John D. Idol - Chairman, Chief Executive Officer, Member of Audit Committee and Member of Compensation Committee Joseph B. Parsons - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Brian J. Tunick - JP Morgan Chase & Co, Research Division Kimberly C. Greenberger - Morgan Stanley, Research Division Randal J. Konik - Jefferies & Company, Inc., Research Division Paul Lejuez - Nomura Securities Co. Ltd., Research Division Erinn E. Murphy - Piper Jaffray Companies, Research Division Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division Omar Saad - ISI Group Inc., Research Division Dana Lauren Telsey - Telsey Advisory Group LLC Joan Payson - Barclays Capital, Research Division

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Michael Kors Holdings Limited First Quarter Fiscal 2013 Earnings Conference Call. [Operator Instructions] Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded. And now, I would like to turn the conference over to miss Christina Lack [ph]. Please go ahead, ma'am.

Good morning, and thank you for joining us for Michael Kors' Fiscal 2013 First 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 annual report on Form 20-F, which are available on the company's website, www.michaelkors.com. 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: Thank you, Christina [ph]. Good morning, and welcome to our first quarter fiscal 2013 earnings call. With me today is Joe Parsons, Chief Financial and Chief Operating Officer. I will begin the discussion with a brief overview of the quarter and share with you some highlights on our strategic growth plans. Joe will then provide a detailed review of our first quarter financial performance. Additionally, he will provide an outlook for our fiscal 2013 second quarter and the full year. We are pleased with the strong start to our fiscal year, with a 71% increase in total revenue and 185% growth in net income. Our results demonstrate the strong momentum of the Michael Kors brand and the continued execution of our key growth strategies. Michael Kors provides our creative vision and design leadership for the company. He and his design team give us a unique advantage that significantly contributes to our success. Michael's luxury designs are resonating with our customers globally. Our company is positioned as a global luxury lifestyle brand and is supported by a compelling assortment of luxury lifestyle merchandise, a jet-set shopping environment and strong execution capabilities. Our exceptional performance extended across our retail, wholesale and licensing segments throughout North America, Europe and Asia. Our performance reflects continued increase of comparable store sales, execution on our retail expansion strategy and shop-in-shop conversions in department stores and international expansion as brand awareness builds. We have a talented management team, strong infrastructure and a healthy balance sheet that will enable us to execute our strategic growth initiatives. During the first quarter, we continued to implement our 6 key growth strategies. First, in North America, our luxury assortment of lifestyle merchandise, increased brand awareness and exceptional jet-set in-store experience has resulted in our 25th consecutive quarter of comparable store sales growth. Second, we continued our retail store rollout in North America with 13 new stores opening in the quarter. Third, we continued the conversion of wholesale department store doors into branded shop-in-shops in North America. Fourth, we continued to expand our European presence through retail and wholesale door openings. Fifth, we continued to develop our business in Japan, which is in the startup phase. Sixth, we have begun to lay the foundation for growth in other areas of the Far East through regional licenses. I would now like to review a few financial highlights for our first quarter, then discuss our segments, our operations by region and, finally, our expansion in the Far East through our regional licenses. Our total revenue in the quarter grew 71% to $415 million, driven by strong performance in all segments of our luxury business: retail, wholesale and licensing. Michael Kors is unique among American luxury brands with accessories, footwear, watches, jewelry, eyewear and related products growing to 79% of our product mix in the first quarter. We delivered gross margin expansion of 420 basis points to 60.5% for the quarter, primarily as a result of exceptional sell-throughs which resulted in lower markdowns. Our income from operations grew nearly 150% to $112 million for the first quarter compared to $45 million last year. For our segments, we grew our retail sales by 76% to $215 million and grew comparable store sales by 37%. We believe that this comp performance reflects our brand strength, compelling merchandise assortment and exciting jet-set in-store experience. Retail sales growth was driven by 76 store openings since the first quarter of last year, including 16 openings during the first quarter. We ended the quarter with 253 company-owned global retail stores, including concessions. Our wholesale segment sales increased 66% to $182 million for the first quarter. Our product assortment continues to be well received by department stores and specialty store customers, and we are experiencing strong sell-throughs in these channels. In our accessories categories, we are seeing similar or greater comp store increases as our retail stores. As of June 30, we are in approximately 2,800 full-price department and specialty retail doors in North America and Europe. Our licensing segment revenues increased 61% to $17 million. Our watch business remains exceptionally strong, while eyewear is also performing well. We remain encouraged by our jewelry launch, and we see this category as a significant opportunity for growth globally. For our operations by region, in North America, revenues increased 67% to $377 million. Our comp store sales increased by 38%, and we opened 13 stores during the quarter. We continue to convert department