Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Michael Kors Holdings Limited Third Quarter Fiscal 2013 Conference Call. (Operator instructions) As a reminder, today's conference is being recorded. And now I’d like to turn the conference over to Ms. Christina Lack. Please go ahead.

Good morning, and thank you for joining us for our third quarter earnings call. Presenting on today’s call are John Idol, Chairman and Chief Executive Officer, and Joe Parsons, Chief Financial and Chief Operating Officer. Before we begin let me remind you that certain statements made on this call may constitute forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ from those that we expect. Those risks and uncertainties are described in today’s press release and in the company’s registration statement on Form F-1, which are available on the company’s website at www.michaelkors.com. Investors should not assume that the statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. I will now turn the call over to Michael Kors' Chairman and Chief Executive Officer, Mr. John Idol.

Thank you, Christina. Good morning and welcome to Michael Kors third quarter fiscal 2013 earnings call. With me today is Joe Parsons, Chief Financial and Chief Operating Officer. I will begin the discussion with a brief overview of the quarter and share with you an update on our strategic growth plans. Joe will then provide a detailed review of our third quarter financial results. Additionally, he will provide our outlook for the fourth quarter and for fiscal 2013, the full year. We are extremely pleased with our third quarter performance across all our luxury retail, wholesale and licensing segment throughout North America, Europe and Asia. The brand strength, innovative fashion design and jet set in store experience drove strong sales and earnings during the critical holiday season. Due to creative vision and design leadership of Michael Kors, our talented design team once again delivered exciting designs for the holidays creating a collaboration that encouraged customers to celebrate the season. In addition, during the quarter we continued to successful execute on six initiatives of our key growth strategies. To quickly summarize, first in North America, we delivered a 41% comparable store sales increase, representing the 27th quarter of consecutive comp store growth in this region. Second, we continued our retail expansion efforts in North America opening 14 new stores in the quarter. Third, we continued to convert North American wholesale department store doors into branded shop-in-shops. Fourth, we expanded our presence in Europe with the addition of nine retail locations as well as new wholesales doors. Fifth, we further developed our business in Japan. And sixth, we continued to build the foundation for growth and other areas of the Far East through regional licenses. Let me take a minute to review some financial highlights from our third quarter. Total revenue in…

Thank you, John. Good morning. I will begin with a review of our fiscal 2013 third quarter financial results, followed by our outlook for the fourth quarter and the full-year. For the third quarter, total revenue grew 70.4% to $636.8 million as compared to $373.6 million in the third quarter last year with strong growth in each of our retail, wholesale and licensing segments. Retail net sales increased 66.8% to $332.6 million in the quarter as compared to $199.4 million in the third quarter last year, driven by a comp store increase of 41.4% and the opening of 66 net new stores since the third quarter of last year. The comp store sales performance was driven primarily by the continued strength of the accessories line. Wholesale net sales grew 77.4% to $274.3 million in the third quarter compared to $154.6 million in the same period last year. Similar to retail, the increase was primarily the result of strong growth in our accessories business and women's ready-to-wear as we continue to enhance our unique design and merchandise assortment. Also benefitting sales was the increased presence in our department channel with the conversion of existing doors to shop-in-shops as well as expansion of our European operations. In our licensing segment, revenue grew 52.1% to $29.8 million for the quarter as compared to $19.6 million last year, primarily driven by the continued strength in watches. Gross profit increased 72.8% to $383.5 million as compared to $221.9 million in last year's third quarter. Gross margin expanded 80 basis points to 60.2% with strong year-over-year gross margins increases in both our retail and wholesale segments. The margin increase was driven primarily by lower in-store markdowns, discounts and allowances, as well as a more favorable product mix shift to higher margin merchandise in both segments. Total…

Thank you, Joe. We are delighted with the strong momentum in the Michael Kors brand. We believe that our unique position in the global luxury lifestyle category combined with our healthy financial position will enable us to capitalize on significant growth opportunities that lie ahead. We will now open up the call to questions.

(Operator Instructions) We will take our first question from Kimberly Greenberger with Morgan Stanley.

Good morning and congratulations on a really fantastic quarter. John and Joe, I wonder if you can comment on a couple of things. The comps drivers in the quarter, are traffic trends still running up, you know mid-20s or higher and the primary driver of your comp, or is there some other metrics that are kicking in there. My second question is on department store markdowns. The department stores seem to be a little more promotional this year then maybe they were in last year, and I am wondering if all of the markdown allowances that would be afforded to the department stores during the holiday season were accounted for in your third quarter or are there any there left over for the fourth quarter.

