Krystyna Lack - VP and Treasurer, IR John D. Idol - Chairman and CEO Joseph B. Parsons - EVP, CFO, COO and Treasurer.

Kimberly Greenberger - Morgan Stanley Robert Ohmes - Bank of America/Merrill Lynch Randy Konik - Jefferies and Company Omar Saad - Evercore ISI Dana Telsey - Telsey Advisory Group Oliver Chen - Cowen & Company.

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 sales would have been 120 basis points higher for the fiscal 2015 and our expanded stores would have added another 60 basis points to our global comp. During the year, we saw strong growth across all our segments, our geographies and our product lines.

Notably revenue growth in both Europe and Japan exceeded 70%, while revenue in North America, our most developed market, grew more than 20%, demonstrating the continued demand for our luxury brand globally. In fact the ongoing strength of Michael Kors brand is also illustrated in the growth of followers across social media sites worldwide.

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

In addition, we made meaningful process across multiple strategic initiatives as we continue to set the stage for sustainable long-term growth. In fiscal 2015, we successfully launched our global digital ecommerce flagship in the U.S. which continued to exceed our expectation with annual year-over-year sales growth of 63%.

We expanded our global retail presence with the addition of 121 stores, including our largest flagship store to-date in Soho, which includes our first ever dedicated men’s store, ending the year with 728 Michael Kors stores worldwide including licensed locations.

We completed the expansion of 32 highly productive retail locations globally contributing to top line growth. We increased global comparable store sales in our retail stores and our wholesale shop-in-shops. We continued to further penetrate our wholesale channel with the conversion of 570 of wholesale stores to shop-in-shop globally.

We expanded our market share in accessories, footwear, ready-to-wear and jewelry. We enhanced our technology infrastructure to support our global digital strategies and operations and we continued to build a strong distribution center infrastructure worldwide to support our growth initiatives.

As we look ahead we remain intently focused on driving the business forward by further building brand awareness, expanding our product offering and growing in each of our regions. Let me discuss some of the key areas that we expect will drive the business this year. We see continued growth in North America in fiscal 2016.

Retail momentum will be driven by our digital flagship strategies as well as new store growth with the addition of 30 locations. As you know today retail environment is quickly evolving. The lines between brick and mortar and online are increasingly becoming blurred and brand interaction and commerce happens across all devices and platforms.

In order to remain relevant luxury brands must evolve in response to this channel shift from stores to online. We began our digital journey with the successful launch of our ecommerce flagship in the U.S.

in 2014 and we are pleased to announce that we launched our new digital flagship in Canada last month, which not only showcases the widest assortment of our luxury products but also offers the broadest and deepest brand experience.

We continue to enhance functionalities and build an Omni channel strategy that connects our digital flagships with our in-store mobile and social presence focusing on Omni channel fulfillment and product personalization with the launch of Kors Concierge.

As we introduce digital devices into our stores our sales associates would be empowered with the most extensive collection of our luxury products, allowing them to become personal stylists and enabling them to drive customer engagement as well as elevate our customers’ jet set shopping experience.

We expect our Omni channel initiatives combined with retail expansion to drive double-digit sales growth in our retail segment in fiscal 2016. We anticipate continued strength in our North American wholesale business and will capitalize on the success of our shop-in-shops with the conversion of an additional 500 doors across all categories.

We anticipate single-digit growth in this channel in fiscal 2016 as we continue to develop our handbag ready-to-wear and footwear categories as well as our men’s business.

In our licensing segment we anticipate continued deceleration in watch sales due to what we believe is a cycle shift to our jewelry category, where we expect to see continued strength this year.

Our watch category continues to evolve and we expect to further elevate our offering with the introduction of new collections for the calendar 2016 spring season. These new lines, which will comprise approximately 30% of the assortment will reflect product innovation focused on new materials and metal treatments.

In our fragrance business and our new eyewear collection we saw strong performance in fiscal 2015 and we expect to see continued momentum in these categories in fiscal 2016. As we further develop our categories we anticipate mid-single digit growth in North American licensing segment this fiscal year.

