Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Michael Kors Holding Limited’s Fourth Quarter 2015 Conference Call. At this time all participants are in a listen-only mode. Following this presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for question. As a reminder today's conference is being recorded. And now I'd like to turn the call over to Krystyna Lack, Vice President and Treasurer. You may begin.

Thank you. Good morning and thank you for joining us for our fourth 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 SEC filings which are available on the company's website. 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, Krystyna. Good morning and welcome to Michael Kors’ fourth quarter and fiscal year 2015 earnings call. I will begin with a review of the fourth quarter and fiscal year followed by an update on various growth initiatives. I will then turn the call over to Joe for a detailed discussion of our fourth quarter financial results and our outlook for first quarter and full year 2016. 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. We attribute this primarily to a continuation of weak traffic trends in North America, including a reduction in tourist traffic, a decline in North American 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. Including ecommerce our global comparable store sales would have been 160 basis points higher for the fourth quarter and our expanded stores would have added another 40 basis points to our global comp. While we are certainly focused on taking steps to drive improved comparable store sales performance in our retail stores there continues to be exceptional growth in our digital ecommerce flagships, our wholesale business and in our international market demonstrating the overall strength of our brand. Reflecting on fiscal 2015, I am pleased to report we delivered top and bottom line growth in excess of 30% which was in-line with our full year outlook. Global comparable store sales for the year increased 11.9% on a constant currency basis. Including sales from our digital ecommerce flagship our global comparable store…

Thank you John. Good morning. I will begin with the review of the fiscal 2015 fourth quarter financial results, followed by our outlook for the first quarter and full year 2016. I am pleased to report that we continue to see double digit top and bottom line growth during the fourth quarter with strong performance across all of our segments, geographies and product lines. Total revenue grew 17.8% to $1.1 billion as compared to $917.5 million last year. On a constant currency basis total revenue grew 23.3%. The U.S. dollar further strengthened since our last call resulting in larger than anticipated impact on our sales. By region, in North America revenue increased 13.7% and on a constant currency basis rose 14.3%. In Europe revenue grew 33.5% and on a constant currency basis increased 59.5%. In Japan revenue rose 42.7% and on a constant currency basis increased 65.0%. By segment, retail net sales increased 14.9% to $469.4 million driven by the opening of 121 net new stores since the fourth quarter of last year and 44% growth in our digital ecommerce flagship stores partially offset by a comp store sales decrease of 5.8%. On a constant currency basis retail net sales increased 21.1% and comp store sales decreased 1.7%. By region, comp store sales declined 6.7% in North America, declined 5.6% in Europe, and grew 12.4% in Japan. On a constant currency basis comp store sales declined 5.8% in North America, increased 11.0% in Europe and grew 30% in Japan. While our North American comp store sales results for the quarter did not meet our expectations, performance was impacted by several factors. First, we saw a continuation of weak mall traffic trends in North America and weaker tourism traffic globally. In particular we saw zero tourists travelling to key U.S. cities…

Thank you Joe. In closing, we have a powerful business model, consisting of a leading fashion brand within the global luxury market, multiple distribution channels and geographic diversity. While we are faced with some challenging market conditions our brand is strong and our luxury products continue to resonate with consumers worldwide. We remain focused on executing our strategic initiatives to continue to build brand awareness and expand the Michael Kors fashion brand globally. We will continue to grow our presence in the domestic and international markets through the development of our global digital flagships as well as our successful retail and wholesale strategies. We will expand upon our ready-to-wear and footwear categories and fully develop our global men's business. We will capitalize on wearable technology and watches and other categories as innovation and demand in this area continue to advance. And we will continue to deliver compelling fashion products that excite our customers with an exceptional shopping experience that embodies the jet set glamor and excellence of the Michael Kors luxury brand. We remain confident that these multiple growth initiatives will enable us to resume double digit top and bottom line growth in 2017. With that I will now open the call for questions.

Thank you. [Operator Instructions]. And we'll go first to Kimberly Greenberger with Morgan Stanley.

Great. Thank you so much. Good morning. John and Joe, it looks like you’re expecting some level of acceleration in the comp as we get into the back half of the year. I'm wondering if you can just talk about the drivers, is it a function of easy comparisons or are there specific initiatives that you've got in order to drive better comps in the back half. And if you could just speak to the deleverage expected at SG&A in the first fiscal quarter. It sounds like it’s expected to beat [ph] the deleverage for the full year based on your annual guidance. And is that just a function of the June quarter being a low revenue quarter and you hope [ph] the deleverage eases beyond that. If you could just give us some color around that, that would be great.

