Good day, everyone, and welcome to the Michael Kors Holdings Limited Third Quarter 2016 Conference Call. Today's conference is being recorded. For opening remarks and introductions, I'll turn the conference over to Krystyna Lack, Vice President, Treasurer. Krystyna, Please go ahead. Krystyna Lack - Vice President & Treasurer: Thank you. Good morning and thank you for joining us for our third 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. John D. Idol - Chairman, Chief Executive Officer & Director: Thank you, Krystyna. Good morning and welcome to Michael Kors' third quarter fiscal 2016 earnings call. I'm pleased to report that our revenues, comparable store sales and earnings per share results for the third quarter exceeded our expectation, which speaks to the enduring strength of the Michael Kors luxury brand, in particular during the all-important holiday season. We know that consumers have a lot of choices when it comes to what brands they purchase, and the fact that they chose Michael Kors is a great testament to our world-class design team, strong product offering and…

Thank you. We'll go first today to Kimberly Greenberger with Morgan Stanley. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thank you so much. Good morning. And a very nice print today, congratulations on that. John, I'm wondering if you can talk about e-commerce. I guess the surprise here is that as you've anniversaried ownership of that business, it sounds like it's still having a very outsized positive impact on your sales growth rate. I just expected we would actually see a little bit of more deceleration at this point. So maybe you can just talk about some of the drivers there. And then Europe also I think a little bit of a positive surprise, just given what we've heard from others and the fact that it's still running positive on a constant currency basis. Are you seeing disparate results across various countries in Europe? And maybe you can talk in particular about the wholesale piece, which was a real source, I think, of upside surprise. Thank you. John D. Idol - Chairman, Chief Executive Officer & Director: Sure. Thank you, and good morning, Kimberly. First, starting with e-commerce, we were very pleased in the quarter with the results that we saw for e-commerce and those were driven by, first, traffic and, second, conversion. Again what we see happening is customers are starting their shopping experience, as you all know, digitally, or mobily, first, and so the mobile traffic that we're getting to the site, it just keeps accelerating every single month. And we think we've got some real opportunities to even take that to another level. So we're extremely pleased with the traffic that we saw there. And we're also just pleased with the fact that certain categories – and I might add, footwear in particular, is…

We'll go next to Omar Saad with Evercore ISI.

Thanks. Good morning. Really nice quarter, guys. Wanted to ask my first question on – dive a little bit more on conversion, John. I think it's something new that you're calling out. I know you touched on it in response to Kimberly's question and the prepared remarks, but is it a new phenomenon, this is kind of accelerating conversion? And do you feel like it's firmly tied to the development of the digital platform, in-store training? Are there other factors driving this? Because you've got exposure to these channels that a lot of other companies, retailers are struggling, tourist markets, mall channel outlets, et cetera. Maybe we can dive in a little bit deeper and understand what's driving that conversion and how much more opportunity there is to use conversion to drive the comps. John D. Idol - Chairman, Chief Executive Officer & Director: Well, Omar, and I'm going to focus this on North America for the moment. We believe that mall traffic in North America is going to continue to decline. And the reason for that is, is again we think that people in North America are a bit more savvy when it comes to digital shopping, and it's just been more cultural here for a longer period of time. And you have big companies who are quite strong at it. And we've seen that both in our own stores and you can see that through our wholesale partners as well, where digital is just becoming a bigger piece of the business. We haven't seen that yet in Asia, where mall traffic continues to be still pretty good. And Europe, I'd say mall traffic is kind of average. We haven't seen the deceleration that we saw in the United States. And in the United States, again, we attributed primarily…