In Europe we expect to open 45 new retail stores and continue to prepare our digital flagship launch next year. On the wholesale side we plan to expand distributions through shop-in-shops and specialty stores in existing countries as well as new markets.

We are well positioned to increase our market share in the handbag category where today we only hold a single-digit market share position. Footwear is quickly becoming an emerging growth story across Europe as we are seeing strong response to our collection across the region.

In addition we expect continued strength in our license categories as we see solid gains in watches, eyewear and jewelry. Although foreign currency rates will continue to be a headwind this year we believe our strategic initiatives in Europe will contribute to double-digit revenue growth on a constant currency basis in fiscal 2016.

Asia remains a tremendous growth opportunity for the company. We are very excited about the opening of our 5,000 square foot flagship store in Kobe in April, and the planned opening of our 7,800 square foot flagship in Ginza, later this year.

These stores will further heighten our presence in Japan, and enhance our luxury brand positioning in this market. We plan to open a total of 10 stores in Japan in fiscal 2016; and drive revenue growth through our compelling luxury product offering and jet-set in-store experience.

Moving to Korea; we are set to unlock the market opportunity in this region beginning with the transition of our retail business in the fourth quarter of fiscal 2016. Our investments this year will center on building the right infrastructure and developing an expansion strategy to position this business for long-term growth.

In Hong Kong, we recently established local distribution where we now are able to provide a greater level of service to select Asian customers which were previously serviced out of North America; and further capture growth in this region.

Turning to our regional license business throughout the Far East, we were pleased with the strong performance in China and Southeast Asia, which saw strong double-digit comp growth in fiscal 2015.

We believe that more consumers are now recognizing Michael Kors as a fashion leader and our luxury brand is quickly becoming a significant factor in this region.

We will capitalize on our accelerating brand awareness in this market and expect to see continued growth this fiscal year with the opening of 40 locations as well as strong comp store sales increases. We believe that our travel retail stores are another effective way to raise brand awareness and this business continues to perform well.

We see opportunity to raise visibility of the Michael Kors' brand to the luxury travel customer as we optimize our presence in premier travel destinations around the world.

And finally, in our men's business, we are pleased to announce the addition of Marcel Ostwald, as Senior Vice President of Menswear Design, coming to us from Hugo Boss, where he was Senior Head of Creative Management and Concept Design for Boss Sportswear. We look forward to Marcel bringing his design talent and experience to Michael Kors.

Working in collaboration with Michael, Marcel will be responsible for developing the product vision, ultimately driving the men's business to global success.

We have begun to make strides in our men's ready-to-wear and leather goods, and have designed our fiscal 2016 marketing campaign to build brand awareness, to increase visibility in print ads, social media and outdoor marketing, all of which will showcase our product and offer a glimpse into the world of the Michael Kors man.

We are very excited to deliver another luxury fashion shopping experience to customers worldwide with the opening of 10 men's retail locations and approximately 90 shop-in-shops globally in fiscal 2016. Looking beyond fiscal 16, we see ample opportunity to drive double-digit top line growth through multiple initiatives.

First, we will continue to drive our direct-to-consumer presence with the ongoing development of our digital flagship strategy in addition to growing our retail store base.

We expect our North American digital flagship to generate strong double-digit gain and plan to expand our global digital presence with the launch of our flagships in Europe and Asia.

The investments we are making in our digital strategy will ensure michaelkors.com is the most expansive expression of our luxury fashion brand, and will support the growth of this channel ultimately reaching 20% of our retail sales long-term.

In addition to our digital growth, we continue to see potential for 700 stores globally, including 400 in North America, 200 in Europe and 100 in Japan, not including the men's stores or the Korea locations.

We also see moderate level of comparable store sales growth, contributing to our overall growth of our retail segment, driven by newness across all product categories, enhanced marketing programs and an exceptional jet-set shopping experience in all channel and platforms.

Second, in our wholesale channel we see continued momentum through comparable store sales increases in shop-in-shop conversions in North America and Europe. Third, to support our growth objectives across our segments and geographies we will continue to invest in effective marketing programs.

