Greetings and welcome to the Capri Holdings Limited Second Quarter Fiscal 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a remainder, this conference is being recorded. It is now my pleasure to introduce your host Jennifer Davis, Vice President of Investor Relations. Thank you, Ms. Davis. You may begin.

Good morning, everyone, and thank you for joining us on Capri Holdings Limited second quarter fiscal 2022 conference call. With me this morning are Chairman and Chief Executive Officer, John Idol; and Chief Financial Officer and Chief Operating Officer, Tom Edwards. Before we begin, let me remind you that certain statements made on today's call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those 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 these statements made during this 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 costs associated with COVID-19 related charges, ERP implementation costs, Capri transformation costs, restructuring and other charges. Unless otherwise noted, all financial information on today's call will be presented on a non-GAAP basis. To view the corresponding GAAP measures and related reconciliation, please view the earnings release posted on our website earlier today at capriholdings.com. Now, I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer.

Thank you, Jennifer, and good morning, everyone. Looking at Capri Holdings momentum, as the world continues to recover from the pandemic, we are encouraged by the progress of all three of our luxury houses. Versace, Jimmy Choo and Michael Kors are all resonating with consumers, as evidenced by the 11 million new customers added across our databases over the last year. During this time, we have continued to see revenue growth and margin expansion above our expectations, reflecting the successful execution of our strategic growth initiatives. We are extremely optimistic about our future growth potential and believe the company is emerging from the pandemic stronger than ever. Capri Holdings success is a testament to the strength of our brands, as well as the dedication, resilience and agility of our entire team across the globe. Now turning to second quarter results, Capri Holdings revenue, gross margin, operating margin and earnings per share all exceeded our expectations. Total revenue in the quarter increased 17%, reflecting better than anticipated results at all three brands. E-commerce sales, increased double digit building upon significant gains achieved last year. Additionally, gross margin expanded 440 basis points, reflecting increases across all three of our luxury houses. Operating margin of 18.5% was significantly above our expectations. As a result, earnings per share of $1.53 was better than anticipated. Looking at group revenue trends by geography, revenue growth continued to exceed our expectations in the Americas, and would have been even stronger if not for inventory constraints. Consumer demand for our brands was healthy and benefited from an increase in social gatherings. In EMEA revenue trends were also above our expectations with growth across all houses. We saw strong momentum driven by robust domestic consumer demand, as stores in the region reopened and vaccination rates increased significantly. In Asia,…

Thank you, John and good morning everyone. Starting with second quarter results, revenue of 1.3 billion increased 17% versus prior year exceeding our expectation. Performance was driven by better than anticipated results across all three of our luxury houses. Michael Kors revenue growth would have been even stronger if not for inventory constraints, which were driven by greater than anticipated supply chain delays and extended factory closures. Net income was 235 million, resulting in diluted earnings per share of $1.53. This was above our expectation, reflecting better than anticipated revenue, gross margin and operating margin as well as they lower tax rate. Looking at revenue by channel, total company retail sales increased approximately 20%. These results were driven by robust e-commerce in-store sales, both of which increased double digits. Wholesale also grew, but at a lower rate. By geography, revenue remained strong and above our expectations in the Americas and EMEA, increasing 20% and 25% respectively versus prior year. In Asia, revenue was approximately flat due to the continued restrictions in Japan, Southeast Asia and Australia, as well as new travel and other regional restrictions in China. However, revenue in mainland China increased during the quarter even with the greater restriction. Turning to revenue performance by brand. Versace revenue was 282 million, a 45% increase to prior year and above our expectations. Mobile sales in our retail channel increased over 30% with strong double digit increases in both e-commerce and store sales. By geography total revenue in the Americas increased approximately 80%, revenue in EMEA increased approximately 50% and revenue in Asia increased 4%. Versace ended September with a global luxury fleet of 211 retail stores a net increase of five from prior year. For Jimmy Choo, revenue was 137 million, a 12% increase the prior year and above our…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Kimberly Greenberger with Morgan Stanley. Please proceed with your question.

Okay, great. Thank you so much. Congratulations on the great momentum in your business. And obviously, as you indicated, John and Tom, the inventory constraint particularly at the Michael Kors brand prevented I think, even greater sales momentum. I'm wondering if you can just talk to us about the ability to get back in stock. And when do you think you'll have an opportunity to get sort of into an inventory position at the Michael Kors brand that you feel is a really good inventory and stock position. And any worries or concerns as we head into the holiday season about any particular categories or areas where you feel like you wish you had a little bit more inventory?

