACCESS collection. We are pleased to be teaming up with Google and utilizing their Android Wear operating system to run this truly unique accessory. The smartwatch will be available in two styles, each with thousands of different display options. The touchscreen device allows you to see your social media updates, texts, emails and call alerts, use voice controls to access services via Ok Google, track your fitness and much more. Our smartwatches will be priced between $350 and $395. ”

Department store promotionality isn’t right for our brand

” we will be removing ourselves from all of the department store friends and family sales as well. We think that this is critical for us to really do three things; number one, to protect our brand image. As you know, that channel has become very promotional and, in fact, is causing us difficulties in our own retail channel, which is why you see our gross margins declining because we’re really trying to meet certain pricing that’s happening to be competitive. And we don’t think that’s the right thing to do for our brand going forward.”

Watches are the main driver of the comp decline

“Now, those aren’t yet enough to offset what we’ve lost in – really remember, the number one decline of our comp store sales is watches. It’s the number one area that’s really hurting us the most when we look at our comp store declines. So we need to get some of these other categories to deliver at a higher rate than they’ve been in the past. We see digital marketing as being one of the critical ways to do that, and then really arming our jet set selling associates with the right tools to engage with the customer, both in-store and out of store.”

You’re seeing impact from currency

” as I think some of our other competitors have reported, factory traffic is down versus its historic level, although not really that significantly. So it’s not an area that we see as volatile as the full price side. And really the full price side, for us, the volatility, as we’ve talked about many times, is happening in major markets, whether it’s New York, South Florida, certain parts of Southern California and you see this all with currency. ”

It’s the tourist markets that are hurting most

“So those are big markets for us and they’re meaningful markets for us. And as we look across our fleet of stores, where we’re suffering the greatest is really in the tourist markets. Where we’re not heavily penetrated by tourists, actually those markets are relatively healthy, with the local customers inside there. So that’s kind of the state of what we see in that area”

Consumer wants a fashion wearable

” the watch part of our ACCESS launch we’re extremely excited about and, as you know, we think we’ve got one of the best products in the marketplace. So we’re competing in a different arena. We’re competing against some very significant competitors, being Apple and Samsung and et cetera. But we think with our partnership with Google and the fact that we believe that we’ve got a product that’s better looking from a fashion standpoint, and the consumer research that we’ve done, in particular with the female customer, is bearing out that absolutely she wants something that’s exciting looking and not quite as just tech looking, so more fashion in its nature.”

Department stores are getting inventories in check

“Lastly, in terms of the inventories, we’ve already started to wind down the inventories in the wholesale channel. Additionally, as you saw, the promotional activities, the retailers are getting their inventories in line. We do not expect there to be any inventory issues in our own channels, with the retailers for the fall seasons. That doesn’t mean they’re not going to be promotional. I can’t tell you what they’re going to do and not do, given the traffic situations. But in terms of inventory, there will be a significant amount of less inventory in the retail channel of Michael Kors’ product. And we think that’s a good thing, and will hopefully improve the health and image of our brand with the consumer as it relates to price.”

Joseph B. Parsons – Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer

Wholesale business down 7%

“In our Wholesale segment, net sales declined 7.0%, due to lower sales in our accessories and womenswear line, partially offset by increases in our men’s and footwear businesses”

Kors FY 4Q16 Earnings Call Notes

Michael Kors Holdings’ (KORS) CEO John Idol on Q4 2016 Results

Building on omni-channel

“We continue to build upon our omni-channel capabilities and remain focused on seamlessly integrating the customer shopping experience across all touch points, as well as taking steps to enhance our mobile shopping experience. We look forward to seeing the benefit of these efforts over the coming year.”

Expect to be challenged by a difficult retail environment

“In fiscal 2017, we expect our results to be challenged by a difficult retail environment, pressured by weak traffic and tourism trends. We will respond by carefully managing our exposure to the U.S. wholesale channel, maintaining disciplined inventory controls, and remaining committed to our relentless focus on designing world class fashion product driving brand engagement with compelling marketing programs and delivering a jet-set luxury shopping experience in our stores and our digital flagships.”

It’s flat out not true that our brand is losing its vibrancy

” Our customer continues to respond to the brand. I see constant communication from various press related things about the brand is dead or losing its vibrancy, et cetera. And that’s just flat-out not true. And along with that, we’re shipping double-digit unit increases.”