store locations in North America into branded shop-in-shops, resulting in significant increases in sales volume per door in these locations. Our strong momentum continued in Europe as our brand awareness rises as demonstrated by our revenue increase of 110% to $33 million. Our comp store sales increased 24%, and we opened one store during the quarter. We also continued to open wholesale doors, primarily specialty doors -- specialty shop doors, and sell-throughs maintained a strong pace. In Japan, our revenues increased 190% to $4 million, with comparable store sales of 21%. We opened 2 shops in Japan during the first quarter. We continue to build brand awareness in all our regions through advertising, public relations and social media. Based on a recent study, total assisted awareness in the U.S. increased 7 points from 71% in 2011 to 78% in 2012 -- excuse me, increased 71% to 78% in 2011. Europe's brand awareness increased 5 points to 36%, and Japan's awareness remained unchanged at 34%. We are focused on building these levels to best-in-class metrics which are in excess of 90%. We continue to build the Michael Kors luxury brand in the Far East other than Japan through our regional licenses. Our most established territory is Korea, where there are 36 Michael Kors retail stores, including concessions. Other regional licensees are in Southeast Asia, primarily Singapore, Malaysia and the Philippines, where there are 10 Michael Kors stores, including concessions. In Greater China, which is in startup phase, our licenses -- licensee has opened 7 Michael Kors retail stores, including concessions, and in the early -- and is in the early phase of building brand awareness. While we recognize that building our brand in the Far East is a long-term proposition, we are excited to be planting the seeds for the future development of these territories. In addition to owned retail stores, the company has 68 additional retail stores, including concessions, operated through licensing partners. There are 321 Michael Kors stores, including concessions, operated worldwide, including North America, Europe, Japan, Korea, the Middle East, Philippines, Singapore, Malaysia and China. Looking forward, the luxury segment continues to grow globally, and our positioning as a jet-set luxury lifestyle brand will enable us to continue our global expansion. In North America, we will continue our store rollout to expand our retail segment. We currently have 204 retail locations and are on track to open 40 to 50 stores this fiscal year. We believe that we can ultimately reach 400 locations in this region. We will continue to drive comparable store sales growth as we increase brand awareness, introduce new and innovative merchandise and provide a superior jet-set in-store customer experience. In our wholesale business, we will drive sales through ongoing conversions to shop-in-shops at department stores, and we expect the pace of shop-in-shop conversions to increase. Consistent with our retail segment, we have experienced strong double-digit comp increases, and we believe that we can continue a double-digit sales pace in our North American wholesale channel. In Europe, I previously noted that our revenues increased by 110%, and our comp store sales increased by 24% for the quarter. While we maintain a close watch on retail -- on the retail environment across Europe, overall, we have not seen an impact to our operations. We are uniquely positioned to build a pan-European accessible luxury accessory business. Michael Kors is established as a desirable jet-set brand, and we believe that we are taking market share in the European accessories, footwear, watch and apparel markets as our brand awareness rises. We are supporting our business through continued advertising, public relations and social media activities. We currently have 30 retail stores in Europe, including concessions, and are on track to open 10 to 15 retail stores annually with continued expansion of wholesale doors. In addition, we have invested in the appropriate inventory infrastructure and other working capital needs to support our growth plans in Europe. We continue to believe that we can ultimately have 100 retail stores, including concessions, and 200 wholesale -- 2,000 wholesale doors. We are pleased with our strong momentum in the current quarter and are excited about both our retail and wholesale business prospects in Europe. Japan will be an important market for us, and we are taking a long-term view for the development of this region. As one of the largest luxury goods markets in the world, we believe that the Michael Kors brand will resonate with the Japanese fashion consumer. At the end of the first quarter, we had 19 retail locations in Japan. We are on track to open 10 locations this fiscal year, and we believe we can ultimately have 100 retail stores, including concessions, in this region. In summary, this is a very exciting time for our company. Michael Kors has strong and expanding global recognition as a brand that embodies the jet-set luxury lifestyle that consumers aspire to. We believe that we are uniquely positioned to continue to build our global luxury lifestyle brand and that we have a tremendous opportunity for growth worldwide. Now I will turn the call to -- over to Joe Parsons for additional analysis of the results. Joseph B. Parsons: Thank you, John. Good morning. I will begin with a review of our fiscal 2013 first quarter financial results, followed by our outlook for the second quarter and the full year. For the first quarter, our total revenue grew 71% to $414.9 million as compared to $243.1 million in the first quarter last year, with strong growth in each of our retail, wholesale and licensing segments. Retail net sales increased 76% to $215.0 million in the quarter as compared to $122.3 million in the first quarter last year, driven by comparable store increases of 37.3% and the opening of 76 stores since the first quarter of last year. This comp store performance was driven primarily by