Good morning, Kimberly and thank you for joining us in that question. I'm going to apologize to everyone on this call. Unfortunately, there's some construction going on, on the floor above us, so we're going to have a little bit of a COVID situation where we can't control some hammering, I apologize. As it relates to inventory, I'll divided into two. I'll talk about kind of the current situation holiday and then I'll let Tom take on the longer term perspective. First off, we're extremely pleased with what - how our results turned out for the quarter across all three of the luxury houses. And obviously, in particular Versace was really extraordinary. And we continue to believe that the strategic initiatives that we put in place at Versace, Jimmy Choo and Michael Kors. If you recall, when the pandemic broke, one of the first things we said is we weren't going to change what our strategic initiatives were and in fact, we were going to continue to really focus on those as our guiding lights. So I think that's proving to be a smart decision on our part and our executive teams around the world. And I want to applaud them, because they are all really implementing the great results that we're having. As it relates to inventory. The biggest inventory issue is a Michael Kors. And it is global, because the supply chain issue is one that's quite challenging, predominantly with shipping product around the globe. So it is not just a North America issue. It's impacting us in all regions of the world. And let's just first start with the timing piece of that. That has clearly added somewhere between 45 and 60 days on to our deliveries on a global basis. Sometimes a little bit more than…

Sure. So as we look at the longer term, Kimberly, we do expect these delays to continue into fiscal 2023. We don't believe they're a short-term issue. But longer term, we do believe the situation will begin to normalize. In the meantime, we are working on a number of initiatives. And John mentioned some around holiday and airing some product over, but also other initiatives to help mitigate the situation in terms of how and where we produce ocean shipping methods and strategic contracting with our carriers. As we look at the rest of this year, we do expect to be building inventory for Michael Kors and the group overall, as we work through the situation. We don't believe the factories will continue to be an immediate issue. They have reopened and are building capacity. But we do believe the extended delays will continue. And as we said in the prepared remarks, this is a 200 basis point impact versus our prior expectations in the back half. And it's really the power of our three brands that is allowing us to offset this. So it's great consumer desire. And we have the continued ability to offset these costs with pricing increases.

Yeah. And on that last note Kimberly, as you know we started to raise prices about two years ago in particular in Michael Kors and just recently started in Jimmy Choo. And that was something we were doing regardless of the supply chain situation. So we've been able to mitigate costs just because that was a strategy that we had. And I've said in previous calls, we're going to continue to do that. Michael Kors is going to become more expensive. And we think that's the right positioning for our brand. And that will be a strategy regardless of whether there was a supply chain issue or not. Okay, thank you very much, Kimberly,

Thank you so much.

Thank you. Our next question comes from line of Ike Boruchow with Wells Fargo. Please proceed with your question.

Hey, John and Tom congrats and Josh if you're there welcome. I guess John it's a good question to ask, I guess. But I think four months ago, he gave us some building blocks for next year, I believe you were 5.9 billion and a 16.5 margin, you're already well above that - the 16.5 on a much lower base of revenue. So I know you're probably not going to want to get into specifics on next year, but can you kind of walk us through how do we think about the business from here? Should there be a step down in margin? Or are you kind of creating a new base for the overall business as you guys continue to outperform?

Good morning, and thanks for the question. I think it's too early for us to really be talking about our fiscal 2023 projections. Obviously, we are exceeding our fiscal 2022 projections and forecasts, which gives us obviously, again, a real foundation to continue to build upon where we are today. I think the one area we feel comfortable in talking about and we've said it on previous calls is we do believe our gross margins will expand approximately 100% over what Tom gave for our annual guidance. So we feel comfortable in saying that that is an objective that this company feels that we will achieve. Again, I just think it's early to be talking about where we will land, in revenues, and even more importantly, operating margin. Because as I said, in the last few calls, we're going to continue to invest in particular in marketing, and other initiatives in the company, which will drive revenues, and if we drive revenues, and we have substantial operating profits that will drive EPS. And we think that in particular Versace and Jimmy Choo, have a long, long way to go in terms of their growth. So we don't want to underfund those businesses. And then additionally Michael Kors, clearly the consumer is engaging with our brand. When you look at the database growth of 21%, it's really showing that we are attracting a new customer, a younger customer, and we're engaging with existing lapsed customers at a rate that we've never seen before. So we want to invest with Michael Kors as well. So I think, again, it's a little early for us to be discussing that. But clearly we are doing better than we had anticipated. And we think that that bodes well for a setup for our fiscal 2023. Thank you, Ike.