Thank you, Kimberly. I will talk to your first question which is the comp drivers. And we really saw tremendous acceleration in the fourth quarter as the holiday season. And I think that again it really says a lot for the consumer's response to Michael's designs. Again, I think, we have the right product in the right stores at the right time and our design teams did an amazing job of putting that together. And, of course, really (inaudible) up the desirability of the product. I think we were very top of mind for gift giving during the holiday seasons on people's gift giving lists. So number one driver of comps was small leather goods, again, were seeing that triple digit increases we had talked about before. The handbag business for us had very very strong acceleration during our third quarter, retailers fourth quarter. So we are very pleased with the results there. And our watch business was outstanding again. And, again, coming off of very very large comps for the last two years in a row. So all those categories really delivered. And then on the new front was jewelry which, in both our wholesale channel and our own stores, had a very nice performance during the holiday season and we think we are at the very beginning stages of what could developed into a significant business for us globally in jewelry. Our traffic trends continue about the same. So we were pleased again to see where that was. And our conversions are around the same. So really the metrics stayed about the same and our transactions were about the same. So it's all working pretty much the same sequentially as we have seen in the previous quarters. Regarding markdowns, I have to correct you in the comment, actually in our department store channel, markdowns were down this year versus last year. So I have heard this comment a few different times about something about markdowns. We are on the exact same cadence as we were in all the previous quarters. And in fact in the department store channel, we have lower markdowns which meant that our consumer responded better to our product. I think you might be confused with our competitors who were very promotional during the retailer fourth quarter and our third quarter. And we in fact chose not to participate in that activity and I think that boded well for us and continues to say a lot about the brand.

Terrific. My last question is just on the new store lease that you signed in Soho. This new store seems to be a bit bigger than we have seen from you in the past and I am wondering if you have any particular strategies in mind on that particular location.

Sure. There is probably ten locations around the world that we are going to be looking very carefully at in terms of larger format stores. Obviously it's New York, it's London, Paris, we actually have the ability to expand the store with the current real estate that’s there, Tokyo etcetera. And those are really for two things. Obviously they are great opportunities for us to add volume for the company and secondly it gives us an opportunity to really present the brand in its fullest presentation. So we have been looking for quite some time down in Soho for a larger format store because our store down there is just very, very, very productive, as well as our Bleecker Street store. And when this opportunity came up, we took it. And to be honest with you, it also afforded us the opportunity to do men's in the store which will be an interesting test for us. We do have a men's business that is comprised of tailor clothing, dress furnishings, sportswear, and now our new introduction of men's leather accessories, which very small early indications, we have had some very strong results with. So this store will be something that will see if there is more opportunity for us in the future. And we like the fact that the Soho market is a very strong men's market so it will tell us a lot there.

And we will take our next question from Brian Tunick with JPMorgan.

Thanks, and I will add my congrats as well to everyone on the team. I guess two questions. First maybe for John, what you have seen over the past 12 months, has it changed your longer term view of what kind of mix you think the business ultimately will look like. Retail versus wholesale or accessories versus apparel. Just curious if you have changed your thinking there. And maybe for Joe, just as we think about SG&A over the next 12 to 18 months and you are bringing ecom in-house and you are trying to ramp up marketing, any ROI that you guys can talk about. From building brand awareness, either domestically or in Europe or Japan, where are you now in brand awareness.

Okay. The first question regarding the mix. Let me just speak to wholesale versus retail. Again, we ultimately believe long-term the company will be 75% plus retail. Obviously, we keep saying that we think that mix is going to start to show up in the financials and every time we report the wholesales business continues to grow at very very accelerated paces. And that isn’t 100% by design, to be honest with you, it's just been really the consumer who has been responding to the product and in particular to the shop-in-shop installations that have gone in. And I might add, not just for the accessories. If you have been to Macy's Herald Square and you have seen our new shoe shop that's gone in, the results are extraordinary what's happened in our shoe business. And we will expand shoe shops not to the degree we have accessory shops, but we are going to begin to open more shoe shops across the United States and internationally. And the secondly on the additional shops, as we have indicated in the call, our women's ready to wear business is performing at a very healthy pace. And we are very pleased with that, we have made some product adjustments that are really resonating with the consumer. And I think both the footwear and the women's ready to wear are just feeling the overall brand presence and resonating with the consumer as they further get deep into the lifestyle brand of Michael Kors. So we believe retail will ultimately be 75%. And in terms of the actual mix, we are a little more excited than we were before about women's ready to wear. Again, it is a very large opportunity inside the United States and we are seeing some real strong gains on that.…

And in terms of SG&A, as we said I think a number of times, we are not attempting to get leverage right now. We are aggressively investing in the business. It appears that we are getting leverage because our sales are coming in higher than what our expectations are. But we are indeed investing very heavily in the company and it's very consistent with what we have told you before. An obvious example is ecommerce where we are bringing it in-house. We are building the platform, we are building the infrastructure and we are building the team to run that business.