Customer research shows the brand loyalty is the highest it’s ever been

” all of our consumer research shows that the brand engagement and the brand loyalty is at highest levels that it’s ever been. And your analysis that you do annually indicated the same thing. So we just — we don’t like the amount of product that’s ending up out in the marketplace. So this is not an issue of doors or anything like that. This is really more an issue of having the right amount of product, given where we want to get back to in terms of full price selling versus promotional selling.”

Handbag business is flat to down but units are up double digits. Promotions are hurting

” Let me start with the industry. We believe that the North American handbag business is flat to down low single digits in total. I know that that’s different from what some other people have reported but that’s just our belief. So we believe that the North American business, handbag business, is about flat to down low single digits and that’s I think primarily because of the promoting that’s going on. Obviously units are up double digits and I think it’s for most of us.”

We’ve seen an acceleration in softening of mall traffic, don’t see tourism rebounding

“We believe that there’s softening that’s continuing in mall traffic. We’ve actually seen an acceleration of softening in mall traffic and this is not just our stores. This is what we see from ShopperTrak, which is a company that we use that looks at our — that looks at not only ours, but other retailers’ numbers. So we compare ourselves to that on a pretty regular basis. So mall traffic continues to soften in North America. We do not see the tourism rebounding. So we’re taking a slightly more pessimistic view of Q1 and Q2 for us. Q3 and Q4 we feel pretty optimistic about. ”

Our teams are excellent at developing content that’s engaging

“I think we’re really good as a company and our teams are excellent at developing content that is engaging and that’s exciting the customer and keeping them engaged with the brand. They may not actually shop from us but I think they love being a part of the Michael Kors family and so I think in today’s world you have to be there.

Mall traffic declining where consumers have high degree of digital access

“I think many times we’re the first company or the most honest company to come out and say these traffic trends you’re starting to see in other places in the world. So mall traffic is declining in Europe now. It’s declining in the U.K. in particular. And I would tell you that in the most sophisticated digital markets is where you see the most mall traffic slowing. So we start out — and this is just our theory and just our hypothesis — that consumers who have high levels of digital product availability are shopping less in shopping malls”

We’re done with expanding our store count

“expanding the stores, we did a handful of them. It really hasn’t been a great return for us. So I would tell you that we’re not going to do that. That’s kind of over with. There will be a handful of select locations where we’ll do that but you’ll be able to count those on your two hands and they’ll be more flagshippy type things. We just did it in London and which happens to be working, thank God. Where we did them in more regional locations it really didn’t provide the uplift from our profitability standpoint that we were anticipating. So unless we see something changing on that, that will not be part of our strategy going forward. And in terms of outlets in North America, we’re basically done at this point. I think there’s one or two more that we’re going to open and it’s over with. And that’s pretty much worldwide also.”

Miscellaneous Earnings Call Notes 11.5.15

Colgate-Palmolive’s (CL) CEO Ian Cook on Q3 2015 Results

Have seen a decline in private label

“At the same time, we’ve seen a decline in private label shares in many of our categories indicating the consumers preference for branded products and respect of our equities.”


Anheuser-Busch InBev’s (BUD) CEO Carlos Brito on Q3 2015 Results

Big change in the Chinese economy towards consumption

“I think what’s happening in China at this point is that there is a big change from an economy that was all lead by exports and heavy investments in fixed assets, okay that generates a lot of blue-collar work or jobs to now an economy that’s much more service and domestic oriented economy. So more consumption, more consumer spending. So that of course, in the midst of this change, we see that in the Southeast, where some years ago there was lack of blue-collar workers and now there is too many of them. So there is a shift in there and I think that’s what the segments are showing us. But the segments that are more high priced are growing ahead of the ones that are lower price. And that’s exactly where we have most of our business and most of our brands position. So I think this change, while it may be bad for the industry, is not bad for us.”


PriceSmart’s (PSMT) CEO Jose Luis Laparte on Q4 2015 Results

We do have a soft economy in Columbia right now

“We do have a little bit of a soft economy right now, driven by the devaluation and other factors in the country. But we still are pretty optimistic about Columbia, and we haven’t reduced our efforts.”


Phillips 66’s (PSX) CEO Greg Garland on Q3 2015 Results

We see that the consumer side of China is doing very well

“we’re continuing to see good demand in Asia and across the system globally. So I think our view is demand is good. China is particular interest I think largely because of the reported numbers that what we see on both fuels and chemicals tells us that the consumer side of China is doing very well.””

By 2017/18 we’d expect not to be in a $50 crude environment any longer

“I mean our view consistently remains by 2017 and 2018 that really sort itself out and we are probably not $50 crude environment but we are probably not $100 but somewhere $60, $70, $80 in that range.”