Thanks.

I'm sorry. I just want to make sure I was clear, it was gross margin of 100 basis points increase. I apologize, I might have said the wrong thing. Gross Margin 100 basis point increase. Thank you, Ike.

Thank you. Our next question comes from line of Omar Saad with Evercore. Please proceed with your question.

Thanks. Good morning, I'll add my congratulations, great results. Maybe you guys could talk a little bit more detail about how the e-com and digital businesses trended, some of your key priorities there, initiatives, and how you expect that to progress as the stores continued to reopen, and the role that digital and e-com will play for your brands? And then also maybe if you could give us an update on watches, I'd appreciate it. Thanks.

Certainly, thank you, Omar. What's been quite interesting is even as we've opened our stores, our e-com business continues to grow. And it's shown sequential improvement, which is really not exactly what we hoped would have happened, which is exciting. And again, I think this is just coming from us, really building our database and acquiring new consumers who are new to the brand. Many of those are younger consumers and they're more digitally native. That being said, we're seeing store traffic sequentially improve. It's getting better every single week as people are returning to shopping, as a way to have fun and a way to be social. As a matter of fact, Josh and I were in Roosevelt Field shopping mall yesterday at 12 o'clock in the afternoon and we couldn't believe how many people were in the mall, which was quite exciting to see. And I think we feel confident that stores will continue to return as a very important core part of our business. And with our digital tactics or marketing tactics, our ability to communicate with our existing customers and our lapsed customers, I think we feel very strongly that the e-commerce business will continue to grow at a very, very fast rate. And again, you've seen that across all three of our brands. And we're absolutely focused on that. We believe it's not only a revenue opportunity for the company, but we think it's one of the single most important parts of our marketing is how we're communicating to our consumers digitally. Both of those are consumers we want to acquire as well as consumers that we have with us today. As it relates to watches, again, we're very pleased the watch business continues to grow. It's not growing at the same exact rate it was when we saw that huge kind of jump during COVID. But it's still growing very nicely. And we see again, many new customers coming into the store that have never owned a Michael Kors watch before. Our business has gotten also very strong in our department store channels, with watches as well. So it's a category that we're pleased is returning to growth.

And in terms of investments in digital and e-commerce Omar, we're making significant investments in digital analytics and expanding our capabilities across our brands and company, as well - and looking at the e-commerce platforms, also looking at common state of the art platforms and new tools and capabilities across all three of our brands. Of course, this extends into omni where we've spoken about clienteling before and the expansion of Versace's omni capabilities for instance. So this is a very, very key focus area for the company.

Thank you, Omar.

Thanks, Tom. Thanks, John.

Thank you. [Operator Instructions] Our next question comes from line of Oliver Chen with Cowen and Company. Please proceed with your question.

Hi, the Michael Kors signature print execution has been very innovative. What do you see happening there and as you think about price increases, how would you balance offering the consumer strong value against where you see opportunity? Would also love a quick update on Versace men's and handbag penetration, you've made a lot of good strides there as well. Thank you.

Thank you, Oliver. As it relates to our price increases at Michael Kors, as I've said to you on previous calls, we were underpriced as it relates to our brand on a global basis. So we are rectifying that situation. And we may end up being higher than competitors over time because we think that Michael Kors is led by Schulman. He is a luxury runway designer. We are carried in the finest stores in the world. We are carried - we're located in the finest locations in the world and we think that our brand needs to move more into the luxury space. So for us value is created not only just in the price product relationship, but also in how the brand is perceived, and how we create the brand engagement with consumers. So again, I think you can - you will continue to see us move in that direction. And I've said that we will raise prices all through the balance of next calendar year. We'll see how the consumer responds to that. And if we see good response, then we'll carry on with that philosophy on a go forward basis. So Michael Kors is clearly going to continue to move into the luxury category. Signature, as we've said, we want it to be about 50% of the total business inside of the company. We're on a perfect trajectory to get there that gives us an opportunity to create higher AURs because we take less markdowns in those areas. It's reduced the amount of fashion flow that we've had into the stores, we still create fashion around signature, but it's just not at the same pace that we were doing previously. We obviously shrunk the line sizes during COVID and that seems to have been no issue…

Best regards.

Thank you. Our next question comes from the line of Matthew Boss with JP Morgan. Please proceed with your question.