And we are also -- Brian, as we told you and the other analysts, we are strengthening the management team. So lot of senior positions being added to the company. Because where we are today at $2 billion and obviously that we expect rapid growth to continue, we need great management on a global basis in all of our regions and we think we have been able to attract that kind of management and you will see some of that show up in the SG&A as well.

We will take our next question from Erinn Murphy with Piper Jaffray.

Thank you and let me add my congratulations. I wanted to focus a little bit on Europe. John, if you could speak to that. You are just doing a fantastic job of really developing a pan-European brand. Could you maybe help us appreciate kind of the major markets that you are in today? What you are learning about that consumer, both the local consumer as well as the tourist consumer? And how should we be sizing up some of the biggest market opportunities in that space?

Yeah, Erinn that’s a good question. It was a little hard to hear, I will just repeat it for the group. Erinn was just asking about the European business and could I discuss the sizing up the opportunities and how we are doing as a pan-European designer company. So we are very excited as we have talked to you for quite some time and I know there is not a lot of companies who get up and say we are really excited about Europe, but we are really excited about Europe. And first and foremost, Michael's designs are resonating globally. And you have to have great products that people appreciate for a brand to be successful. And our jet set imagery and the fact that Michael is always looking to create glamorous, chic, and sexy product is resonating with this customer very well. There is an interesting thing that is going on for us. We have told you in the past that, for example, legacy stores for the past, almost five years, are doing as well as our new stores. And that’s relevant to our comp stores. We have another interesting thing that’s happening in Europe. Our business is strong right across Europe. So whether it's in Greece, whether it's in Spain, whether it's in Italy, obviously very difficult markets, our business is very strong there. And our business is obviously strong in the UK and Germany, and in France. Also interesting, we are doing very well in France which is very unusual for American brands that typically have a difficult time there. Again, I'd preface this all by talking about product and I think Michael is really delivering on that. So we take inspiration from our runway product sometimes to put in to the Michael line, or sometimes Michael is innovating new product inside the Michael line that you don’t see anywhere else in the company. We really focus internally on discussing what does she want to wear in Scandinavia? What does she want to want to wear in Paris? What does she look like in London? So our company is geared towards thinking about not only the European market but obviously the Asian markets as well. So we continue to believe that Europe is $500 million opportunity for us. We just came back from a multi-country, multi-city tour. We are very comfortable with the ability to open a hundred stores that marketplace. And as we mentioned to you on the last call, we might be looking longer-term at an opportunity that is greater than that. We are still in the early days of assessing that but some of the indications are pointing to opportunities beyond what we have initially thought about. So all in all, I think that as there is a few other American companies that have been quite successful building pan-European brands, I think you will see Michael Kors in that same category.

Thank you, I appreciate that. Just a quick follow-up. In terms of the health of your vendor base, I mean clearly with the pace of growth that you are expanding and growing at, I'm just curious if you are expanding the, either vendor base or just strengthening those relationships within your existing vendor base? And how we should be thinking about that longer-term?

Yeah. We certainly are looking at expansion in certain categories of the vendor base and we have got some very strong relationships with obviously our existing vendors, who are growing with us. But as we move forward we will definitively have to expand that. We are going to do it selectively. I think again one of the reasons why we have been able to deliver these comp store sales growth is because we are so closely aligned with our existing vendor base. And they have been very very helpful in responding when we needed things done quickly. So we want to make sure that we are continuing that relationship with them and then bringing on some additional vendors as the business continues to scale.

We will take our next question from Lindsay Drucker Mann with Goldman Sachs.

I just had, first a quick question on ecommerce. As you guys think about bringing that platform in, Joe, I was hoping maybe you could expand on some of the incremental costs associated with that move and then also how much revenue that's generating right now that you would plan to bring onto your P&L and also from an earnings accretion perspective, what the implications of that might be. And then as you bring it in house, how you might expect to make any changes to your merchandising or perhaps marketing use of the website? Thanks.