traffic and was led by the strength of the accessories and watch categories. Wholesale net sales grew 66% to $182.4 million for the first quarter compared to $109.9 million in the same period last year. This growth was the result of increased sales of our accessories, footwear and apparel businesses, driven by our unique design and merchandise assortment, the continued conversion of North American department store doors to shop-in-shops and the continued expansion of our European operations. In our licensing segment, licensing revenue grew 61% to $17.5 million for the quarter as compared to $10.8 million last year, primarily driven by continued strength in watches. Gross profit increased 83% to $251.0 million as compared to $137.0 million in last year's first quarter. Gross profit as a percent of total revenue increased 420 basis points to 60.5%, driven primarily by lower in-store markdowns, discounts and allowances. Total operating expenses grew 51.2% to $139.1 million in the quarter as compared to $92.0 million for last year. As a percentage of total revenue, total operating expenses decreased to 33.5% from 37.8% last year. SG&A expenses grew 50.9% to $126.0 million compared to $83.5 million for the last year. The increase was primarily due to increases in our retail occupancy and salary cost as we continued our retail store rollout and corporate employee-related cost, including stock compensation. As a percentage of total revenue, SG&A expense decreased to 30.4% from 34.3% in the same period last year. Depreciation and amortization expense was $13.1 million during the first quarter as compared to $8.5 million in the first quarter last year, primarily due to the build-out of new retail locations, new shop-in-shops and investments in our IT and corporate infrastructure to support our growth. As a result of these factors, income from operations grew 149% to $111.9 million or 27.0% of total revenue as compared to $45.0 million or 18.5% of total revenue for the first quarter of last year. Income taxes were $43.2 million for the first quarter as compared to $18.7 million for the first quarter of last year. Our effective tax rate was 38.6% compared to 43.7% for the same period last year. The decrease in our effective tax rate was primarily due to a greater portion of our income being recognized in jurisdictions with lower statutory tax rates. Net income increased 185% to $68.6 million in the first quarter as compared to $24.1 million for the first quarter last year. Diluted earnings per share were $0.34 based upon 199.4 million weighted average shares outstanding. This compares to diluted earnings per share of $0.13 based upon 179.2 million weighted average shares outstanding for the same period last year. Turning to the balance sheet. At June 30, 2012, cash and cash equivalents net of $27.7 million of borrowings under our credit facility were $134.4 million as compared to $45.0 million at the end of the first quarter last year, net of $13.2 million of borrowings. Inventories at June 30, 2012 totaled $246.6 million as compared to $122.0 million at July 2, 2011. The higher inventory levels are partially due to an increase in replenishment programs for our wholesale and retail segments to be better positioned to fulfill replenishment retail sales and wholesale reorders. In addition, we have broadened our production schedules, resulting in earlier production and receipt of certain merchandise. As a result, the production flow has accelerated as compared to the prior year. The increase in inventory also reflects merchandise for new store openings planned for the second and third quarters as well as an increase in the number of planned conversions to shop-in-shops and department stores. As new store openings and shop-in-shops require an initial investment in inventory, inventory levels will tend to increase at an accelerated rate as compared to the prior year. Capital expenditures during the first quarter of fiscal 2013 totaled $17.4 million. The majority of these expenditures related to new store openings, with the remainder being used for investments in connection with building new shop-in-shops and enhancing our information systems infrastructure. We opened 16 stores in the quarter, 13 in North America, 1 in Europe and 2 in Japan. We ended the first quarter with 253 stores, including concessions. Turning to our outlook. For the second quarter of fiscal 2013, we expect total revenues to be between $490 million and $500 million, assuming a comp store increase of approximately 30%. We expect diluted earnings per share of between $0.33 and $0.35, assuming a tax rate of 38% and 201 million shares outstanding. For fiscal 2013, total revenue for the year is now expected to be between $1.8 billion and $1.9 billion. This reflects comp store sales growth in the mid- to high-20% range. We are now -- we now expect diluted earnings per share for fiscal 2013 in the range of $1.32 to $1.34 per share based upon an estimated tax rate of 38% and 201.2 million weighted average shares outstanding. We anticipate the gross margin to modestly expand in the second quarter on a year-over-year basis and be slightly lower in the second half of the fiscal year as markdown rates are anticipated to normalize. We continue to expect capital expenditures to be in the range of $150 million to $170 million. Approximately 50% of the CapEx dollars are allocated to the retail segment. The other half is allocated to wholesale and corporate-related expenditures, including investment for our infrastructure -- for our information systems infrastructure. For fiscal 2013, we remain on track to open approximately 7 locations -- retail locations globally. Thank you. I will now turn the call back to John Idol. John D. Idol: Thank you, Joe. We are very pleased with our exceptional performance this quarter. These results position us for continued growth in fiscal 2013 and beyond in all our operating segments and regions. Thank you for participating in this call. We will now open the call for questions.