Great, congrats on a nice print.

Thanks.

Maybe John, as we think about potential structural changes, post pandemic. Couple of things, I guess, any change you're expecting in the overall growth for TAM for handbags and accessories? Do you see any constraints to a full recovery of your travel business over time? And then Tom, if we tried our best to isolate the higher penetration of e-commerce, which I know is higher margin. Is there any way to think about this piece alone? What you think this structurally adds to the company's margin profile post pandemic?

Matt, first off, thank you for your compliment under the nice print. What is - your question about handbag and accessory we couldn't really hear you.

Yeah, so a couple things that I was focused on. Is there any change you're expecting for the growth rate of handbags and accessories or the overall TAM exiting the pandemic? And then the second part was, is there anything preventing a full recovery in your opinion of the travel business over time?

Right. Okay, so it handbags accessories, I think we saw right through the pandemic, in particular, the luxury goods, a part of handbag and accessories, which I believe all three of our brands are in has grown. I mean, that market continues to grow. Yes, there was a small setback when all stores were closed, et cetera. But this category continues to be a representation, I think, for the consumer have their fashion style, and the way that they want to express themselves. So we saw that that did not really change except during the real hard lockdown periods. So we don't believe that there's going to be a change in trajectory. We think on a global basis, again, accessories will grow somewhere in the 6%, 7% range. And that'll change by marketplace. So we feel very comfortable with the handbag and accessories, luxury market growth. And I would add I think we're all surprised at how strong the growth has been in North America. And it's not just us, all of our competitors, European and America have shown those same types of results. So really bodes well, we think for the future. As it relates to travel. I would say there's two parts to the answer to that question. First is the tourists coming to markets. We are beginning to annualize that in a sense that they did not - really there was some small return to Europe this year. We're at a very high penetration. There's been no return to Japan and Korea, which were typically higher penetration markets. So that in a sense is behind us and we are not forecasting for any type of a strong return in that tourist market. We do have some tourists that we believe will be returning to the US market shortly when the borders are open, and we think that will be a positive for us. So in our forecast, we don't see tremendous movement, changing our trajectory, at least in next fiscal year. The second answer to that question is, we as I think I told you previously had a very substantial business in travel retail that would be airports and duty free shopping, et cetera. And again, while there has been a very strong resurgence in that business inside of China, which was unfortunately slowed during July and August during some of the issues that China faced. We also are not forecasting for that business to recover in our fiscal '23. We think that's, that's going to be further out more into our fiscal '24, we would look for a strong recovery in global travel, and tourist travel and how that would impact not only our own stores, but travel retail, and then, of course, big key department stores in Europe, where those are substantial businesses for us, which will be a very nice uptick for us in that period of time. Tom?

With regard to the e-commerce question Matt, if you look at history, we've now doubled the e-commerce penetration. It was about 13% pre-COVID and it's now in the mid-20s expected for this year. And as we noted at Investor Day that we expect that to continue to grow into the mid 30% range as a percent of our retail sales. So when we look at it, Jimmy Choo and Versace's margins have always been very positive and strong compared to retail stores and e-commerce. Just as a function of their luxury pricing and positioning. Michael Kors has seen really a sea change over this last couple of years as the penetration has increased and revenues increased, e-commerce margins have moved to above store level margins. And we would expect them that this to be one of the supports for our gross margin expansion over time. As John mentioned, we would expect continued expansion, 100 basis points next year. And when we look at the components, its continued full price sell-throughs filling out our accessories businesses that meets you in Versace growing in Asia, which is structurally higher margin and of course, this e-commerce piece. So I view it in that context of supporting the overall corporate goal.

Thank you, Matt.

Thank you. Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hey, thanks, guys. Curious if you can talk about that gross margin upside. Which brands are the largest increase and what were the biggest surprises to you and the drivers of that have that upside? And then just second, curious how your wholesale partners are thinking about the spring season from a unit perspective? And what are you going to be able to deliver to them just given the supply chain constraints relative to what they would love - what they would like to order? And are you seeing cancellations given the 45 to 60 day delays? Thanks, guys.

