Good day, everyone, and welcome to the Michael Kors First Quarter Fiscal 2018 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Christina Coronios, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining us for our first quarter fiscal 2018 earnings call. Presenting on today's call are John Idol, Chairman and Chief Executive Officer; and Tom Edwards, Chief Financial and 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. In addition, certain financial information discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain items related to the acquisition of the company's Greater China license. You may identify these non-GAAP measures by the terms adjusted and non-GAAP. To view the corresponding GAAP measures and related reconciliations, please view the earnings release posted to our website earlier today at investors.michaelkors.com. I will now turn the call over to Michael Kors' Chairman and Chief Executive Officer, Mr. John Idol.

Thank you, Christina. We are in an exciting and transformative time for our company. We recently announced that Michael Kors Holdings Limited is forming a global fashion luxury group with our acquisition of Jimmy Choo, bringing together two iconic companies and creating a platform for future acquisitions. The foundation of our group will be built on fashion authority with craftsmanship and heritage at the core. Jimmy Choo embodies all of these elements and is an excellent fit for our group. The brand has been a leader in designing glamorous, innovative, expertly crafted footwear and accessories that have resonated with luxury trendsetters for more than 20 years. Under the leadership of Chief Executive Officer Pierre Denis and Creative Director Sandra Choi, the company has demonstrated an impressive track record of consistent sales and earnings growth in addition to strong cash flow generation. We believe Jimmy Choo can reach $1 billion in revenue over time as we partner with Pierre, Sandra and the rest of the talented management team to build the brand's online presence, expand its retail footprint globally, and accelerate growth in the accessories and men's categories. Through the formation of a global fashion luxury group, we expect to enhance long-term value for shareholders by growing the Michael Kors and Jimmy Choo businesses, while diversifying our product and geographic mix. Now moving to the quarter's performance, this morning we reported first quarter fiscal 2008 (sic) [2018] results, which were ahead of our expectations, largely as a result of better than anticipated comparable sales performance in our retail segment in North America and Europe. We have also begun to execute our strategic plan, Runway 2020, to reposition our company for future growth. These efforts are expected to drive improved financial performance as we generate even greater appeal for our fashion luxury…

Thank you, John. I'd like to cover our results for the first quarter of fiscal 2018, provide an update on our forward outlook for the second quarter and full year, and conclude with some additional perspective on the Jimmy Choo acquisition. For the first quarter, we reported net income of $125.5 million, or $0.80 per diluted share, which was ahead of our expectations largely due to higher than anticipated retail comparable sales results. This represents a 3.6% decline compared to last year including $11.3 million of one-time costs associated with the acquisition of the Greater China license. Excluding these one-time costs, earnings per share decreased 11.1% in the quarter. Moving to top line performance, total revenue was $952.4 million, a decline of 3.6% compared to last year. Retail net sales increased 10.1%, largely driven by 67 net new store openings and the impact of the acquisition of the Greater China license. This was partially offset by a comparable sales decline of 5.9% in the quarter with North America e-commerce contributing 330 basis points of benefit. Wholesale net sales declined 23.0% due to our strategic decision to reduce sell-in in order to protect the long-term health of our brand in North America and Europe as well as the shift of China sales to our company-owned retail segment. In the licensing segment, revenue decreased 5.6%, primarily due to the absence of licensing revenue associated with the previously-licensed business in Greater China, while fashion watch declines were almost entirely offset by increases in ACCESS smartwatch revenue. Gross margin for the quarter was roughly in line with our expectations at 60.3% compared to 59.9% last year. This year-over-year improvement was primarily attributable to the growth of retail sales as a percentage of total revenue. Retail gross margin increased 120 basis points, which was largely…

Thank you, Tom. In concluding, this is an exciting time for the company, as we create a global fashion luxury group. The acquisition of Jimmy Choo is expected to unlock opportunities for additional growth, while also diversifying our product and geographic portfolio. In addition, we are pleased with the initial progress we are making on Runway 2020 strategic plan and the initial success we have seen so far has increased our confidence level in how we're executing against the plan. With that, I would like to open up the call to questions.