[Operator Instructions] Our first question will come from Brian Tunick with JPMorgan. Brian J. Tunick - JP Morgan Chase & Co, Research Division: Questions, I guess first with Joe, just a little more maybe on the wholesale margins. They were significantly better than we were expecting, and just sort of wondering was there some kind of maybe pent-up demand from the previous quarter where you may have called out some DC disruption? So just wondering what in the wholesale margin was so much stronger. And if you can update us on the number of shop-in-shop conversions today and how many you think we could expect to end the year on. And then maybe, John, if you look at the second half and the holiday build that we're coming to, are there any categories or inventory flow opportunities versus last year? I know the markdowns were very low. But is there anything you look at as an opportunity versus last holiday? Joseph B. Parsons: So I'm going to start with wholesale margins. There really was very, very little impact due to the warehouse disruptions of last year. So the margins were primarily driven by the sell-throughs that we achieved, resulting in lower allowances than we anticipated. And those lower allowances really dropped to the margin, and that's what attributed to our wholesale margin expansions compared to last year. For shop-in-shops, we are well under way in our development shops. We think we're slightly ahead of what we had previously anticipated. And I'm going to turn it over to John for some more color on the shops, and then he can address your category question. John D. Idol: Yes. Thank you, Brian. The -- then thank you, Joe. The performance of the shop-in-shops, as we have stated to you many times, is -- has been just fantastic. And we are seeing similar to and, in many cases, greater than comp store performance to what we see in our own freestanding stores. And that's a real testament to, first and foremost, the outstanding products being designed by Michael and the teams; second, by our management group here, who has done an amazing job of executing, getting the right product in the right place at the right time; and thirdly, to the selling staff that we have employed in the shop-in-shops around the world, and there are literally hundreds of those people in place. And so the return on investment for us, as you know, we share the cost of those shop-in-shops with department stores, is excellent. And so we and the department stores are experiencing the same type of return on investment and performance, so we see that to be a category that we'll be able to continue to develop and grow. As Joe said, we're slightly ahead of where we thought we'd be, and that's really based on the performance and the desire of certain stores to move quicker than we had originally anticipated. Secondly, the category performance. The fall season, we think we're going to actually be in a better position this year than we were last year. You can see that we've gotten our inventories in better position than we were at this time last year, really heading into the holiday season -- fall and holiday season. We wanted to be in a better place to handle replenishment. And then I would say to you, so that's the #1 category is replenishment. Secondly is small leather goods, where we really continue to believe that we're under-penetrated versus certain competitors, and we're getting ourselves into a much better place there. And then lastly is logo, and again, our logoed merchandise and not just things that are overall, such as card-type patterns, but things that may have our charm hanging from it, particularly we're seeing it in footwear, are continuing to build in terms of performance and percent of total sales. So we think that, that category will be very meaningful in the holiday season as consumers continue to aspire to want to own a Michael Kors product and then, of course, to show their friends, their relatives, their family that they own a Michael Kors product.

We'll take our next question from Kimberly Greenberger with Morgan Stanley. Kimberly C. Greenberger - Morgan Stanley, Research Division: I was hoping you could just elaborate a little bit on the inventory numbers. I know at least a piece of it, the growth rate was timing. Maybe you could just help us understand how you've planned inventory here for the back half of the calendar year so that we get some insight into how you're thinking about inventory management. And then, John, I'm wondering if you have any insight in terms of the Sportswear Holding position in the stock and their sort of outlook on timeframe with that position. John D. Idol: Yes. Let me address the inventory thing. Both Joe and I will address it. Joe mentioned in his opening remarks that inventories are going to continue to outpace sales growth. And as Joe mentioned, there's a couple of reasons for that. First, we've got new store openings, and you can see we're planning on opening 75 stores -- approximately 65 to 75 stores this year, and you can see we opened about 16 in the first quarter. So those stores are coming on more heavily in the back half. And you're never going to be able to have 100% visibility onto the timing of that, because some of that's even us -- it moves around a little bit due to landlords, moving, location, timings. And again, some of these are mall stores. Some of these are street stores. So it gets a little tricky for us. So that is a bit of a moving target. So for me to sit here and say, "Oh, Kimberly, use a percentage every quarter," we're not going to be able to do that. It moves around a bit. And then the same thing in shop timings. Everything from department store opening dates, when they're moving construction around their floors, et cetera, the timing kind of moves on us a little bit. I think what we could give you as a general overarching comment is that inventories will continue to outpace our sales targets, and as long as our business continues to grow at this rate, I think you can anticipate that. And then lastly, I think you can always anticipate a little bit bigger buildup heading into the fall and holiday season when replenishment becomes an even greater piece of our business, particularly as highly recognizable products in handbags, small leather goods, watches, where consumers have aspired to have these products all year long. They're giving them as gifts. So typically, we will build up a little bit heavier on those core and key replenishment items for us. In terms of the SHL position, there is no commentary that we have to make on that. And I think you can understand that our shareholders that I speak to seem to be relatively pleased with the performance of the stock this year. So that's where we are with that topic.