Why don't I take the wholesale part first, and then I'll turn the gross margin over to Tom. Our wholesale partners around the globe are experiencing very strong sell-throughs, sell-throughs that date back, I'd say seven or eight years ago. So really strong seller-throughs. And it's in accessories, it's in footwear, it's in women's ready to wear, so we cannot get enough merchandise to our partners unfortunately at this moment. There has been no cancellations. Everyone understands what the situation is and basically is taking any of the merchandise as it arrives. We did fly as I said earlier, most of our seasonal holiday gifting businesses here. So anything that was very seasonal oriented, we wanted to make sure it was here for the stores, because it obviously becomes more obsolete, if it's not here during the holiday period of time. So we feel good about that. We are going to be in a better position in Q3 - I'm sorry, Q4. Our Q4 as an inventory relates as Tom said, you will start to see inventory build. So we have kind of tactically mapped out what is happening with this delay and it's really more of a transit delay than anything. There was the piece in Vietnam, but most of this is a transit delay and so we've got a lot of that put into our projections. And I would say that like ourselves, our wholesale partners are planning the businesses up. We've had a great - we're having a great fall season. And therefore people are super optimistic about what is in front of us, in particular for next year. And again, I think that first and foremost comes to incredible product that Michael, and that Donatella and Sandra are really putting together with the design teams. I think our marketing campaigns have been extraordinary. If you look at whether it's Dua Lipa at Versace or Hailey Bieber at Jimmy Choo or Bella Hadid at Michael Kors, I mean, we've got powerful influencers who are associated with our brands who want to be part of our family, and are really helping us communicate that message around the globe. And you look at the incredible events that we're doing with all of our brands in China, and how our brands are resonating there. And the growth opportunity. I want to remind everyone on this call, we need to double our business in China with all of our brands. We're under penetrated by 50% to all of our competitors, so we have huge upside for ourselves there. So I think we the way we look at the situation is its quite optimistic. And I believe our partners are looking at it in the same page. Tom?

And with regard to the second quarter gross margin, all three brands exceeded our expectations Paul, and they exceeded them in a meaningful way. So we were really pleased to see every house perform quite well. And if you look at the themes across it, the first and foremost is full price sell-through across all businesses is driving great results. At Michael Kors and Jimmy Choo, we have the pricing benefit. And at Versace, we're seeing continued traction in accessories as that category, which is quite important for the future continues to expand and they're doing a great job there. John mentioned signature at Michael Kors, which also expanded and that's also supporting the full price sell-through for that brand. So in general, all three were well ahead of expectations.

Thank you, Paul.

Thank you guys. Good luck.

Thank you. Our next question comes from the line of Simeon Siegel with BMO Capital. Please proceed with your question.

Great, thanks, guys. Congrats on really ongoing great results. John, congrats on the succession planning and honestly, all that you've built here. And if you're listening, congrats, Josh, looking forward to having you back at party. Sure you missed us all. John, so you alluded to this and we've spoken about it on past calls. But just curious to hear if you have any updated views on what you think the industry level promotional cadence will look like into next year. I know we have all the constraints right now, but just kind of echo your thoughts around holding price points if and when others start promoting again, I would be curious to hear your view of the broader industry level. And then Tom, if I can just ask any thoughts on the timing of the new share repurchase, just given what seems to be a cheap valuation and ongoing clear path and visibility for you guys? Thanks a lot.

Thank you, Simeon. Appreciate those kind remarks about the company. Simeon, the promotional - I continue to say that that is not a topic we spend a lot of time on in this company any longer, and maybe that's naive. But first off Versace, Jimmy Choo, that's not a conversation, we are pretty strict around what we do there. And as it relates to Michael Kors, where a substantial part of the Michael Kors business is done outside of the United States, both in Europe and in Asia. Again, those are not conversations that are really relevant. As it relates to North America. It is relevant and we've just made the decision that we're just not going to be as promotional and that means that we want to make more money and we've shown that. We've shown that we made more money on lower sales than we did on having higher sales and trying to chase other - our own selves or other competitors, whichever one you want to call it. So we've made the decision prices are going higher. We're going to have less promotional activities. And we're going to let the consumer respond to that. We're also operating on much lower inventory levels. You will see inventories rise over the next two quarters and more of that, just as a preview is going to be in some of our core products, where if we get them here earlier, we don't have to worry about this delay issue and it will substantially reduce our cost over time. So we might hold a little more inventory in particular on basic product where we're just running reorder businesses. And let that flow through as this supply chain issue kind of works itself out over what we think will be a six to 12 month period of time, when I say that really starting from January 1, so we think it's going to take most of next year for that to work itself out. And we've got some ideas on how to mitigate those costs. Some of that will be holding a little higher inventory, but really on core replenishment items. So in our mind, we are going to stick to our guns on what we said. And we've already seen other people starting to promote much more aggressively than we are, and that's okay. And that they do, that's going to be their strategy, and we wish them well. But we're not going to start to go down that path. We know where that leads and that leads to typically lower gross margins and trying to sell too many units and trying to chase too much business. And that usually is something that long-term doesn't end the way that you want it to. So our perspective is stay focused on the path that we have been going down and we think we'll get more rewards from with the consumer.