Sure good morning Kimberly. I'll take the first question and I'll let Joe handle the second one. On the first, the back half of the year, one of the biggest contributors to that comp number is going to be the fact that we'll be reporting the ecommerce sales fully baked into our numbers. So that will improve in terms of the total. And again 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, including our ecommerce business. And then secondly we do have some what we think are some strategic and exciting initiatives for our fiscal third and fourth quarter. First we will be launching Kors Concierge in the third quarter which will give all of our -- not all but a significant amount of our selling associates technologies that they will be able to, we think create some significant upsell inside our stores, and then secondly we have a very, very strong program in the third quarter around gifting, which is an area after doing consumer research that we are finding our customer is continuing to clamor for from Michael Kors especially in that holiday season, and we think we missed fair amount of that last year. So we think those initiatives will help to really guide us to more favorable comp store performance in third and fourth quarter in particular.

So in terms of the SG&A and deleverage, you are correct. We anticipate that Q1 will be the lowest revenue quarter of the year. As you know we're anticipating a growth during the year and then as I mentioned in the call, our projects that we're working on are actually going to be anniversaried, as we go through the year, the projects that we started in 2015, so that the deleverage will not be as large for the full year as it is -- as we're reflecting in Q1.

Great. Thank you. And then just to wrap up for me, I'm wondering if you can speak to share repurchases, so far. You've had two quarters now of repurchasing. As you look out to the upcoming fiscal year, I know you haven't baked any share repurchases into your guidance. Maybe you can just share with us your philosophy around the timing and pace of share buybacks. Thank you so much.

Sure. Kimberly, I'll take that one. I think we did bake some of that into the guidance, I think we've reported 200 million shares for the year. But that being said, we believe as a management team, and as a company, that our stock price is significantly undervalued. 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. And I might also add that while we are disappointed that we're not delivering a double-digit bottom line this year, when you really add back constant currency, it takes us to constant currency, our top line revenue would be about 14% and our bottom line revenue would be about 10%. So we’ll once again deliver a double-digit top line and bottom line, which we had originally forecasted but unfortunately the euro in particular and the yen deteriorated significantly from late January on. And I would also add one thing to that as well; that deterioration in euro and the Canadian dollar is where we see the greatest impact to our North American comps. Two things that really impacted our North American comps were tourism, which New York City, the business is very difficult, certain parts of Southeast and Las Vegas where we've seen traditional very, very strong European traffic in particular, that affected us. And you could almost tie it right back to when the currency started declining and then of course the watch sales which really did catch us off-guard in terms of the amount of decline. So our handbag business is very strong, our footwear business is -- actually all of our core businesses are quite strong. So again, we think that bodes well for the future and that gives our Board and myself and rest of the management team, great confidence that we will use our balance sheet in a very significant way to take advantage of what we think is just an incorrect perception on the stock price.

And we'll go next to Robbie Ohmes with Bank of America-Merrill Lynch.

Hey, morning. Thanks for taking my question. A couple things. First, John given everything that's going on out there, can you comment on how the competitors look like they're responding? Do you think it's going to have to get more promotional from where it is? And then another question I have is, can you give us some color on maybe some of the trends you're seeing in your core handbag businesses, they're still shifting to lower price points, smaller handbags or how do you feel about how the trends in that core business could play out as you move through the season this year? Thanks.

Thank you, Robbie. Let me just start with the environment today. I would say that our wholesale business, I want to start with that because that is a very significant part of our business, and I know that most of the dialogue that we have is around our company-owned domestic stores, but we have a very, very large business in North American wholesale, which continues to perform at very, very strong rates and we are performing better than our competitors in that channel. And 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. We do believe that certain of our competitors in the accessories business, while they state that they are reducing certain of their sale postures, we see tremendous amount of sale activities in their full line stores. We see the continued use of flash sales which we do not do. We see a lot of things to drive customers into the stores, that as you know we've taken a posture, since we started this company that we wouldn't do. We take our markdowns on products the same thing that we've been doing since we started the business. So we in our own full price stores have made the decision that is not a posture that we want to engage in. I do think that has had some impact on our business. But I think the greater issue is that our handbag business continues to grow at very, very nice rates and the fact that…

And John just on the handbag outlook, do you see anything sort of reinvigorating the category for you and others as you look out to maybe the fall season of this year?

I think the category on, I would say North American basis is probably in the low single digits for growth. And I don't see anything that's going to widely accelerate that. The category is growing. But it's definitely growing more slowly than it grew in the past, probably five or six years on that side. On the other side we see great growth opportunity in Europe. As we stated in the call we have a single digit market share in that marketplace and we know that we can probably get our subs to at least double digit market share. So plenty of upside for us there and it’s a very significant market in terms of size; and then as you know we're excited about our business in Asia, but we are in early, early days of developing that marketplace and many of our competitors can run 30% to 40% of their total business out of that market. So North America is going to grow more slowly. We know that and we've said that since we went public. And then we have these two other phenomenal marketplaces which are Europe and Asia to continue to grow our handbag business, our footwear business, our women's accessories business and our really exciting business based around men, that we think long term is going to be a great growth opportunity for us.