I think in terms -- I am going to turn it over to John but I think in terms of the incremental expenses, we are not going to detail that. We do include it in obviously the overall cost that we have in our guidance for CapEx. So you see all those costs in what we are guiding you to. John, you want to talk about...?

Yeah, let me just -- Lindsay, look we believe that ultimately in North America, the web could account for as much as 10% of our revenues, of retail revenues. So that’s a goal. I can't tell you when we are going to get there. I can only tell you it's a goal for us. And I think that’s a realistic goal because of the -- you know there is a lot of precedents out there with other retailers who were operating web business that are at that level. And obviously there is certain ones that are operating much higher than that. So that can give you an idea of where we are thinking of trying to. I don’t think we can really begin to tell you that until we have the business in our hands and we are operating it fully ourselves. And I would expect that to be kind of third, maybe even after fourth quarter of next calendar year 2014. I think we will have a real good handle on how quickly we can scale that up. And the second thing is we would definitely have broadened assortments on the website. We are building an entirely new website that you will see in February. Again our creative team here is doing an extraordinary job of putting that site together. We think we are going to have a much better brand experience today. I do not give us very high marks for our brand experience on our website. I give us high marks for our shopping experience, our site is very easy to shop. But I don’t give us high marks on our brand experience. So we think we are going to greatly enhance that presentation. And lastly, what we know today is that there is a tremendous amount…

We will take our next question from Erika Maschmeyer with Robert W. Baird/

Your Q4 comp guidance, does that represent how you are planning the business? Is there any specific reason that we should see deceleration? Has there been any impact from the recent storms?

I smiled slightly when you say deceleration. You know to plan 20% plus comp store growth, I think is pretty healthy. And so we consider that to be still a very very strong growth trajectory for the brand. And as we have said in the past, if the consumer is there and she wants more, we have shown signs of being able to fill her needs. Again, this 40% comp store growth is not going to go on forever. I want to reiterate that strongly. So we do plan the business at that level. Obviously, we are guiding to that so we are planning to that. We do have the ability to do better if the product -- if the consumer is there. But I would be thinking in those kinds of ranges going forward because I think it's unlikely that we will continue to operate at those kinds of levels. I might add also that, as we said in the earnings statements, we saw that or higher in the department store channel. Which was really exciting for us because we have our own sales associates in many of the shops but not all the shops. So to be able to hit those comp stores and higher inside of our -- in particular our accessories business and very healthy comps in our ready to wear business and our shoe business, in wholesale, I think again, really says a lot about the resonation -- the way the brand is resonating with the customers.

We will take our next question from Omar Saad with ISI Group.

I wanted to follow up on the last question actually. As you think about planning the business, obviously you are taking a little bit more conservative approach, but you've obviously been able to execute and do a lot of chasing. Can you talk about the supply chain and how you've been able to develop a supply chain that has that flexibility and allows you to kind of mitigate inventory risk as you plan it out and think about where the comps come in and where you are able to take them to? Could you just give us a little bit more insight on the supply chain? And then I have one of follow-up question.

Sure. And Omar, and for the rest of the analysts, I am not trying to be defensive here, but we are not planning conservatively. We think 20% plus comp store is, we think is, pretty aggressive growth. And that’s the way we have been planning the business all along. What happens is that consumer response is higher to than what we are planning the business. So, again, I am not trying to be combative, but it's really the way we look at the business. Supply chain is -- we have a very close relationship with a lot of vendors around the world. So they understand our potential to swing up in the business. And so what we do is we work ahead with them. We are obviously working with them 30 days, 60 days in advance and letting them know where the trends are heading. Certain suppliers might keep additional materials on hand, all at their expense, to be able to feed us the product. And you will see that not only in our handbag and small leather goods businesses, but you will see that in our shoe business and in some cases our ready to wear business. So we feel very confident that our current supply chain network is capable of continuing to support our existing growth and help us if we need to accelerate that growth.

Understood, great, and I appreciate those nuances, John. And then just thinking about over the next couple years, it sounds like Japan, you are getting a little bit more confident there. Europe obviously incredible ecommerce, categories like jewelry, other new categories. Maybe in men's, beauty, who knows. Like what are the big kind of, over the next few years, what are the biggest chunks of growth that you are most excited about?