Our digital flagships, along with our growing social media presence will remain instrumental in maintaining our engagement with our customers as well as enabling us to broaden our consumer reach globally. In addition, we will continue to invest in national advertising, direct marketing and our direct mail catalogs.

Fourth, maintaining a strong assortment of luxury products will also enable us to drive sustainable growth. We expect global demand for our accessories products to remain strong and we see additional opportunity to further build our footwear and women's ready-to-wear business.

In addition, we are very excited about our men's business and continue to believe and view this as a billion dollar global opportunity. In our licensed product categories we see exciting developments in wearable technology and believe that we can become a leading brand in connected fashion accessories.

We will also increase our penetration in jewelry, fragrance and eyewear to fully realize those product potentials. And lastly we see significant opportunity in our international markets as we grow brand awareness, launch our digital flagships and execute our strategic initiatives.

We continue to see Europe as a $1.5 billion market, Japan as a $300 million market and Korea as a $100 million opportunity long term. In addition, we see strengthening our presence across Asia to our regional licenses where we are seeing strong demand for Michael Kors products to continue to rise.

As we capitalize on our top line growth opportunities, begin to leverage strategic investments and continue to use our strong balance sheet to buy back shares, we remain confident that we will deliver double digit top line and bottom line growth in fiscal 2017.

I'd now like to turn the call over to Joe Parsons to discuss the fourth quarter performance. .

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 in the Northeast and Southeast regions as well as fewer Middle Eastern and western travelers in Europe. Second, we saw a decline in sales in the watch category, particularly in North America following many years of sequential growth due to what we believe is a category shift to our jewelry collection.

That said, the AUR for jewelry is substantially lower than watches. Third, shipping delays for footwear and ready-to-wear and small leather associated with the West Coast port issues negatively impacted our comp performance by approximately 90 basis points. Our U.S.

digital ecommerce digital flagship performed exceptionally well with 44% sales growth during the quarter. Our sales in this channel were driven by strong growth in both traffic and conversion and performance was led by our handbags and small leather goods as well as our ready-to-wear and footwear categories.

As you know the ecommerce warehouse experienced severe weather related damage, which prevented us from shipping goods for approximately five weeks. While we took steps to mitigate the impact by shipping goods from stores and other facilities we believe this incident impacted our digital sales by approximately $7 million.

Excluding this impact, ecommerce sales would have added 480 basis points to our North American comp and 380 basis points to our global comp. I would also note that we suspended our digital marketing efforts during this period.

While we began marketing once we resumed shipping we expect a residual impact going forward in the first quarter as it will take time to re-engage our customers and for trends to return to levels seen prior to this event.

Lastly, excluding the expanded or relocated stores from our comp base negatively impacted our global comp sales results by approximately 40 basis points. We opened 17 net new stores in the quarter; six in North America, eight in Europe and three in Japan. In addition we expanded or relocated two stores.

We ended the year with 526 company owned retail stores. In addition, our licensing partners operated 202 Michael Kors stores around the world including 134 stores in the Far East bringing our overall presence to 728 locations worldwide.

Wholesale net sales grew 20.4% to $570.4 million for the fourth quarter, reflecting a continued demand for our brand globally. On a constant currency basis wholesale revenues increased 25.8%.

The momentum was led by accessory categories as well as our continued conversion of wholesale doors to shop-in-shops and the expansion of our European operations. On a global basis our accessories and footwear businesses comped at a double digit rate during the quarter and we saw continued gains in women's ready-to-wear.

We converted an additional 103 wholesale stores into shop-in-shops globally ending the year with 2,132 accessories, footwear, women's wear and men's wear shop-in-shops worldwide. As John noted earlier we recently established distribution operations in Hong Kong for certain Asian customers.

As a result of this change approximately $100 million of sales previously recorded in North America wholesale will now be reflected in Asia's wholesale sales. In our licensing segment, revenue grew 16.5% to $41.3 million for the quarter. The growth was led by our jewelry category as well as eyewear.