Thank you, sir. Our first question comes from Kimberly Greenberger with Morgan Stanley. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Okay, great. Good morning. Thank you so much. John, it sounded like there are some early positive signs in select category performance. I wondered if you could just go category-by-category and talk about the things that are working, and then over the next one, two, three quarters, the next steps to firming up those categories. I think clothing apparel might've been positive in the quarter. Is that a trend that you think can continue, and if you could just give us your thoughts on categories. And then one follow-up on the wholesale revenue, if you could talk about, look out over the next two years and give us your best guess at where you think, once the wholesale channel is cleaned up and the promotional days are down to where you want them to be, what does that wholesale revenue look like in total? Thanks so much.

Think you, Kimberly, and good morning. I'll start with your first question and just give some brief updates on the categories. The most exciting thing that happened to us in the quarter was the increase in AUR, which I mentioned in our prepared remarks. So as you recall, a few quarters back we said that we had made the decision to create a promotional policy for the company that would really increase AURs over time because we felt that there was too much activity of the brand being put on sale, really just at multiple different time periods. So that has absolutely had a positive impact across our own retail distribution and in the wholesale channel as well. So AURs are definitively up. The second part that has helped the AURs in, again, our retail channel and the wholesale channel is the fact that we took five groups, and we focused those five groups on price points that we thought would improve full price sell-throughs. We went back and looked at where was the product going "out the door" at and really analyzed where the customers response was the highest for us. And that obviously has impacted our wholesale gross margins, but we've seen the improved sell-throughs as it relates to that strategy. I might add that what you're going to see happen really come spring season and through the balance of calendar 2018 is we will now begin to layer up price points in our own stores and in the wholesale channel. In particular, in our own stores, we will start that with the Michael Kors Collection handbags. I talked to you about Bancroft, which landed in the stores a few weeks ago, and we've had tremendous sell-throughs on this product which we're very excited about. It's an expensive…

Our next question comes from Randy Konik with Jefferies.

Yes. Thanks a lot. I guess a couple of quick things. John, can you expand upon – you had a nice impressive result that you talked about on the AUR inflection. I think it's the first time in a number of years now you gave some commentary around the full price sell-through improvement. In the years past, we've also been hurt on AUR because of, I guess, silhouette. Can you just give us some perspective on what you think silhouette changes come through in the next 12 months to impact AUR either up or down from here? And then the other thing that kind of stood out in the numbers was the inflection in the retail segment margins. I think it was mentioned that the gross margin improved there. I just kind of get some sense of are we seeing the floor in the retail segment margins? And what can we kind of think about now that we're starting to see some stabilization in your business model or business, where the retail operating margins can re-shake back out on a normalized basis going forward over the next couple of years because it seems like it's starting to kind of move higher. I just want to get some perspective on the drivers of that change going forward. Thanks.

Sure. Thank you, Randy. A couple of things. On the AUR side, the thing that will continue to drive AUR for the next I'd call almost 12 months is going to be the reduction in promotional activity. That will be the single largest driver. The second driver of that will actually be our introduction of higher price points into the business, and that's not just raising prices but it's actually delivering fashion that's very evident to the consumer and we're really working again with Michael and the design teams on innovative materials and workmanship to that product because clearly the customer wants that. They want something that's going to look different for them and look different with their wardrobe. And then customization will also help to drive AUR. Again, we're seeing a lot of response to monogramming and all the different areas, whether it's the guitar straps we talked about, whatnot; that's going to become a significant part of the business as we move forward for anyone in this category. That's the tailwind. The headwind is unfortunately, some of the small leather goods business is being impacted, as you see, with payment plans coming on through all different vendors. There's less need for cash and in some cases credit cards. So there is some impact in that business that we're experiencing, which does hurt a little bit as smaller wallet sales are becoming more popular as opposed to larger wallet sales. So, again, we'll just have to see how that shakes out. And as I mentioned in the prepared remarks, one of the real key drivers in the Men's' leather goods business is backpacks and we're seeing the same thing emerge in the Women's business and that's – it's really shaking out. It's taking a lot of the tote business…