We'll go next to Randy Konik with Jefferies. Randal J. Konik - Jefferies & Company, Inc., Research Division: Joe and John, just a quick -- a couple of quick questions. First, I guess, Joe, the -- can we get the logo penetration this fiscal quarter versus the last fiscal quarter sequentially? Just a reminder where we're going to think about long-term operating margins. And then I guess, John, have you thought about other possible brand extensions since the brand is exploding here, something like makeup? I know CHANEL and Armani have makeup and cosmetics and so forth. Can you I guess elaborate on any other potential brand extensions you may be thinking about? Joseph B. Parsons: So for the logo, we're not going to give specific percents, certainly, compared to last year. We will say that we're very pleased with the logo performance, and we think we're slightly ahead of what we anticipated. That being said, as we said before, we want to keep logo at a certain percentage within our portfolio. So John, I don't know whether you want to add any more color. But before we move on to that, operating margins, as I said, we've had very positive results because of our very strong sell-throughs. I'm not going to give you more than what I've already provided in terms of guidance. However, I will say that we have, as we said, experienced very strong sell-throughs, which means that allowances and other dilution has been very low, and so we would anticipate a similar decrease in terms of margins on a go-forward basis. John D. Idol: Yes. And Joe, thank you. Randy, the logo penetration piece is just -- so we're not going to give that on a sequential basis quarter-to-quarter. But we have said in the past that we want to be in that 20% to 25% range, and we told you also we got there a little quicker than we had anticipated coming out of the fourth quarter. So that trend continues. And Joe also said something that's 100% correct in that we're very conscious of the fact that we built this company on luxury leather. And if you go into our stores and look at the presentation, the way we've represented the business, I think there's a very good balance, and our consumer responds very, very favorably to that balance. And so we're going to continue to build our business that way. Luxury leather is the primary category that we're focused on with great fashion presentations. Every month, we're flowing new product into the stores. And then we'll continue to evolve and develop our logo business but not let that become the business, because we think that's, long term, not a healthy way to develop the business. In terms of other categories, there are no new licenses on the horizon. We're very focused on the businesses that we have today, and we do want to develop other categories more healthfully than they are today. So the big opportunity for us, and we've said this in the past, is our fragrance business, first and foremost, and we look forward to talking to you more about that in upcoming calls. We do have some strategies to significantly strengthen that piece of our business. But we are underdeveloped there significantly if you compare the Michael Kors size of our company to the size of our fragrance business and what that potentially represents for us. So we see that as a potential very large upside for us.

We'll go next Paul Lejuez with Nomura. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Paul Lejuez. Can you talk about the performance of your mall stores versus your street location versus your outlook stores during the quarter, if there was any divergence there? I'm also curious about sales productivity levels in general at your mall stores versus your outlet stores. And then also, just curious about what sort of lift you're getting on the gross margin side from channel mix. John D. Idol: Sure. I have to tell you one fun fact to start with that did not come up in your question, but I want to tell you this. Mike Moore, a gentleman who works in our company and analyzes a lot of data for me before these calls showed me that stores that are 4 years old actually comped higher than even some of the new stores. So I just -- I wanted to point that -- again, that legacy stores are continuing to see outstanding comp performance. So we look at them 4, 5, 3, 2 years all back, so very, very even performance across the board both from a legacy standpoint and from a geography standpoint. So we're seeing -- we think that really resonates well for us in the company and the brand that it's not being driven by pockets in the U.S. And we're seeing similar results in Europe, quite frankly, as well. So we're getting a very balanced development. In terms of the performance in sales per foot, I think we've told you before, we run pretty similar numbers between malls and outlets. So again, we are -- we're in a very fortunate position that we -- the investment we make in a full-price store looks, smells and feels very similar to the ultimate results that we get from the outlet channel as well. So we feel compelled to continue to drive our full-price business. We have not seen any change in traffic in the full-price channel nor the outlet channel. I know that there's been some conversation about that. We have not seen that, so -- and then our street performance stores are typically also at or above where they were last year in terms of traffic, in particular because of tourists. And again, we have not seen a change in the tourist traffic inside of our stores of any significance across the globe. So again, I think it's also because our brand is continuing to build awareness. We're continuing to build new customers coming into our stores. And I think, in particular in the accessible luxury category, I think we continue to elevate the entire category by our exciting fashion presentations, and we're drawing new customers into the category who might not have been in the category before. And we see that not only in our handbags, small leather goods and, of course, watch business, which we know for sure we've been increasing the average price in department stores and specialty stores around the world, but we're also seeing the same thing happening in our footwear business now, which is really exciting. We're starting to see this same momentum shift that we saw in some of the other categories of our business, where consumers are coming in and asking for Michael Kors footwear. And of course, they would like that footwear to have some kind of an identification on it. I think we've done a very tasteful and exciting way of branding the merchandise. On the gross margin side, it's not -- it's lower gross margins for us in the outlet channel, and that's because we're, obviously, moving merchandise out of our full-price stores into the outlet stores, so that will depress gross margins. But in total, our gross margins, as you can see, are remaining very healthy. Paul Lejuez - Nomura Securities Co. Ltd., Research Division: Joe, what about the mix from retail versus wholesale on the gross margin side? What kind of lift are you getting there? John D. Idol: I'll let Joe speak to that. Joseph B. Parsons: Well -- and again, we don't talk to gross margin by segment. I think very typical of the business, the gross margin on the retail side is going to be considerably higher than the wholesale. Obviously, the operating margin is what we're looking at. And I think the other thing to point out is although that we were expecting retail to outpace the growth of wholesale, we actually have continued with a very healthy wholesale growth, and our business continues to be about 50-50 in terms of wholesale and retail. John D. Idol: Yes. And that'll eventually, as we've said to you over time, we believe that retail will account for 70% to 75% of our business. It's just that the wholesale, in particular the shop-in-shops that we've been putting in our accessories business -- and also, I might add that our women's ready-to-wear business, we've been adding quite a few shops which are also experiencing very similar types of performance results, are helping to drive wholesale businesses, again, faster than we had anticipated.