Greenlight Capital Re’ (GLRE) CEO Bart Hedges on Q3 2015 Results

-16.9% through October

“The Greenlight Re investment portfolio lost 14.2% in the third quarter, bringing the year-to-date return to minus 16.9%.”

Brought next exposure up slightly during market sell off in August

“We reduced our gross exposure by 30 points in the quarter. Our net exposure increased slightly from 21% to 26% as we covered several shorts during the market sell-off in August. We continue to hold macro positions including gold, short Asian currencies and short French sovereign bonds. Overall, it’s been a challenging environment. We’re optimistic that we should get some recovery from our beaten down long portfolio.”


The Sherwin-Williams Company’s (SHW) CEO Chris Connor on Q3 2015 Results

Volume demand lagged initial expectations in virtually ever market we serve

“Volume demand lagged our initial expectations for the quarter in virtually every market we serve, but we remain focused on delivering positive results regardless of the demand environment.”

Continue to see deteriorating demand outside of NA

“We continue to see deteriorating demand for our product outside of North America.”


Banco Santander-Chile (BSAC) Q3 2015 Results

Economy has done better than most regional peers

“Segment [ph] in the corporate sectors continue to contract, but given the diversity of Chile’s economy and the fact that the average GDP growth of Chile’s main trading partners is relatively high, the economy has done better than other regional peers.”

No deterioration in asset quality

“In terms of evolution of asset quality, we think that the aligned trends are generally positive, especially in the consumer side, in the mortgage side and in the mid-size market. We haven’t seen any deterioration. ”


CBS (CBS) Leslie Moonves on Q3 2015 Results

Advertising is coming back in a big way

“advertising is coming back in a big way at CBS. Underlying network advertising was up 8% in the third quarter with strong growth in primetime, double-digit growth in sports and daytime and huge growth in late night, which was up 42%.’

The dire predictions of cord-cutting are overblown

“I think we’re all seeing that the dire predictions of cord-cutting are overblown, but the good news for CBS is, no matter where distribution goes, no matter how or where you want your content, we are in a perfect position. ”

There can never be too much content

“we are a content company, we believe the world can have more content, we don’t believe the guy who says oh, there’s too much content. There never can be too much content and we want more of it.”


Activision Blizzard (ATVI) Robert A. Kotick on Q3 2015 Results

Comparing King to Blizzard

“When we merged with Blizzard Entertainment, we found the right partner with extraordinary leadership. And when others dismissed the sustainability of Blizzard’s incredible capacity for innovation, we were certain patience would be rewarded. And it has. We see a lot of the same characteristics today in King. We think now is the right time to enter mobile gaming in a meaningful way. ”


Third Point Reinsurance’s (TPRE) CEO John Berger on Q3 2015 Results

Third Point owns Argentine debt

“Sovereign credit was up 3.1% on average exposure during the quarter, due to strength in Argentinean government debt the largest position in our credit portfolio. We’re looking forward to the run off Argentinean presidential election next month and we’ll be pleased with the victory from either candidate.’


Michael Kors Holdings (KORS) John D. Idol on Q2 2016 Results

Warm weather bad for seasonal items. Watch business still under pressure

“We saw accelerated growth in footwear, although the warm weather tempered boot sales in the quarter. The watch business continues to remain under pressure in retail and wholesale. ‘

Trend has been towards smaller handbags

” the idea that people are not buying handbags, I do not believe is a correct concept. They happen to be the fashion trend of smaller bags, so if we were selling x percent of $350, $400 and $500 handbags at this time last year we were selling less of those because we were selling a lot more in particular across bodies and large wallets. And that is what the consumer in particular the millennial is viewing as a fashion trend.’

All of us are now being impacted in parts of Texas because of oil prices

“all of us are now being impacted in parts of Texas because of oil prices there, that’s a little bit less tourist, but some of it’s related to the Mexicans shopping cross-border with the peso to the dollar.”


Time Warner (TWX) Jeff L. Bewkes on Q3 2015 Results

Programming is the most significant area of investment for the company

“Programming remains by far the most significant area of investment for the company. As you all know, we have plans to invest aggressively in content in 2016 and beyond.’


Stratasys (SSYS) David Reis on Q3 2015 Results

Excess capacity created by extraordinary expansion in 2014

“We also believe the situation has been worsened by the negative impact of excess capacity that followed the two-year period of extraordinary industry expansion that ended in 2014. Reflecting the low visibility of the current market environment, expected orders did not materialize as expected at the end of the quarter.’