Our North American watch business was softer during the quarter. We opened 31 new watch and jewelry shop-in-shops during the quarter and ended the year with 261 shop-in-shops globally. Gross profit grew 14.8% to $630.8 million. Gross margin was 58.4% versus 59.9% for the same period last year.

The 150 basis point decline is attributable to additional markdowns in allowances as well as a 50 basis point foreign currency impact. Total operating expenses grew 23.4% to $374.7 million. As a percent of total revenue total operating expenses increased to 34.7% from 33.1%.

Selling, general and administrative expenses increased 20.5% to $336.8 million.

The increase in selling, general and administrative expenses was largely due to the higher retail occupancy and salary costs related to new store openings, costs related to corporate management additions as we continue to build the Michael Kors team to support global growth, higher costs related to our digital strategies, including our new customer call center, an increase in litigation cost and an increase in advertising and marketing expense.

As a percent of total revenue selling, general and administrative expenses were 31.2% compared to 30.5% for the fourth quarter of last year.

Depreciation and amortization expense increased 58% to $37.9 million for the fourth quarter, primarily due to the build out of new retail locations, the expansion of existing locations and our corporate New York offices, including accelerated depreciation relating to these expansions, new shop-in-shops, an increase in lease rights purchased for our new European stores and investments in our distribution and IT infrastructure.

As a result of these factors income from operations was $256.2 million or 23.7% of total revenue, as compared to $245.9 million or 26.8% of total revenue in the same period last year. Operating margins in the retail segment contracted 660 basis points.

380 basis points of the decline was due to an increase in general corporate operating costs, including costs related to our digital flagship, higher litigation-related costs and higher retail occupancy and salary costs.

120 basis points is attributable to higher depreciation and amortization expenses related to new stores, expanded stores and lease rights. The remainder is due to 165 basis points decline in gross margins, primarily due to higher level of markdowns and the impact of currency fluctuations on the cost of goods sold.

Wholesale operating margin decreased 30 basis points due to the 105 basis point decrease in gross profit margin, primarily due to higher discounts and allowances partially offset by lower selling and distribution expenses.

Finally, the licensing segment operating margin decreased 380 basis points due to an increase in operating expense, primarily higher advertising cost. Income taxes were $76.1 million in the quarter as compared to $85.0 million last year. Our effective tax rate was 29.4% as compared to 34.6% in the same period last year.

The decrease in our effective tax rate was primarily due to the increase of taxable income in certain non-U.S. subsidiaries, which are subject to lower statutory tax rates. Net income increased 13.4% to $182.6 million for the fourth quarter and diluted earnings per share were $0.90 based upon 203 million weighted average diluted shares outstanding.

The unfavorable currency impact to EPS was $0.06 per share. Net income for the fourth quarter of last year was $161.0 million or $0.78 per diluted share based upon 207.0 million weighted average diluted shares outstanding.

Turning to the balance sheet, at the end of the quarter cash and cash equivalents were $978.9 million, as compared to $971.2 million at the end of last year. There were no outstanding borrowings under our credit facility in either year.

We continued to use our strong balance sheet and cash flow to repurchase additional shares under our $1 billion share repurchase program. During the quarter we repurchased 1.4 million shares totaling $92 million, bringing our total repurchase to 6.8 million shares, totaling $491.9 million for fiscal 2015.

We remain confident in our long-term growth outlook and free cash flow generation, and are pleased to announce that the Board of Directors has authorized the repurchase of an additional $500 million of the company's ordinary shares and has extended the program through May 2017.

This increases the initial repurchase authorization to $1.5 billion, of which $1 billion is available to us for future repurchase over the next two years. As we demonstrated this past year, we will continue to use the strength of our balance sheet and future cash flow to repurchase additional shares and drive value for shareholders.

For the quarter, inventory increased 21.8% versus the last year and was in line with sales growth.