Our next question will come from Erinn Murphy with Piper Jaffray. Erinn E. Murphy - Piper Jaffray Companies, Research Division: John, just a question for you, actually. It's very encouraging to see that acceleration in Europe sequentially. Could you speak a little bit more about some of the regional trends and product trends you're seeing within that market? Is the -- I guess is the mix of apparel and accessories, is that similar to what you see kind of globally? Or do you index a little bit higher, still, in apparel? And then how are you seeing the tourist customer respond versus the local customer in the European market? And then I have a quick follow-up. John D. Idol: Sure. Well, obviously, you can see we're very pleased with the performance of the business. As we told you in the last quarter, we were actually a little lean on inventory in Europe. While we've gotten ourselves into a better inventory position, we're still probably not 100% up to where we need to be. Again, the business there is moving faster than we had anticipated, so -- and in terms of the mix, we've said to you before, if you look at the retail stores on a comparable basis, very similar to the U.S. in terms of percentages of accessories and watches and footwear and apparel inside of our stores, so not much difference in change. And we -- by the way, we see that pretty much globally. So whether it's in Malaysia or Korea or Europe or the U.S., the stores all perform very similar. And also, in terms of what sells in the U.S. is almost identical to what sells for us, again, in the Asian markets and the European markets, so it's not totally dissimilar. But what you will see in Europe, and we've said it before, in the wholesale side, you'll see a much bigger women's apparel business happen over a period of time, because there are more specialty -- women's apparel specialty stores, women's ready-to-wear specialty stores. So that mix in totality will be much more skewed towards that category than it is in our typical handbag and footwear business. And that's also a good thing for us as well, because our margins in the women's wholesale business in Europe are very healthy, in the specialty channel in particular. And then in terms of tourists, we've been having excellent results with the tourists on a global basis. And so we've seen tourists coming from China all over to our stores in Europe, to our airport locations. We've been seeing Europeans inside of Europe, so whether it's Russians or people from Poland or people from Italy traveling to different places inside of Europe. And of course, we're seeing the Brazilians travel quite a bit, both to the U.S. and to Europe as well. So we've enjoyed excellent tourist traffic inside of our stores and actually saw it past 2 months in particular really spike inside of our stores. So we've been very pleased with that. And also, hopefully as you travel the world, you'll be seeing some really spectacular airport locations open for Michael Kors in the best airports, so whether it's JFK or whether it's Heathrow or Amsterdam or whatnot. And we think that's important for not only servicing customers but also really for continuing to build the brand image. And we've been able to secure excellent locations, and the results are outstanding. Erinn E. Murphy - Piper Jaffray Companies, Research Division: Great. That's encouraging. And then just one other quick question, John, for you. On the jewelry rollout, how should we -- I mean, there's been a lot of success thus far this year in retail. How should we think about incremental doors in the wholesale channel both in the U.S. and internationally for the jewelry launch in the back half and early next year? John D. Idol: Yes. Well, we're taking a very measured approach to opening doors in jewelry. And the results, as I'm sure you've heard from Fossil, are very strong, and we're encouraged, as we said earlier, about our opportunity not only in the U.S., but in Europe and in Asia. So if you get out to some stores, you're going to be seeing shop-in-shop -- jewelry shop-in shops that are being put in. Also, we have watch shop-in-shops that are being installed as we speak, which we think -- sometimes it's not always about adding more doors. It's about doing more business in the doors that you're in. So again, we're going to have a measured approach to expansion of doors on the jewelry side. We're learning. Just like we did in our freestanding retail stores, just like we've done in shop-in-shops and accessories and just like we did in watches in the early days, we want to make sure that we work in an A store, a B store and a C store. So we're still in early days on that. Results in the U.S. have been very strong. Results in Europe are just -- we're really rolling it out in Europe as we speak, but we're pleased. We like what we've seen in our own freestanding stores. And the jewelry, by the way, in our freestanding stores has become a very -- we reached our goal in the first year of our percentage presentation that we thought was going to take us 2 to 3 years. So that's a very, very good indicator of how the consumer is multiple shopping with us. She's not only coming in buying a handbag, then she might come back and buy a watch, and then she might come back and buy a piece of jewelry and then shoes. So we're getting -- our intent, which was to get her to come into the stores multiple times, is clearly working, and jewelry is helping us do that.