Focused on adjusting the cost structure of the company to fit customer demand

“what I can tell is that we are taking very seriously the change in the business volume that we see in front of us and we are dealing with adjusting the cost structure of the company, the entire cost structure of the company not only MakerBot, to fit through what we see today in the market in terms of customer demand.”


Douglas Emmett’s (DEI) CEO Jordan Kaplan on Q3 2015 Results

Seems like occupancy is being driven by much stronger tenants

“I would say that, what’s driving — what’s going on here right now is a much stronger and wider base than what was driving the run up in ’04, ’05, ’06 and ’07. It’s way more comfortable, a way better percentage of kind of expenses for the tenants. The tenants are very — we’re seeing strong balance sheet and good credit. We’re seeing a good diversity of industries. You’re not seeing like a heavy lean on, I remember before, it was the mortgage — these mortgage guys were taking huge chunks of space”

“the strength in this market, all seems really healthy going to just literally more functional space for our tenants, as opposed to some of the tenants before that were literally just space grabbing and whether it be a big dotcom guy that didn’t exist a year ago and all of a sudden now needs 50,000 feet, 100,000 feet. What’s going on now seems a lot more comfortable and it’s backed by much stronger, more established tenants.”


Annaly Capital Management’s (NLY) CEO Kevin Keyes on Q3 2015 Results

Continued improvement in CRE fundamentals in the US

“The third quarter saw continued improved in U.S. commercial real estate fundamentals with healthy demand across all property types. Vacancy rates across all asset types declined compared to last quarter, with office and industrial continuing a trend of 22 consecutive quarters of positive demand.”

While the pace of CRE asset sales has slowed, we don’t see this as a weakening trend

“While the pace of sales has more recently begun to slow down 10% in September, we don’t see this as a weakening trend, as large take-private transactions continue to be announced with private equity taking advantage of the discount between listed markets and asset values.”

CMBS spreads have moved wider, but cap rates have not yet moved higher

“Spreads, however, have a continued widening that started this summer, with AAAs now at about 120 basis points, 32 basis points wider than at the beginning of the year and 34 basis points wider than this time last year. In addition, BBBs are almost 200 basis points wider than this time last year. While, this type of rate expansion is significant, we have not yet seen cap rates move higher. ”


Andrew Sohn Notes: KORS, SHAK, M

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.

 

KORS

 

Cannibalization of mall traffic

“In North America, we experienced a high-single-digit comp decline, reflecting a channel shift to online purchases and the continuation of reduced mall traffic.” –Michael Kors (KORS)

 

Store traffic future looks bleak

“Near term, we expect continued pressure from macroeconomic headwinds, including currency fluctuation, lower store traffic due to channel shift, reduced tourism in select markets and geopolitical issues.” –Michael Kors (KORS)

 

Ready to pivot for new tastes, newness is key

“Newness is without a question what is driving her interest, and I just might add, on that point, if you look at what’s happening, there’s some really good things starting to happen in the handbag business. Backpacks are starting to trend, and I think we’re a leader in that category. I think we’ve caught it pretty early on. There’s a very big shift towards smaller handbags and then crossbodies and small leather goods, particularly the millennial customer. It’s the way that she’s shopping. It’s the way that she’s wearing the product.” –Michael Kors (KORS)

 

Luxury companies should have strong balance sheets

“We believe that having a company that operates with a strong balance sheet is the right way to build a luxury company. Other companies don’t run their businesses that way, but we think a luxury company should be run with a strong balance sheet, of which we’ve done from the date that we really went public.” –Michael Kors (KORS)

 

Reducing inventories for department stores

“as we see the department store channel in North America slowing down because you know that, you know the department stores here are not posting robust results. We’ve decided to reduce the amount of inventory that we’re starting to put into that channel because we don’t want to have a lot of markdowns showing up inside the channel.” –Michael Kors (KORS)

 

Odd things happening in Europe

“You know, it’s so funny because while Greece doesn’t mean anything, while that was going on, all of a sudden business softened up. And the minute that that kind of got past whatever was in the consumer’s mind, our business in this quarter has really accelerated. So there’s some funny stuff going on over there.” –Michael Kors (KORS)

 

 

SHAK

 

Pursuing cluster growth

 

“We continue to execute our strategy to cluster growth in existing markets, opening our third Shack in New Jersey, at the village of Bridgewater Commons; and our second Shack in Chicago, on Michigan Avenue, on the ground floor of the impeccably restored Chicago Athletic Association, a boutique hotel overlooking Millennium Park.” -Shake Shak (SHAK)