That's super helpful, John. Can I ask another question, maybe a little bit more detail on the decision to continue to destock the wholesale channel? The channel's down, that's what the market's worried about, what you're seeing there? It's obviously a channel you're also committed to. How should we think about that and the thought process behind it and the evolution of it? John D. Idol - Chairman, Chief Executive Officer & Director: Sure. First off, we love our partners, whether it's Macy's or Dillard's or Lord & Taylor or Bloomingdale's or Saks or Neiman's or Harrods or Selfridges or Takashimaya or whatever, the wholesale channel is phenomenal. Department stores are phenomenal. They carry amazing brands inside these channels and I think that the theory that this channel is a channel that's going away is not a very well thought out theory. That channel is, like every channel in retail today, is being challenged because the consumer is shopping differently. And as they shop differently, quite frankly, they're smarter. They have the ability to see things online, a lot more assortment, a lot more selection. They can compare side-by-side. They can compare pricing online. So what we just believe is that that channel is going to figure out how to manage its growth over the next 12 to 24 months, as many of us are. And we think it's better to have less inventory in there, to have less promotions, which will keep the brand integrity at a higher level. And our partners are very supportive of this. We also want to turn our inventories faster for them and for us. And we think the better we look to our end consumer and not confusing them with different promotional activities at different levels, the better it is for the brand long term. So as I said in our prepared remarks, we believe that channel is going to be down on a go-forward basis for us. And we'll make that up more so in our own retail stores, our e-commerce expansions in certain marketplaces. And then ultimately long-term, as we've said in the past, we're looking at certain other licenses that we may or may not bring in house, our Men's business growth. So we have plenty of opportunity for us to grow. It doesn't all have to be pushed. And that's what we're afraid of. We don't want to push too hard, because we think that could damage the brand long-term. Thank you.

Thank you, great job. Thanks.

We'll take our next question from Matthew Boss with JPMorgan.

Hey, good morning. Congrats on a nice quarter. So as we think about the handbag category, do you see this AUR pressure as entirely fashion-related? Is any of this promotionally-driven? And when did you really see the AUR pressure start? I guess my question is do you think we've seen the peak? And what's the right stable state balance between the unit growth that you're seeing and the right level of AUR? John D. Idol - Chairman, Chief Executive Officer & Director: Yeah, first off, good morning, Matt. It's a great question. I don't have the exact percentage in here for you, but it's definitively much more driven by bag size than it is by promotional activity. And I think I said in the last quarterly call that we are hoping, believe, think, wish, whatever you want to say, that we start to lap this in June, July, August of next year. We saw the small bag trend happening. It really started happening two years ago. We think we're a bit more up against that or there will be less of a headwind for us. There's no guarantees on that. Again, it's just going to depend on the trends that are happening. You even see in money pieces now are getting smaller because, again, as more things end up on your phone, you need less things in your wallet. So that's just a fact. So actually our much smaller money pieces are accelerating even faster than our larger money pieces. So we're seeing it across the board. In terms of the promotional activity, look, there's no question that our third quarter or the retailer fourth quarter had more promotional activity inside of it. I wouldn't say there was more events. I would just say there was a lot more markdowns related to clearing inventories, as everyone wanted to be clean to start the year. We had terribly unseasonably warm weather, which really affected everyone in the business, and not just things like boots and coats, which everybody talks about. But when people aren't going to the stores because it's 60 degrees outside on the day before Christmas, it's just got a psychological halo that we really think affected the business in North America. So I think people got healthy with inventories. And I think that was a very good thing for us to start out the spring season. So, thanks, Matt.

Great. And then just a follow-up, what was the run rate of watches in the quarter? And when do you anticipate a level of stabilization here and potential return to growth in that segment? John D. Idol - Chairman, Chief Executive Officer & Director: Yeah, first off, we don't disclose the various categories in detail like that. The Watch business remained difficult during the quarter. I would say that, as in the prepared remarks, we really saw something very interesting. We saw when we put newness on the table, the customer responded very, very positively. So, you're going to see something from us in spring. We have one of the largest new assortments of watches coming in our history. And that's going to be led by slim watches. We think there's a very, very big fashion trend toward slim, so Michael Kors will be pushing that in a very significant way. And we think that's one of the key issues is we probably didn't have enough newness out there. I told you that in previous calls. We think we've addressed that for the spring season. And secondly, clearly, consumers are just wearing less watches because of what a smartphone will do for you and the fact that people are glued to their phone and they use that for more of a timepiece. I think and I believe Kosta Kartsotis at Fossil thinks as well, that the smartwatch technology is actually going to revolutionize the fashion watch business. I think over the next five to 10 years, most fashion watches will be sold with some type of smartwatch technology in it. So we're super excited. We'll be announcing our whole program at Basel in March with a launch in-store in August. And watch out. We're a very competitive group, Fossil and Michael Kors. And we see big opportunity in a category that is today in the billions of dollars, that being not only smartwatches but other connected accessories as well. And we intend on competing and competing at a very high-level. Thank you, Matt.