We'll go next Erika Maschmeyer with Robert W. Baird. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Okay, great. Incredible gross margin, I know that you mentioned strong sell-throughs and that you -- but that you expect markdowns to normalize in the back half of the year. Could you talk about the factors you're assuming will contribute to that? And does your guidance leave room for a further economic slowdown? And has trends in logo bags been part of your nice gross margins? John D. Idol: Sure. I think the question, really, you're asking is what is normalized? Because we keep saying... Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Yes. John D. Idol: Yes, I know. Every time we get on this call, I know it's -- we're like a broken record. The... Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Are you assuming they don't normalize or hoping they don't normalize? John D. Idol: No, no. The latter is true. We hope they don't normalize. I'd like to keep having this conversation with you every call. But no, look, Joe and I have been in this business a few years, and we know what more normalized markdown rates look like in our own freestanding stores and in department stores. So we have to anticipate, at some point, we're going to get back to that level. So we will always be thinking out in the forward quarters to that level. Obviously, if it doesn't normalize and we continue to have the outstanding sell-throughs that we've had, which are, literally, almost, in my career at an all-time low, then of course, that will flow to the bottom line. And -- but we can't make that assumption sitting here today. So we utilize more formulaic thought processes in that modeling. And it's not the fact of the logo or no logo that's giving us the expansion of gross margin. It's really just having less markdowns inside the stores and the sell-throughs and our ability -- and I think we've done a very good job over the last few years of being able to scramble to have the merchandise to be able to hit these kinds of comp store growth. To be able to have 37% comp store growth is pretty extraordinary, and to be able to fuel that and to keep going is -- operationally, it's a big challenge. And Joe and his team have done an outstanding job in being able to execute that. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Okay. And then does your guidance leave room for further economic slowdown in the back half? John D. Idol: I'm not going to make a comment to that. I think we put a lot of different factors into our thought process. And again, I will tell you that whether the U.S. economy slows or the European economy slows further, we're not going to think about that, at least at this moment today. We think that the luxury market continues to expand on a global basis, as you've seen. The U.S. handbag market continues to expand. And then, of course, we believe that we have the opportunity to take market share as well. So the great news is we're operating in markets that are expanding, but we do have the capability of taking market share from competitors, which is something that if you think about the size of the market and the -- and what we represent as a percentage of the total market just in U.S. handbags alone, we could take market share and grow substantially. We don't think that's necessarily going to happen. We think the market's going to continue to grow, but we think it's there just in case the market did slow down. Erika K. Maschmeyer - Robert W. Baird & Co. Incorporated, Research Division: Great. And then just quickly, could you remind us of the lift that you're seeing from the stores and the store conversions? John D. Idol: Yes, it's typically about 3:1.

We'll go next to Omar Saad with ISI Group. Omar Saad - ISI Group Inc., Research Division: ...I know it's run by a third party and how that influences your thought process in terms of the store rollout in the U.S. and North America and globally as you think about the mix of what this brand could be, bricks-and-mortar versus online, and how you kind of piece together that pie of how you want this brand to look, looking out several years. John D. Idol: Omar, we didn't hear the beginning of your question. Do you mind repeating that? Omar Saad - ISI Group Inc., Research Division: Oh, absolutely, yes. So on the online business, I know it's run by a third party, I believe Neiman Marcus. Just how do you think about the mix of the business long term between bricks-and-mortar and dot-com? Or is this brand such an experiential brand that really most -- you see, long term, most of the sales are going to be driven through bricks-and-mortar, because it's such an experience to be in the stores and in the shop-in-shops? Or do you think about online becoming a bigger piece, especially eventually if you take it in-house, such that perhaps you don't -- might not need as many stores as you would have historically x e-commerce? John D. Idol: Yes. It's a very good question, Omar. First off, we've stated previously that we will be bringing the website in-house. It's just a matter of time, and we're in the midst of some very focused planning on that. And as you can imagine, given our warehouse move, et cetera and some of the things that we've been going through to make sure that we have our operations in place to handle our brick-and-mortar business around the globe, that really, bringing the Internet in-house has taken a back seat, although it is an important part of what we consider to be a 360-degree experience for the consumer, everything from viewing the product online, shopping online and then ultimately, being able to service them in-store and online. So that being said, we believe that long term that the Internet business will be a global business for us. And our goal, for sure, is to, by 2014, be operating the U.S., Europe, Canada and Japan in calendar '14 and all of those marketplaces with a 360-degree experience with Michael Kors online in all those markets. I hope we get there, but that's our goal. And we think that ultimately, the online business in the U.S. should represent approximately 10% of our retail volume. So it is a bigger opportunity than we had originally thought. And lastly, we don't think that the online business actually precludes you from having brick-and-mortar, because as you know, people love to shop. It's a great experience whether it's on a Tuesday evening or a Saturday afternoon. So again, we think that keeping the amount of stores that we project on a global basis at around 600 and having these -- the e-commerce business located in all these marketplaces will further enhance brand awareness and our ability to service the customers. So that's kind of our strategy. 