 

Increasing pace of growth due to favorable environment

 

“Development conditions remain favorable for Shake Shack. And as a result, our team has been able to increase our pace of openings to exceed our originally stated guidance of at least 10 new domestic company-operated Shacks in 2015. We are confident that we will now open 12 new domestic company-operated Shacks in 2015.” -Shake Shak (SHAK)

 

Commodity prices going to be a problem for the foreseeable future

 

“As you know, we follow the market in our major baskets of beef and dairy. So beef is still up, high-single digits from last year for us, even in Q2. So we’re being conservative about what that means for the rest of the year. And we just don’t see the light at the end of the tunnel there just yet for sometime. We’ve been winning on dairy as of late, but then as Jeff noted starting to get a little more expense. Eggs are up. Our dairy costs have gone up” -Shake Shak (SHAK)

 

 

M

 

Consumer spending restricted to certain categories

“The overall growth in the economy is modest at best and we are seeing customers gravitating to restaurants, recreational services, healthcare, and electronics rather than to traditional general merchandize apparel and furnishing category.” -Macy’s (M)

 

Cautious expansion in China

“Our game plan is to start small and use a test and learn approach as we move forward. We also believe that by increasing the presence of Macy’s in China, we will actually help our business here as well both with the Chinese tourists as well as Chinese residents.” -Macy’s (M)

 

Must maintain financial flexibility

“the key here is maintaining financial flexibility, so that if the business hits a bump, we would still have the access to the financial markets that we need to operate the business as a proxy for that. That is why we talk about remaining investment grade as being so important to the company because we want to be a strong retailer for many years to come, and so we do need to have that flexibility for the speed bumps that do happen or the cyclical nature of retail.” -Macy’s (M)

 

Michael Kors FY 4Q15 Earnings Call Notes

Revenue up high teens but comps declined

“During the fourth quarter total revenue grew 18% and EPS increased 15%. Double-digit gains extended across our retail, wholesale and licensing segments. While we were pleased with the continued momentum in our overall business comparable store sales declined 1.7% on a constant currency basis. ”

Poor tourist traffic, decline in watch business, shipping delays

“We attribute this primarily to a continuation of weak traffic trends in North America, including a reduction in tourist traffic, a decline in North America watch business as well as a 90 basis points negative impact from shipping delays in our footwear, women’s wear and small leather goods products associated with the recent West Coast port issues.”

Citing social media followers

“In the fourth quarter on a year-over-year basis Facebook followers increased 22%, Instagram followers increased 99%, Twitter followers increased 46% and Weibo followers increased 120%, as consumers around the globe turn to Michael Kors for lifestyle and fashion inspiration.”

Foreign currency hedges roll off in the early part of the FY

“we expect foreign currency to remain a headwind for fiscal 2016. In addition to the translation impact we are exposed to transaction risk as our international businesses purchase goods and services in U.S. dollars. While we partially hedge purchases through forward contracts, many of our favorable contracts will be expiring in the early part of the fiscal year, resulting in higher cost of goods. Our largest currency exposures are the euro, Canadian dollar and Japanese yen.”

Comps a little better than posted when including e-commerce

” if you look at our comp store sales even in this quarter, when you add back the ecommerce and some of our stores that we have upside and sadly the port issue — and on a constant currency basis we are basically close to flat in our comp stores. So while we did have difficulty in North America it really isn’t as bad as it kind of was reflected when we’re not reporting a total number with the comp stores’

We’re ready to aggressively buy our stock

“We have, I think the best performance of any company in the global luxury field today. And when we’re reporting our earnings, I think it’s very, very clean in terms of the way that we are performing, and clearly the marketplace has not responded to our performance. And while we are very concerned about that issue, we think that that’s only going to make it that much more interesting for us to continue to repurchase shares. And I would say we’ll probably do it aggressively because as much as the market continues to undervalue our company, myself and the management team and the Board feels that just the wrong perspective on a very, very successful and strong company that we’ve built globally.”

No indication that wholesale channel is any more promotional than it has been

“we really don’t see that channel as being more promotional than it was the last three years to be quite frank with you. There are few retailers who are doing some additional price matching of one another. But that really hasn’t been something that has significantly increased our business or been a driver for the business at least in terms of our perception.’