Well, first and foremost, obviously the North American growth continues to be the biggest dollar increase that you will see in over the next two to three years, just by the sheer size of the market and the store growth opportunity. Second from me is Europe and I am very -- and I think everyone in the company is thrilled at our response rate. And I forgot when I think Erinn asked the question earlier, it's amazing the tourist business that we are doing on our stores globally. And I think we have done an excellent job. So if you go to our store in Paris, we probably speak seven to eight languages in the store. If you go to our store on Bond Street, the same thing. We are speaking Portuguese, we are speaking Russian, we are speaking Mandarin, we are speaking. So we are very focused on the travelling tourist. So we like what's happening in Europe from a tourist standpoint and then of course we also like what's happening in the local markets. I am going to give an example. We just opened a store in Poland in a mall called (inaudible), and the numbers are just staggering what we are doing in the store. And here is a marketplace that is not the typical London, Paris, Madrid markets. And we are really seeing the power of the product. It's even beyond the brand. I think the customer is first responding to the product and secondly they are responding to the brand. So that would be our second market for us. I would say in terms of dollar volume, I would say that the web would be third. That would be the next big exciting opportunity. We will be able to scale that more quickly than Japan. And I think it will reach profitability relatively quickly for us. And then I would put Japan as the fourth market in terms of our level of excitement and the excitement is always based on sales and profitability. Again, we are many years out from being profitable in Japan but we have made this commitment. We are going to invest and we do think that’s a multi-hundred million dollar opportunity for the company over the next few years.

We will take our next question from Joan Payson with Barclays

Just first off, to think a little bit more about the comp trends during the quarter, you mentioned that watches accelerated as you got further through. But what was that similarly for overall comps, what was the monthly trend and then how have you been tracking quarter-to-date? And then as a follow-up, just in terms of the retail basis, you have gained scale on that. What have been the learnings or surprises and how is that shaping the opening of new stores?

The launch comps are slightly below our overall comps. And, again, the watch business was more developed I think than any other business in our stores, quite frankly over the last years, but not significantly below. But it was above our internal projections and estimates and I think even Fossil's internal estimate. And the same thing happened with our wholesale accounts. The watch business was just far outpaced what we had anticipated in particular in Europe. The watch business in Europe is really gaining some significant traction. So we are very pleased with what's happening there, not only in our own retail stores but in our wholesale accounts. So I think we continue to view the watch business as a part of the jewelry business. Today it is a fashion accessory for the consumer. And I will also tell you, may be Kosta will talk about it in his 9 o'clock call but the freestanding shop-in-shops that we are putting in in the department stores for watches and jewelry are having the same kind of affects that we are seeing in the handbag and accessories shops in terms of amazing comp store increases and really hitting some significant number inside of these stores. So we are very pleased. We are not going to talk about quarter-to-date trends but obviously we had an outstanding fourth quarter -- sorry, thank you. I keep thinking of the retailer fourth quarter, I apologize. And then in terms of our new store openings, we are seeing the same trends that we have seen all along. Our new stores are coming out of the gate very strong. There really has been no change in that and we are obviously opening in the United States in more B&C markets as we have told you in the past. And Europe, we have been focused on more of the A market. So we see no change in any of our strategies in terms of new store openings.

We will take our next question from Oliver Chen with Citi.

Regarding the watch business and what you see as the longer-term prospects there. With taking ecommerce in-house, is the watch business something you would consider down the line? Also, could you speak to us a little bit about the differences in your portfolio with regards to price points? Some people in the sector have been speaking to better performance at higher price points.

Yeah, first off in terms of the watch business, we are very comfortable with our relationship with Fossil and Kosta Kartsotis' leadership of that company is outstanding. And the teams that are there that we work with, we are very very comfortable with our relationship. So we see nothing but growth together going forward in the future. So that’s not something that’s on our agenda. Secondly, in terms of the price points, you know unlike other companies, we have always had higher price points in our stores. I think one of the reasons why our stores are called Michael Kors and not Michael Michael Kors, because obviously a large part of the product is Michael Michael Kors sold in the stores, is because we sell our handbags inside the stores, which are on average $800 to $1500. And that’s always accounted for a very nice piece of business in our stores. So we sell at what we call collection level price points. Remember on Bond Street we are sitting across from Gucci and Prada and Vuitton. And in Macy's we are sitting across from Gucci and Prada and Vuitton. So we need to have and have always had not only accessible luxury price points, but we have had luxury price points in our stores. And that’s always been a strong performer for us and we continue that as the ethos of the brand comes from the designer collection level pricing which is where Michael started the brand over 30 years ago. I am going to have to say that’s going to be our last question and I want to thank everyone for participating in the call today and we look forward to speaking to you on our next earnings call to discuss Michael Kors results. Thank you very much.

This does conclude today's conference. Thank you for your participation.