Our next question comes from Lindsay Drucker Mann with Goldman Sachs. Lindsay Drucker Mann - Goldman Sachs & Co. LLC: Thanks. Good morning, everyone. John, I was wondering if you could give any details on what you're seeing in terms of North America retail by type of store or by region. So any difference in sort of outlet versus full price or age or region across the country? And also with having had a bit more time to spend with Jimmy Choo, just curious if you could give us an update on any synergy or other opportunity to – as we think about integrating the business. Thanks very much.

Think you, Lindsay, and good morning. We're definitely seeing business improve in North America. Now that's I think a combination of a few things. It's – I think the – our product that we're delivering is getting better and the customer is responding to that. I would say the traffic trends really haven't changed at all, so that's not something that we're seeing as of yet. But we think that our conversion rates continue to accelerate inside of our stores but there's definitely a slightly better feeling that we're seeing with the consumers coming into the store being a bit more optimistic and I would say also being more excited about fashion and innovation. I've said before that I think our company needed to be more aggressive in its fashion and innovation, and Michael and the design teams have done just a spectacular job with that. So I'd say it again, we're seeing business definitely improve, and I don't think it's a channel, it's one channel versus the other. It's just the general – there's a little bit of an uptick that we're feeling so it gives us some optimism going into the fall season the way that she is responding to newness. And also, I want to leave you with one other thing too. The reduction in promotional activity, what we've seen is that she's not fighting us on that. As long as we are giving her the right product, she's responding extremely well. And our two best-selling products being Mercer and our smartwatches, have basically no sale. There's some limited colors that are on sale on Mercer but we really have shown that if it's the right product, you do not have to have these aggressive markdowns happening at retail. And I think that's proving to be a…

Our next question comes from Omar Saad with Evercore ISI.

Thank you for taking my question. I wanted to ask, John, if you could give a little bit more color about the new product that's coming down the pike for spring 2018. 65% sounds like a big number in terms of the newness that's out there. Obviously, you guys have been developing new product over the years. What's different about seeing – to the extent that you can provide detail and some color, what's really different about the spring 2018 product and what's giving you that confidence? Are you testing it out there? Are you getting feedback from retailers, et cetera? Any color would be greatly appreciated. Thanks.

Thanks, Omar. Omar, I'd answer that in two ways. I think, first, we know from the industry trend that product – we're in a cycle where more innovation is what the consumer is responding to and we're not the only company seeing that. You certainly look at many of our European luxury competitors and they're seeing the same type of response from the end consumer. And given that we are a global luxury brand, we don't just compete in North America but we compete around the world and we're sitting on the best streets in the world across from or next to the best competitors in the world. So we have to really excite the customer because she has choices. And we know that clearly in the women's ready-to-wear business where we got off to a little quicker start in being able to get that innovation in front of the consumer, the results have been outstanding. And so, now we have actually customers coming in here saying, let's make it a little bigger next year. Are we going to go slow? Are we going to be patient about that? We have our own retail teams who are going, wow, let's get more of this in our stores and we're seeing the consumer respond. We saw that same kind of reaction this market when we opened up with our accessories collections where our teams and our retail partners walked in and said, wow, this is different. Our customer's going to respond to this. So some of this innovation is based on taking a bag like Mercer or group like Mercer which is very strong and powerful for us and creating layer-ups in that. Some of this is based upon areas that are very strong in terms of fashion trends, like backpacks…

We'll take our next question from Simeon Siegel with Nomura/Instinet. Simeon Avram Siegel - Nomura / Instinet: Thanks. Good morning, guys. Great job on the retail margin expansion, and to your comments that should continue. Can you help us think through the math behind the wholesale margin contraction on that deleverage and how you would expect those margins to look over the year? And then congrats on the Asia growth. Just given the timing of the in-housing, can you help on what the apples-to-apples retail growth looked like? And how that would look like over the year? Thanks.