Handbags doing well, footwear too, watch is declining in North America, but not internationally

“our handbag business continues to grow at very, very nice rates and the fact that our footwear business is growing at very, very substantial rates as well. Now that’s somewhat offset by our watch business which you would have to refer to as a core business and that business is definitely seeing a decline in the North American market. We’re not seeing that in the European and Asian market, actually the business is accelerating at a very, very nice pace.”

Kors’ CEO really, really likes the phrase very, very (it was used 11 times on the call)

“And we believe part of that shift to the jewelry category, where we’re again our jewelry business is very, very strong.”

Tourism dropped as soon as the euro started its decline

“you can almost trace it back to when the euro started its precipitous decline. All of a sudden the tourism really dropped for us. We had seen some minor declines in Q3 in tourism but we didn’t think it was going to be as precipitous as what we saw happen and kind of in January things were okay and then February and March the business got extremely difficult.”

Watch sales are not healthy in North America

“watch sales, watch sales, again our handbag business is healthy, our shoe business is healthy, our women’s ready business healthy. Our watch business is not healthy in North America. Outside of North America it is. And we did see shift in our business to jewelry. So whether that’s something that’s cyclical, whether that’s something that’s a trend, whether that’s something that’s driven around other entries into the category, we are not exactly 100% sure. We’ve gone out and done a lot of consumer research around it. The customers still saying very, very positive things about the brand and their intent to buy Michael Kors and interestingly enough some of that intent is shifting into other categories.”

Watches were a significant portion of the comp decline

“We’re not going to break it out but it’s significant. It was a significant portion of the comp decline.”

We’re not trying to be number one market share

“We’re still not the number one market share in North America and I’ve told you we don’t aspire to be the number one market share…the way that you would have to grow the market share additionally in North America would be very promotionally-driven and we don’t want to do that. And we’re comfortable with that.”

We want to be best in class in e-commerce and we’re not there yet

“And we want to be best-in-class. We do not view ourselves as best-in-class on this. We view ourselves as behind but making a very significant effort to move forward on this platform and hopefully within the next 18 months we will be up digitally with ecommerce platforms globally probably with the exception of China. And that will be by the way our unified platform inside the company, which we think will be a real advantage for our business as we grow going forward.”

Michael Kors 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

43% revenue growth

“Revenue grew 43% to $919 million and gross margin expanded 20 basis points. Income from operations grew 40%, leading to an operating margin of more than 30%.”

400 store potential in NA

“we believe that North American market can support 400 stores excluding potential men’s locations.”

200 store potential in Europe

“Over the long-term, we continue to believe we can expand our store base to 200 locations and now believe this market can generate of approximately $1.5 billion for Michael Kors.”

Inflection point develops when brand awareness greater than 50%

“brand awareness is around 89% and in Europe brand awareness is now at approximately 49%. So, we’ve always said to everyone that once we get north of that 50% area, you really start to see an inflection develop. The only market that we are north of 50% is in the UK and we are on the cusp in Germany. The balance of the markets are still in 30% to 40% range, 40%, 45%, so lots of opportunity for growth there.”

Loyal watch customer has 2-3 watches from us, we want 4-5

“the watch business is just like the rest of our businesses, we have to have newness, we have to have excitement to stimulate the customer. We know our loyal customer has somewhere between two and three watches that they’re purchasing from us. And we’ve got to excite her to want a third and fourth and a fifth.”

YOu have to invest in growth

“I might add we have said all along from again, the day we went public. We never believed that a 30% operating margin was a sustainable margin for the company. And by the way we don’t want that. So I want to be very clear, let no one be misunderstanding, we don’t think that’s the right way to run our business. We need more investment, we’re building this company for the long-term, we’re not here for a quarter-by-quarter situation, we’re here to build something that is very sustainable. And to do that you have to invest”

When you’re growing by 8-900m per year, you’re going to have to make investments

“We’re investing in distribution facilities, when you’re growing a staff business and putting on $800 million to $900 million a year, you need to invest in state-of-the-art distribution facilities, you need to upgrade your technology. By the way bringing in ecommerce in house, I don’t know how anyone could assume that that’s not going to impact our operating margins. ”

You’re bound to make mistakes in fashion at times

“Are we going to make some mistakes at times? Absolutely that’s what fashion is about. And so that timing issue for us — same thing we do by the way and the holiday season, in January we tried to get out of the sale product as quickly as possible and we try to bring spring product into our stores in January. Sometimes that works, sometimes that doesn’t work depending on how the weather is outside, depending on what the season was before.

But again I want you to know we are not going to back off being a fashion company trying to deliver newness and trying to excite our customer. That is our competitive edge period, end of story, that’s why we’re winning around globe.”