As we stated previously our inventory growth fluctuates from quarter-to-quarter, but we generally expect our inventory increase to outpace sales growth as we further develop our digital flagships, open and expand our retail stores, expand replenishment stock and convert shop-in-shops. Capital expenditures for the quarter totaled $73.5 million.

These expenditures were related to global retail store expansions and renovations, corporate office renovation, construction and renovation of shop-in-shops, investment in our distribution facility and enhancement of our information system infrastructure. Turning to our outlook, we expect foreign currency to remain a headwind for fiscal 2016.

In addition to the translation impact we are exposed to transaction risk as our international businesses purchase goods and services in U.S. dollars. While we partially hedge purchases through forward contracts, many of our favorable contracts will be expiring in the early part of the fiscal year, resulting in higher cost of goods.

Our largest currency exposures are the euro, Canadian dollar and Japanese yen. Fiscal 2016 will be an investment year centered on infrastructure enhancement and new growth initiatives with the company as we remain focused on our long term sustainable growth.

We expect to see higher SG&A and depreciation expense driven by further development of our global digital flagships and Omni channel capabilities, infrastructure investment in the transition of our Korean business, infrastructure investment in the development of our men's business, occupancy and overhead costs related to our global retail store expansions, the build-out of our European Distribution Center as well as improvements to our existing distribution network and continued corporate investment with the addition of key executives, expansion of our IT capabilities, as well as the additional corporate occupancy cost.

While these investments will put near-term pressure on operating margins, particularly in the first quarter we believe that they are critical in creating the foundation for continued double-digit top and bottom line growth. For the first quarter of fiscal 2016 we expect total revenue to be between $930 million and $950 million.

On a constant currency basis, total revenue is expected to increase in the high single digit range, assuming a $60 million impact from the change in foreign currency rate. We expect a low double-digit comp store decrease on a reported basis, and a mid-single digit decrease in constant currency.

Operating expense as a percentage of total revenue is expected to increase 550 basis points to 600 basis points in the first quarter primarily due to the global investments I described earlier. We expect diluted earnings per share to be in the range of $0.74 to $0.78 assuming a tax rate of approximately 29% and 202.5 million shares outstanding.

We expect foreign currency to impact net income by approximately $14 million, and EPS by approximately $0.07 for the first quarter. We anticipate that revenue growth will accelerate in the second half of the year, due to a number of factors on a reported basis.

First we believe that the FX headwinds will diminish during the year, the average euro to US dollar rate last year for the first quarter was 1.37, weakening to 1.13 average in the fourth quarter. Second we will have a full year effect of operating the U.S.

digital flagships and nearly a full year of the Canadian digital flagship as compared to fiscal 2015 when the U.S. digital flagship was operational for half a year and was affected by the warehouse disruption. Third, we plan to open new stores and shop-in-shops that will provide incremental sales during the year.

Fourth, we are planning to add compelling new products to our assortment and create excitement in our marketing plans, which we believe will further drive sales. Finally we anticipate that the 53rd week to add approximately $40 million of additional sales or approximately $0.03 per share.

As a result for fiscal 2016 we expect total revenue to be between $4.7 billion and $4.8 billion. On a constant currency basis total revenue is expected to increase in the low to mid-teens range assuming a $200 million impact from a change in foreign currency rates.

We expect flat comp store sales on a reported basis and a low single-digit increase on a constant currency basis.

We believe that comp store sales will continue to be challenged by current trends in mall traffic and the recent slowdown in tourism in addition to the deceleration in watch sales, while we expect digital sales to provide a benefit in the second half of the year.

Operating expense as a percent of total revenue is expected to increase 110 basis points to 140 basis points for the year due to the global investments I described earlier.

We expect the increase in operating expense as a percent of total revenue to moderate in the second half of the year as the rate of spend slows and we begin to anniversary the investments that we made in 2015.

We expect diluted earnings per share to be in the range of $4.40 to $4.50, assuming a tax rate of approximately 29% and 200 million shares outstanding. We expect foreign currency to impact net income by approximately $39 million and EPS by approximately $0.20 for the year.