That's great. Good luck.

We'll take our next question from Oliver Chen with Cowen & Company. Oliver Chen - Cowen & Co. LLC: Thanks. Congrats on the solid product and execution. John, we had a question on the longer-term margin profile. As you look ahead, what are your thoughts as it interplays with product mix or AUR and your opportunities? It's a question we get from investors. Also you had such strong performance in earnings growth ahead of your expectations this quarter, just why wasn't there necessarily an opportunity to raise your full year? I'm just curious about that. Thank you. John D. Idol - Chairman, Chief Executive Officer & Director: Oliver, I'll let Joe answer those questions. Joseph B. Parsons - Executive Vice President, Chief Financial Officer, Chief Operating Officer & Treasurer: Thanks, Oliver. So in terms of margin, obviously, we've talked some time about normalization of gross margin. We are not giving guidance further than the current year until our next quarter call. That being said, we are thinking that gross margins have approximately normalized, and that we can continue forward with the margins in the zone where we're at. In terms of EPS, we think that we can continue to grow EPS into the future. And in terms of operating margin, we discussed recently what we thought operating margins could be on a sustainable basis and we continue with that. In terms of the full year, we're actually very pleased that we're sustaining the projections for the full year for both revenue and EPS. We're obviously in a difficult market. We talked about that on the conference call. We are reflecting what we are seeing, plus some timing differences in the fourth quarter. And that's why, at the end of the day, we did not increase the full year, but again,…

We'll go next to Joan Payson with Barclays.

Hi. Good morning, everyone. Could you talk a little bit, John, about how you've been investing in the business, maybe what inning you're in with some of the recent investments, whether it's supply chain, marketing, e-commerce, flagships and which of those are driving the most OpEx growth? And then, Joe, could you just quickly touch on – I think you mentioned some of the favorable hedges that are rolling off soon, maybe how those will potentially impact fiscal 2017? John D. Idol - Chairman, Chief Executive Officer & Director: Sure. Good morning, Joan, and a very good question. As you can see when you really look at our income statement, the revenues continue to grow inside the company. We're making sequential improvement in comp store sales. So hopefully a bit of the naysayers who say that our brand is ubiquitous, over distributed, et cetera, some of that hopefully you'll get comfortable with the fact the Michael Kors brand is still very strong, growing and developing, both in North America and globally. That being said, our SG&A is actually rising slightly quicker than our sales, which is something that we're working on, and that's being driven by a number of different projects, as you know, that we were investing in. And also we had anticipated a much higher top-line in particular because of the FX change. We're about halfway through the development of our Venlo project, which is a very, very expensive endeavor for us, a 1 million square foot facility in the Netherlands to support our $1 billion-plus business in Europe and the fact that we're going to be launching ultimately in 22 countries our online. And we want to really have the best-in-class facility to be able to handle that and not have to keep upsizing the way that…

Great. Thank you both.

We'll go next to Erinn Murphy with Piper Jaffray. Erinn E. Murphy - Piper Jaffray & Co (Broker): Great. Thanks for taking my question. Good morning. I was hoping, John, you could talk a little bit more about the Men's opportunity in the wholesale channel. I think you talked about 75 shop-in-shops being rolled out. Where do you see the longer-term opportunity at wholesale, in particular, for Men's? And then during the quarter, I do believe Mark Brashear, he left to go to John Varvatos. Can you just talk about where the leadership team is now at Men's and did that departure change any of your near-term rollout plans? Thanks. John D. Idol - Chairman, Chief Executive Officer & Director: Sure. Mark Brashear, by the way, was terrific. We really enjoyed his leadership here, so I guess we did a switch with John Varvatos. Mark went to John Varvatos and Don Witkowski came from John Varvatos to come over here to run Men's. You may not know this, but actually Don ran Men's here many, many years ago when we first started it. Don was with me at Donna Karan as well. So Don is somebody who walks in the door, hits the ground running, doesn't miss a beat, has great leadership and merchant qualities. And so, as far as we're concerned, really nothing has changed at all. And as you know, we are really excited about Marcel Ostwald joining the company. And I can't tell you how thrilled you're going to be to see the Men's product when you walk in the door. And I'm very excited for when you all come visit because for the first time – normally, it's always that the female analysts who are oohing and aahing. This time, we're going to have hopefully a…

We'll go next to Simeon Siegel with Nomura Securities.