2014, we would be up and running in all of these countries. Some might come on earlier than later. We expect it to ultimately reach 10% of our retail revenues. That's not going to happen in the year 2014, but we do think that we'll -- if you start adding that up on a global basis, it's going to be a very significant number for us. Omar Saad - ISI Group Inc., Research Division: That's helpful. And also, if I could have a follow-up. The Europe business accelerated. The Japanese business, you sounded quite bullish on the long-term opportunity there. As you mentioned, it's a big luxury market. What is the key to see this brand kind of take off on a global basis like that? What do you think the key attributes are, the key elements behind this inflection where we've seen a lot of U.S. brands kind of go through fits and stops and starts in this process? Or put another way, like what do you think are the key areas that you need to focus on to make sure this brand can really capture its international opportunity? John D. Idol: Yes. That's also an excellent question, Omar. The -- let me start with Europe as a good example. When we entered Europe some 3 or 4 years ago, we made the decision that we were going to lose money for an extended period of time and make significant investments in the market, and we're going to continue to do that. Europe is going to be profitable this year, but it's going to be marginally profitable, and it will expand over a period of time. I think we've indicated that, told you that. I think that we believe that you have to go in and you have to spend money. You have to spend money on advertising, marketing, the right stores and the right locations, the right infrastructure of people. I can't speak to what other companies do, but if -- you have to be prepared to sustain substantial losses over a substantial period of time to build the business. And we have always operated that way, including when we went public. We kept that same vision, and we're keeping that same vision. So I'm very confident in Europe. You're seeing the -- a sequential growth in brand awareness. We think that you really have to get that -- into that 60%, 70% range to get that lift. We really start to see the brand accelerating. And so we're a long way from that in Europe, as you can see, but we're patiently building that marketplace. Japan is a tougher build, because there are only a handful of brands in Japan that are really viewed as luxury, and it's going to take us a long time to get there in Japan. We've told you that. Think closer to 5 years for the development of Japan. And then we've even said to you in the Asian markets, think beyond that. It takes time, patience, money and the tenacity to believe that you're going to have something 10 years from now that's going to be worth something significant in value. And Japan, again, even though you saw some nice comp store increases, it's on a handful of stores. It's really -- I would tell you, let's talk about Japan in 2 years from now. Let's see where we really are at that point in time, because none of the, really, the relevant gains that we'll make there will impact us significantly from a positive standpoint. We're losing money in Japan, and we've said we will kind of try and keep it in the same zone for the next few years. But we don't anticipate having anything there improve until we get a lot more stores open and get that brand awareness up into that 60% to 70% range.

Our next question will come from Dana Telsey with Telsey Advisory Group. Dana Lauren Telsey - Telsey Advisory Group LLC: Can you talk a little bit about the levers of the comp increase, price, conversion, traffic, what you saw? And also, as you think about just category breakdown, from handbags and small leather goods, what are you seeing on the category side of it? And what do you expect go-forward in the channels? John D. Idol: Sure, Dana. Pretty consistent with where we've been in the past on the category breakdown, let me start with that. SLGs led the way, triple-digit increases. We just see that continuing to go on. We continue to believe we're under-penetrated in that category, and we're going to build that as a big opportunity for the company in gifting and in personal use. Secondly, handbags. We're showing, again, just incredible comp increases outpacing the store slightly in totality. And then thirdly is watches, and we're very pleased. We have a highly developed and penetrated watch business, as you well know and have heard. But we're still continuing to see very, very substantial double-digit increases in watches, which is an important category for us in our stores. So those were really the big drivers of the business and then, of course, the nice new addition of jewelry, which added as well. The traffic is basically consistent on a sequential quarter-to-quarter basis. So we did not see any traffic changes, and that was, again, by channel and really by region as well. There's a little bit of movement in Europe because of Ramadan, but beyond that, really no significant mix in the traffic. And then in terms of conversion, conversion was about flat for us, which obviously is fine given the increase in traffic. And the AUR is up slightly in the stores, and that's just more of what the consumers buy, because we haven't really changed any prices to speak of, so it's just what they're buying inside of our store and location. And actually, I shouldn't say AUR. Let me take that back. Average transaction, I apologize. Average transaction was up almost 10%. So that's just they're buying a little bit more each time they're visiting our store.

And our last question will come Joan Payson with Barclays. Joan Payson - Barclays Capital, Research Division: I just have one question, I guess, to speak more to the pricing and, specifically, the mix in terms of the Michael Kors Collection versus the MICHAEL Michael Kors products, I guess where you see that mix going long term and where it is today. John D. Idol: Yes, sure. Our Collection business has represented kind of 10% or less of our business. And quite frankly, that percentage is going down as a percent of total because of our MICHAEL Michael Kors and our lifestyle stores in particular growing so rapidly and our shop-in-shop conversions happening on the MICHAEL line as well, both in handbags and in ready-to-wear. And I also might add we're starting to put some footwear shop-in-shops in. Hopefully, if you get to see our new fabulous location at Hermann Square, which we're quite proud of. The -- so I really don't think that, that category will maintain its percent to sales, and it will decline. But in terms of actual performance, we are strongly behind it. We're actually opening shop-in-shops. We have been, over each quarter, in that business as well, and we continue to look at freestanding locations around the world to open Collection shops. We've also, in our larger flagship stores, I think you might -- if you were in Paris on the recent trip. I know many of you saw our store in Paris. In Malaysia, we have a similar situation; Dusseldorf; many large cities we have. We just opened Madrid, where we have the entire company's business represented together with Collection inside the building. So that's -- we think that's a little bit more relevant for us to have all families of businesses in large buildings, in flagship markets than opening freestanding shop-in-shops, freestanding stores for Collection only.

Thank you. That does conclude our question-and-answer session. I'll turn the conference back over to our speakers for any additional or closing remarks. John D. Idol: Thank you for joining us today, and we look forward to speaking to you for our second quarter earnings release.

Thank you. Ladies and gentlemen, this does conclude today's presentation. We appreciate your participation, and you may now disconnect.