Michael kors holdings' kors ceo john idol on q1 2015 results Welcome to the michael kors holdings limited first quarter 2015 conference call.At this time, all participants are in a listen only mode.Following the presentation, we will conduct a question and answer session.Instructions will be provided at that time for you to queue up for questions.As a reminder, today conference is being recorded. And now, i would like to turn the conference over to christina lack, vice president and treasurer.You may begin. Good morning and thank you for joining us for our first quarter earnings call.Presenting on today 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 press release and in the company sec filings, which are available on the company web site.Investors should not assume that statements made during the call will remain operative at a later time and the company undertakes no obligation to update any information discussed on the call.I will now turn the call over to michael kors chairman and chief executive officer, mr.John idol. Thank you, christina.Good morning, and welcome to michael kors first quarter fiscal year 2015 earnings call.With me today is joe parsons, chief financial and chief operating officer.I will begin with a brief overview of our first quarter performance and discuss our long term growth opportunities as we continue to expand our presence as a leading global luxury fashion brand. I will then turn it over to joe for detailed review of our first quarter financial results and our outlook for second quarter and full year.We are very pleased with our first quarter results, which we believe demonstrate the great momentum in our brand and a significant grow opportunities that lay ahead.Michael and our design team continue to deliver an amazing, diversified collection of fashion products that is resonating with consumers worldwide.This has positioned michael kors as a true luxury lifestyle brand with a compelling offering of handbags, small leather goods, footwear, ready to wear, watches, jewelry, eyewear and fragrance. The strong performance across our product lines and geographies contributed to our financial results in the first quarter.Revenue grew 43% to $919 million and gross margin expanded 20 basis points.Income from operations grew 40%, leading to an operating margin of more than 30%.We achieved these strong results as we continued to successfully execute on our six growth strategies. First, revenue in north america grew 30% driven by comparable store sales increase of 18.7%.We've been very successful in our north american business thus far and we are still building momentum.As we look ahead, we believe that we continue to have significant growth opportunity in this region, driven by comparable store sales growth, new store openings and expansions, shop in shop conversions and expansions and the transition of our e commerce business in house. In addition, we believe that the expansion of certain existing categories will fuel incremental growth of footwear, women ready to wear and men wear.Second, we are on track with our retail expansion in north america.During the first quarter, we opened 13 net new stores.Long term, we believe that north american market can support 400 stores excluding potential men locations. Third, we successfully converted a 108 department store doors in the branded shop in shops globally and ended the first quarter with 1670 shop in shops worldwide.For fiscal year 2015, we now plan to convert 750 department store doors into shop in shops across all categories globally. Fourth, in europe revenue grew 128% driven by a comparable store sales increase of 54.2% and the opening of 21 locations.We see great runway for growth in europe.Over the long term, we continue to believe we can expand our store base to 200 locations and now believe this market can generate of approximately $1.5 billion for Michael Kors.This growth will be driven in part by store openings in new and existing markets, the expansion of select retail locations as well as the increased penetration of the wholesale business in this region. Fifth, our business in japan continues to develop.Revenue in the quarter grew 89%, driven by a comparable store sales increase of 48.8% and the opening of four new locations during the quarter.Looking forward, we continue to believe that this market can support 100 stores. Sixth, we opened nine locations in the far east region through our regional licenses, bringing our total to 112 stores. Stores in this region saw strong double digit comparable store increases in the first quarter.Overall there a tremendous opportunity for us in asia.And we are in early stages of growth and believe we can ultimately have 200 stores in this region in the long term.In addition to these core strategies we are just now starting to put together a greater emphasis on the men business. And you will see this clearly displayed in our new soon to open soho flagship store, which will feature an entire floor devoted to men's.From there we will begin to test free standing men store next year and believe that there may be the potential for us as many as 500 men stores worldwide over the long term. To leave the development of this important strategy we recently brought mark brashear on board as president of the men division.Mark background with hugo boss in nordstrom makes him a perfect fit to lead our men extension.With the right team in place i believe that we have the potential to be leading global men wear brand. Turning to segment performance for the quarter, retail net sales grew 48% with global comparable store sales increasing 24.2% this marks our 33rd consecutive quarter of comp store sales growth which is best in class performance and speaks to the continuing demand for our luxury products. Growth in the retail segment was driven by 115 new stores opening since the first quarter of last year with 38 net store openings net new store openings in the first quarter.We ended the quarter with 443 company owned retail stores globally.In addition we had 162 locations operated through our licensing partners bringing our total to 605 stores in concessions worldwide. There is a great runway for growth in our retail business globally and we continue to strategically open new stores to ensure we are in the best cities and the right locations to serve our customer base.Ultimately we believe that we can have 700 company owned retail stores worldwide which does not include potential men locations.We are also moving forward with our store expansion plans we expanded or relocated a total of six locations globally, roughly doubling the average size of this stores to approximately 5, 000 square feet.The largest stores enable us to have a more prominent presentation of footwear, ready to wear, watches and jewelry which we believe will drive increase frequencies of visits and incremental purchases. We are pleased with the performance of these locations and we believe we can maintain high sales per square foot productivity in our expanded stores.In our wholesale segment net sales grew 40% driven by strong performance in both accessories and footwear as well as the expansion of our european operations and the continued conversion of wholesale doors in the branded shop in shops.For fiscal 2015 we now expect to open approximately 750 shop in shops worldwide in ready to wear accessories and footwear.Overall we are very pleased with both the first quarter performance and the future opportunities in our wholesale segment. Turning to our licensing segment, revenues increased 30% driven primarily by the strength in watches and jewelry as well as growth in our fragrance business.We are expanding our watch and jewelry offering both in our retail stores and with our wholesale partners and rolled out an additional 30 watch and jewelry michael kors outlet australia shop in shops in department stores worldwide during the first quarter. We now have 155 watch and jewelry shops globally and continue to believe that there is an opportunity for approximately 500 shop in shops globally over the long term. We also continue to expand our fragrance offering.Our new men fragrance michael kors for Cheap Michael Kors men will launch in september and will be available exclusively through macy's as well as our own boutiques and website. The set was created with the men on the go in mind and balances urban sophistication and rugged style.We are also launching an ad campaign to support this and including a thrilling tv spot, reminiscent of an action movie and print ads that exudes(Jet set glamor)[ph]. Now for our operations by region, in north american revenue grew 30% to $719 million during the quarter.Comparable store sales increased 18.7% and we opened 13 net new locations ending the quarter with 301 North American retail stores.Looking ahead we remain on track to open 45 north american retail stores this fiscal year. We are also on track to bring our north american e commerce site in house this fall which we see as a tremendous opportunity to grow our brand.Our new site will serve as a powerful marketing tool and will also allow us to more fully engage our customers every step on the way on their path to purchasing a michael kors luxury product. In our north american wholesale business overall growth was driven by comparable store sale increases primarily in accessories and footwear which were similar to or greater than the increases in our retail stores. We also continued to cheap mk successfully convert north american department store doors into shop in shops.We will continue these conversions going forward to create a world class presentation of our brand within department stores.Our brand is expanding internationally as well.In europe we saw revenue growth of 128% during the quarter to $185 million, with a comparable store sales increase of 54.2%. We opened 21 stores in the region and ended the quarter with 101 retail locations across europe.We continued to see a positive response from consumers as we very pleased with the performance in this region.In the wholesale business strong sell through continued in both department and specialty stores and comparable store sales primarily in accessories and footwear were similar to our higher than our retail store comp growth during the quarter.We clearly continue to gain strength in europe as our exceptional product and unique jet set experience drive acceptance of our brand.That said we only just begun to maximize our potential in this region.
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