I would note that going forward we will be reporting comp store sales on a global basis which better represents management’s view of our company as an expanding global business. Our focus is on driving top and bottom line growth for the long-term.

To that end in addition to driving comp store sales we have multiple levers in both the domestic and international markets such as our global digital flagship, expansion of our under penetrated categories such as footwear and men’s, square footage expansion and capitalizing in the opportunities in our wholesale and licensing businesses.

Overall we take a global view of our business as we look at our long-term growth potential focusing on the areas where we see the greatest opportunities. Capital expenditures are expected to total approximately $400 million in fiscal 2016.

The expenditures will focus on retail expansion with continued investment in our global digital strategies, the opening of 85 stores globally as well as the transition and development of our Korean business. We expect 30 new stores in North America, 45 in Europe and 10 stores in Japan.

The development of our men’s business, the expansion of wholesale business with the conversion of 600 shop-in-shops globally, continued investment in our distribution infrastructure and information system and the renovation of our New York corporate offices.

In summary we were very pleased with the advances we made on our strategic initiatives in fiscal 2015 despite the challenging macro environment and foreign currency headwinds and we believe that we have multiple growth opportunities ahead of us.

We will continue to strategically invest in our business this year to support our initiatives and maintain our leadership position within the global luxury market ultimately driving double-digit revenue and EPS growth in fiscal 2017. I will now turn the call back to John Idol..

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 our footwear business is growing at very, very substantial rates as well.

Now that’s somewhat offset by our watch business which you would have to refer to as a core business and that business is definitely seeing a decline in the North American market. We're not seeing that in the European and Asian market, actually the business is accelerating at a very, very nice pace.

And we believe part of that shift to the jewelry category, where we're again our jewelry business is very, very strong. The negative to that is that the transaction in jewelry is significantly lower. It's more than half, less than the watch businesses.

So we we're very attuned to the fact that we're going to have to do something to reengage the customer in that classification. We are the leader of the fashion watch business in the United States and fast approaching that in other parts of the world.

So we have an obligation to come up with really exciting compelling product and we think we've got pretty good handle on what we're going to do for that in Q4 of our fiscal year.

And we also, as we look out to 2016 we see the wearable technology space as a place that we're going to be able to play and compete and offer great excitement for our customer. .

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 again we have giving guidance for Q1, given the fact that we are concerned about the trend that we saw coming out of Q4.

And hopefully that business trend will improve and hopefully we've got some initiatives that are based around some new and exciting product trends that are starting happen for us, that will help drive that. In terms of the product and promotion of the stores, again we're not doing anything different.

We're not doing friends and family, and we're not doing -- taking additional 20 off with a coupon, with whatever, we're not doing flash sales. We just don't think that's the right thing for us to do.

And quite frankly our competitors are doing it and they're doing it on a regular basis and while they all claim that they're doing it less they are still doing it.

So and I think that we probably had a competitive disadvantage, but we'd rather build a quality business with the consumer in terms of what the Michael Kors brands stands for than to go down the path that I think we will be sorry for long term, because as you hear our competitors talking about they're doing everything they can to get out of those things and that's not a conversation that we want to be having with you.

.

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 drive additional business in our own freestanding stores, we have to offer more fashion, we have to be a little newer, a little fresher, we have to take a few more chances and we've got a couple things that are really starting to cut for us in terms of new handbag groups.

We're starting to see soft bags emerge. We've got a new bag out called Riley, which you've probably been seeing international ads and that bag is starting to really get some traction. So as we believe the fashion leader in accessible luxury we've got to get out there and give new product to our customers.

You’re going to see that in watches as I stated earlier, we're going to -- we are going to change 30% of our entire watch assortment for the spring season and that's going to be focused on one of our real core strengths which is our mix materials program.

As you know we're one of the only companies in the world that really do that well whether it's totes or acetate clear watches which are really hot right now. And we didn't probably focus on that as heavily as we had in the past with metals.

So we're going to really shift our mix there and so I think that's going to help drive our comp store growth but that will come with a little bit of margin pressure which I think we've given you guidance on, in particular our own free standing stores. .

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..