Thanks, guys. Good morning and congrats on the quarter. John, any thoughts on the jewelry opportunity and how large you can see that category reaching? And then, Joe, just given your commentary on advertising earlier in the call, is there a targeted marketing as a percent of sales to keep in mind? Thanks. John D. Idol - Chairman, Chief Executive Officer & Director: Good morning, Simeon. The jewelry category again has been continuing to expand and grow, so while unfortunately we've seen the watch category decline, we're seeing the jewelry category increase. One of the things that we're going to do in our own stores for the spring of 2017, and you've heard me talk about this kind of last year more, that while we loved introducing the jewelry category, unfortunately that drove the AUR of the total jewelry and watch category down for us because we were selling a $150 bracelet or an $85 pair of earrings versus a $225 watch. So that really hurt us. And again, I think sometimes when people are looking at the business, they think it's all handbags that's driving the comp up and down, but in a lot of cases, that's not really actually the issue. So we kind of hurt ourselves a little bit with that. So what we're going to do is we will exit most of the fashion jewelry line in the spring of 2017 from our own stores. And we will introduce a more fine jewelry line inside of our own stores, really bringing it closer to the watch AUR, not completely but we'll have gold, we'll have silver, we'll have plated materials as well, 18-karat-plated et cetera. And we're going to really elevate that whole category inside of our store and there will be select retail partners that…

Great. Thanks a lot, guys. Best of luck. Thank you.

We'll go next to Lindsay Drucker Mann with Goldman Sachs. Lindsay Drucker Mann - Goldman Sachs & Co.: Thanks. Good morning, everyone. I wanted to ask a question about your plans for stores in calendar 2016. Can you give us a sense on what you're planning to do as far as in North America your store expansions, your full-price store openings, your outlet store openings? Any detail on how you're planning to grow that distribution be would be great. Thanks. John D. Idol - Chairman, Chief Executive Officer & Director: Sure. Lindsay, we don't give guidance on that yet. We'll do that in June. But we have between our licensed partners and ourselves, we have about 860 stores worldwide. And out of that 860 stores, in the Americas we have about 400 stores. That includes Canada, Latin America, the United States, et cetera. So we're kind of getting built and finished with our store rollout. In North America, in particular, it's going to be very few stores. We told you many years ago, and I know many people have not loved the fact that I've held very steadfast to the number. We told you we were going to build 400 stores in North America. And many people have asked me over and over again why you doing that. And we said we're going to keep building 400 stores in North America and we will finish that buildout. The Americas got a little bit larger as a number because it now includes Latin America, so maybe it will be 425 or 430 or something like that. Whatever it is, we're pretty much done with our buildout in this region of the world. Europe will continue to accelerate. In that marketplace, we had 171 of our own stores and then we have…

We'll take our next question from Brian Tunick with the Royal Bank of Canada.

Thanks, all, and my congrats again to you guys in a pretty tough environment. I guess last quarter, you guys took on an additional line of credit. And I guess clients are asking about the potential of buying in maybe the China license, given the ongoing positive comments you've been making about China, despite some of the issues there, so maybe curious about your thoughts there, John. And then maybe secondarily on your beat to your guidance, can you talk about in North America, was there upside coming from the malls or was it coming from your outlet stores? Just trying to get an understanding of where the upside came from bricks-and-mortar. Thanks so much. John D. Idol - Chairman, Chief Executive Officer & Director: Sure. Sure. Brian, first off, and I'll let Joe speak at the end here, also, about our balance sheet, but as we've said in the past, we're a company that has an amazing operating model. We have, I think, the second or third highest operating margins in the world in luxury compared to the European luxury operators, et cetera. We're going to end this year somewhere around 25% operating margins, which really is extraordinary. And we generate a lot of cash. And we've been very aggressive about buying back stock, because we feel that the market, if I may say that, has misunderstood our story and our potential and our long-term vision and our success, quite frankly. So we are going to continue to be very aggressive, given what we think is a dislocation of where our multiple is versus the rest of the industry. And I might remind everyone that we will end the year with top-line growth and bottom-line growth, which is very unusual for many, many players in the luxury industry. Pardon…

Ladies and gentlemen, thank you for your participation. This does conclude today's conference.