Yeah. Simeon, I'm going to turn the two questions over to Tom.

Hi, Simeon. First, on the wholesale margin contraction, we've been working closely with our partners as we navigate the promotional strategy where we're reducing our promotional days this year. And really in that business, we've enhanced our margin with our partners, and we think it's important to have their partnership as we work through this. We've also put in the strategic price points to make sure we're going after more sell-through on our core product, and we believe that this margin will really continue through this year. And as we noted in Runway 2020 and our Investor Day, that we'll be stabilizing our margin performance in 2019.

On Asia, I'm going to make one quick statement about Asia, and then I'll turn it over to Tom. As I said earlier, there is an impact that Asia has on the overall margins. We don't break that out specifically, Simeon, but what I will tell you is that the North American margins are absolutely starting to stabilize. And we believe that as we move closer to Q3 and Q4, North American margins potentially have the opportunity to expand, but I'll let Tom give you a little color on the impact of that.

Sure. When we take a look at retail, and then I'll give you a little color on wholesale as well, we said retail sales are up about 10%. Excluding the change in the China business, it would've been up 3%, so that was a portion of the driver. The other was the net new store openings, partially offset by the lower comp sales. On wholesale we declined 23% but that would've been down as our guidance noted in the low-teens excluding the change in the China business which moved to the retail side.

Thank you, Simeon.

Our next question comes from Oliver Chen with Cowen & Company.

Hi. This is (54:36) on for Oliver today. Could you just elaborate more on what you're seeing on the broader retail environment and the overall handbag category? I think the growth of the overall category has been flattish to up low-single digit. Are you seeing customers react positively to the product innovation that's driving renewed excitement for the category as a whole?

I'm sorry. I didn't hear the first part of the question.

Sorry. I was just wondering if you could comment more specifically on the broader retail environment and the overall handbag category of what the category growth has been like during the quarter relative to prior quarters.

As I said earlier, we're seeing a little positive movement, I would say at least for our product in the category. I can't comment on the overall category. But clearly, the customer is responding to initiatives that we're taking. And we're seeing, as I said, the actual transactions and accelerate. We're not seeing traffic accelerate but we're seeing our conversion rates accelerate. So obviously, she's responding to what we're doing. And I would say that the overall accessories category remains roughly flattish in North America, as we've said before, probably up low-single digits in Europe. And as you've now, I'm sure, have ascertained seeing luxury goods reporting, it's very strong in Asia and in China in particular. There is a very strong inflection and acceleration happening for the accessories business in China. The consumer is definitely back. And as we said in our prepared remarks, we're seeing more of that in Mainland China. She is definitely shopping in Mainland China, and there still is some softness in other parts of the region from a travel basis. But as typical this time of the year, very strong response from the Asian consumer in Europe as they're traveling during the holiday season. Thank you very much.

Our next question comes from Erinn Murphy with Piper Jaffray. Erinn E. Murphy - Piper Jaffray & Co.: Great. Thanks. Good morning. I guess, John for you, could you talk a little bit more about what you're seeing in the North American retail environment as it relates to the international tourist into this market?

Sure, thanks. Erinn, we unfortunately have not seen any rebound in the market. As you know, I'll call it, two to three years ago, we had a very strong business with South Americans and that's really not come back. And we also had a very, very strong business with Europeans coming here and in particular when the euro was about 1.35 to the dollar. We do not anticipate that changing for the moment. Although the dollar is weakening and so that gives us some hope that that consumer will start to come back in a stronger way to North America. So I would say that if we see this weakening of the dollar continue, that could create some activity in North America that we have not seen rebound in the last couple of years. Thank you, Erinn.

And that concludes the question-and-answer portion of today's call. I would like to turn it over to John Idol for closing remarks.

Thank you for joining us this morning. We look forward to sharing updates with you on the development of our fashion luxury group, our Runway 2020 initiatives and our pending acquisition of Jimmy Choo in the coming quarters.

And that concludes today's presentation. Thank you for your participation, and you may now disconnect.