We'll go next to Randy Konik with Jefferies.

Great, thanks a lot. So I guess when I'm looking at the name here, at these levels, it looks like based on your enterprise value -- A, your market caps now in parity with your main competitor and your enterprise value is trending at the low end of the industry. So do you -- can you kind of give us some thought process around what you think about the minimum levels of free cash flow generation you see in the business and/or EBITDA, what does the CapEx picture kind of look like going forward? And you spoke a lot on the call about, it sounds like you are very confident about the global growth and the cash flow generation prospects of the business. Is there any thought process on alternative capital structure for the business at this time? Thanks.

Yeah, Randy I think we are very happy with our free cash flow generation. We have got an incredibly strong balance sheet. We leveraged that balance sheet to buy quite a bit of stock back over the past six months and we’re not going to look at any type of capital restructuring. We think that again the marketplace has significantly undervalued the shares of the company and therefore this is going to be an outstanding opportunity for certain investors going forward and we will use our balance sheet to show our commitment and to deliver increased value to our shareholders.

Well, I guess can I just maybe ask Joe, can we get some color on what the CapEx profile of the business should look like from current guidance, should it change all that much in the years ahead?

So Randy, as you know we are a company that continues to investment in ourselves and we’ve had significant CapEx in the future and -- in the past excuse me, in terms of investing over the last couple of years. We’ve increased that CapEx. So we are forecasting $400 million of CapEx for fiscal ‘16 and we would assume that we would continue to have, consistent with our past practice continued significant investment in the company.

And we’ll go next to Omar Saad with Evercore ISI.

Thanks, good morning. Wanted to ask a clarification question. So to be clear on the comp guidance, for 1Q and the full fiscal year, that includes ecommerce as part of the total comp that you are going to -- you are guiding to and that you are going to report?

Omar in Q1 and Q2 you really won’t have -- Q1 you will have nothing, including the ecommerce and in Q2 you will have just a very tiny piece of it. It’s really Q3 and Q4 that you have the -- actually it’s on a GAAP basis reported in the comp guidance -- in the reported numbers, sorry.

Got you okay. And then if you look back to this past quarter when we spoke to you on February 5th, a month or so into the quarter you guys were still thinking mid-single digit kind of comps for system wide for the business ramp [ph], did something changed dramatically after that point or was it a confluence of these various factors that you talked about and maybe if you could elaborate some of the promotional strategies in the stores how that could have an impact to sell through at the same store sales results?

Sure, as I said a few minutes ago 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. The other thing that happened Randy, you have to remember we shut the marketing off on online and that drives a lot of people into stores and maybe that was the right decision, maybe that was a wrong decision but we just didn’t want to be frustrating, the customer sending out emails, sending out all kinds of communication. So those two things really impacted the business. And then thirdly the 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. One of the things that popped up in our consumer information was eyewear and we are obviously in a very aggressive mode with Luxottica launching eyewear and we've got really good feedback from the customer. So I think…

That's really helpful John. And then really quickly -- it was helpful that you gave us, quantified some of those drags on the comp store numbers, FX and the West Coast port issue. Can you give us the -- what are some of the drag just from just [indiscernible] brands watches, how much?

Omar you cut out we couldn't hear you what you said something about the drag on the watches.

Sales [ph].

Omar you cut out again, you said something about the drag on the watches.

The watch drag on the comp numbers, comp store sales in the quarter how much of the -- how much of a -- how much of a drag was the watch slowdown?

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

Thanks guys.

We'll go next to Dana Telsey with Telsey Advisory Group.

Hi, good morning everyone. Can you talk a little bit about store opening. How you are thinking about size of store, productivity of the existing stores and also how some of the new flagships that you've opened in New York are doing and what your plans are go forward on the real estate side? Thank you.

Sure, thank you. Good morning Dana. Dana, we have consistently said since the day we went public that we would have 700 stores worldwide. We know the locations, we know the developers, we know the street names. And none of that's changed at all. And when you really look at that on a global basis it's the right number for -- given our profile of business and in 90% of the cases we're sitting next to really fantastic retailers who are in the luxury category. So we feel good about that. Our store size isn't really going to change that much. We upsized about 30 stores, 33 of our stores this past year. And we're going to do about the same this coming up year. And we doing that in certain strategic locations and one that we're very excited about is we are going to be upsizing Regent Street this year, a store that way over productive for its space and so that's a good example of the type of store that we'll do. And we've upsized certain very high end luxury mall locations as well. And we're pleased with the results of that. I wouldn't say that that's what we're going to do chain wide, that's actually I will say that's not what we're going to chain wide. And so the still that average lifestyle store is around 2,500 square feet. And we did start to implement some of these larger stores, so we can show footwear and women's ready-to-wear in a better format. And those stores are around 5,000 square feet. And again in the right marketplaces we'll look at that but it not a strategy that we have said we're going to go chain wide and start to upsize stores on a global basis.