And with regard to timing of share repurchase, I just like to put a little context of our overall capital allocation policy and the strength of our balance sheet and free cash flow, which is the reason we put in the new billion dollar share repurchase program. As a matter of fact, year-to-date, generating free cash flow of about 350 million. So our first priority remains paying down debt. In the quarter, we paid down 200 million and we'll continue to do so to further strengthen our balance sheet. We do plan to return cash to shareholders in the form of share repurchase. We think that's important, we now have the broader capacity to do that over the longer term, but will also be active in the near-term. And finally, luxury acquisitions are the last priority where - as things come up for luxury, European acquisitions, we will look at these and that would be another use of cash in the future and another reason to strengthen our balance sheet. So Q2 is a great example of this balance where we paid down 200 million of debt and also repurchased 100 million of shares.

Thank you, Simeon.

Okay, guys. Thanks a lot. Congrats again. Best of luck for holiday.

Thank you.

Thank you. Our last - our final question for today will come from the line of Erinn Murphy with Piper Sandler. Please proceed with your question.

Great, thank you. Good morning, and thanks for taking me in. My question John, is around Versace. I have a two part question. First, I mean, you've hit your long-term margin target for Versace just in the first half of this year. But if I kind of pencil out the guidance, it implies that the back half EBIT margins go down to the low teens. So just curious what's driving that forecast? Maybe that's for both you as well as Tom. And then secondly, any update to the search process around Jonathan's replacement at Versace. Thank you so much.

Yeah, I'll take - I'll the second half, I'll take the Jonathan piece. First off, we want to thank Jonathan for all of his efforts. Prior to us acquiring the company, he did an outstanding job trying to really reset the company and then the great thing about us acquiring Versace is we cleaned the house and I think we told you we walked away from $150 million worth of multiple other lines that were in the company to shut them down. We have spent hundreds of millions of dollars in refitting, rebuilding, opening new stores. We believe in luxury. I told everyone when we bought Versace, this takes time. But if you invest properly and you believe in the future of luxury, the returns are really spectacular. And you can look at some of our competitors and how those returns have turned out and how the revenues are looking over time. So I think we've really positioned Versace to be set up for - at minimum hitting our $2 billion goals and to hit our long-term margin targets. And we will absolutely find a new leader. It is going to be one of the most sought after positions in the luxury industry. So I have no concerns about that. It will probably take us north of six months till we have someone into that role. Jonathan's with us until March. And in the meantime, I'll be working closely with Jonathan and the management team to continue to achieve our strategic objectives and by the way we have an outstanding management team at Versace. So I'm really proud of the teams that are at Versace, at Jimmy Choo and Michael Kors. I think in all three companies, we have some of the best executives, not only in our corporate offices,…

Sure when we look at the back half Erinn, and third and fourth quarter. First, I just want to point out we expect margin expansion in both Q3 and Q4 versus prior year. So Versace is still building and expanding margin. And for the year we've raised our forecast and now expect the mid-teens operating margin. So as John mentioned, we're very pleased with the progress of Versace. When we look at the quarters just kind of walking through it. Q3 is a seasonally lower operating margin quarter for Versace, it does not include December, which is the most profitable month of the year for the brand because of our lagged reporting. And it's also the lowest absolute sales quarter. So we're seeing deleverage. For both Q3 and Q4, we're also increasing our investments in brand growth. We're ramping up stores to be fully open versus prior year. So we have full store costs. And we're also lapping some COVID related savings that we were able to achieve and garner last year on both payroll and rent. So those are some of the puts and takes. But really, we're still growing versus prior year. We're very pleased with that trajectory and pace and very pleased with the overall brand position.

Thank you.

Thank you very much, Erinn. I'd like to thank everyone for joining us today. I'm sorry, we ran over a little bit. But hopefully you heard some interesting information about Capri Holdings and how we intend on continuing our growth trajectory. And again, very excited about having Josh join the team and he'll be with us on our next call and be talking about the continued success of the Michael Kors brand. Thank you everyone and have a great day.

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.