On the outlet front John. Any updates there in terms of opening so what your game plan is.

Game plan remains exactly the same. We said that in North America we would open, I believe the number’s 125 stores and when we get to that level we'll be done. And again unlike our competitors who have a lot more stores than we do we'll be finished and complete with that. And in Europe it's significantly less. So today if you look at our global footprint we have 373 full price stores and 153 outlet stores, and long-term, the full price number will get a lot larger and there's only a handful of additional locations that we feel appropriate for an outlet store for us. And again, we were very careful. We do not want to turn our business -- we run a full price retail business very successfully, very profitably and we will continue to stay focused on that as our key strategy, and we will use the outlets for clearance of merchandise and in a marketplace like Europe, it's really important for us because we don't have certain of the other channels selling off our excess inventories, the way that we do here in United States. And so again we're going to use it appropriately and judiciously.

Thank you.

And we'll take our last question from Oliver Chen with Cowen & Company.

Hi. Thanks a lot. Your handbag market shares are really impressive in North America. Could you just articulate the kind of runway you may have in terms of the price tiers and where you see opportunity in terms of growing share? And also, regarding the markdowns in allowances which you have been speaking about for a while now, were there discernible differences between the channels in terms of wholesale versus retail and is this kind of the evolution as you expand your product breadth and thinking about that? And then I just had a final question on digital.

Okay. So, our market share in North America is, we're somewhere in the number two, number three range, we estimate today. 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. I would say our market share growth in North America will in hand [ph] and accessories in particular will grow very slowly on a go forward basis, because we think that if -- 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. So we've got very solid steady business. It's going to grow in a steady basis and we know the customer’s responding and saying very positive and favorable things about the brand in North America as well as outside North America. We feel that the footwear business we are definitely under penetrated in terms of market share. This is low, low single-digits in North America, so it's a huge opportunity for footwear. And I would tell you that in terms of volume top line and a business that we feel comfortable kind of putting our foot on the accelerator a bit long is definitely footwear and we know the customer is saying yes to us really across the entire region here and as we stated in Europe it’s starting to come on quite strong as well. So I think that our thought process is just be steady, keep the brand in the right place and then in terms of allowances, the channel that had a little higher allowances was our own free -- markdowns was our own freestanding stores and that's going to be a bit natural because for us to…

Okay. And John, we've also seen really attractive innovation online in terms of you really engaging the customer. How are you thinking about the integration of your bricks and mortar plus online and what can be done in terms of the customer experience being Omni channel and the opportunity to ensure that she can get what she wants where she want it?

Thank you and I'll -- I know you joined us the other day at the Wharton presentation. So you know our thoughts on this. We believe that luxury companies have to embrace the digital circle as we view it. And we view it as really a 360 degree communication engagement and relationship with the customer. So first we think it's a single most important vision of the Michael Kors Company and brand is through our digital flagship. And we also believe that's going to become 20% of our business globally over the next three to five years. So this is why we're making all this investment and it's absolutely having some pretty significant impact on our SG&A corporately and in particularly in the operating income of our retail business. And what we think is not only do you have to create that experience online but you have to create that experience in stores. Many people continue to say well why do you open stores if digital is going to so important. Well number one it’s 20% it's not 100%. Number two, people still will go into a store and shop but when you can only offer in your own store 30% or 40% of your entire assortment, that customer becomes disappointed. And now with Kors Concierge being rolled out -- and by the way it will be public -- it will take us probably about a full year to roll out all North America starting in October-November in our own stores, in about 35-40 stores. And we'll roll out throughout the chain. Our sales associates are going to be able to engage the customer as a personal stylist. We think that is a very big differentiator of having a sales associate on the floor. We already think our people have amazing training and are really excited to work with our clients. But this is going to be a whole different level. They're going to become your personal stylist. And then lastly, Omni has really -- is going to change the game for all of us in terms of being able to -- people want things quickly and they want it when they want it. And if you're not going to be able to deliver to them in that manner then they're absolutely going to go somewhere else and get the experience and the service from another retailer. 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 on an unified platform inside the company, which we think will be a real advantage for our business as we grow going forward.

All right. I'd like to thank everyone for joining us today and look forward to updating you on our future progress at Michael Kors. Thank you very much.

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