Capri Holdings Ltd

NYSE:CPRI

Earnings Call Transcript 2007-Q1

[Operator]

Good day, and welcome to the Michael Kors Holdings Limited Versace Acquisition Conference Call. Today’s conference is being recorded.

At this time, I would like to turn the conference over to Katina Metzidakis, Vice President of Investor Relations. Please go ahead.

[Katina Metzidakis, VP, IR]

Good morning everyone and thank you for joining us. With me this morning are our Chief Executive Officer, John Idol; and Chief Financial and Chief Operating Officer, Tom Edwards. For us this morning’s call, we will be referring to Capri Holdings Limited, which is the new name to be adopted by Michael Kors Holdings Limited upon the closing of the acquisition of Versace.

Unless otherwise noted, all discussion of operating income and earnings per share on today’s call will be presented on a non-GAAP basis. In addition to this morning’s press release, we have posted a presentation to the Investor Relations section of our website. Following prepared remarks, we will open the call for questions.

Finally, I would like to note that today’s discussion contains forward-looking statements, which are subject risk and uncertainties that could cause actual results to differ from those that we expect. Please refer to the Slide 2 of the presentation as well as the press release and the information contained in our SEC filings.

Now, I would like to turn the call over to Mr. John Idol, Chairman and Chief Executive Officer.

[John Idol, Chairman and CEO]

Thank you, Katina. Good morning everyone. I’m extremely excited to announce our acquisition of Gianni Versace S.p.A. The House of Versace is one of the most storied luxury brands in the world, routed in the Italian glamour and style. The Versace brand has a heritage spanning over 40 years. Fashion has always been at the core of the Versace DNA. This brand fits perfectly into our group’s strategy to focus on international fashion luxury brand that are leaders in style and track. Each of our founder-led companies have one way collections at their foundation as well as craftsmanship and heritage at their core.

With the acquisition of Versace, we now have created one of the world’s leading fashion luxury groups. Now I would like to give you a brief overview of the House of Versace. The creative inspiration for Versace started in 1978 when Versace opened its first boutique on Milan's Via della Spiga. The brand quickly became known for its innovative designs and couture craftsmanship. Through the 80s, 90s and 2000s, the brand continues its global expansion led by its runway excitement and association with the world’s most famous celebrities including Madonna, Lady Gaga, Beyonce, Jennifer Lopez, Angelina Jolie, Jennifer Lawrence, Nicole Kidman, Elizabeth Hurley. In men’s Elton John, Sting, Bruno Mars, Matt Damon, Bradley Cooper and Orlando Bloom just to name a few.

The brand has also been associated with the most glamorous models in the world such as Naomi Campbell, Cindy Crawford, Linda Evangelista, Claudia Schiffer, Christy Turlington, Gisele Bundchen, Gigi Hadid, Bella Hadid and Kendall Jenner. The Versace clients are equally as glamorous and as exciting as the celebrities and models that are in love with the brand. Versace has grown globally over the past 40 years developing not only its ready-to-wear but also its accessories, footwear, eyewear, watches, jewelry and fragrance businesses. Additionally, the Company has an iconic home furnishings collection that has become synonymous with the Italian luxury lifestyle.

Today Versace has approximately 200 boutiques in the most glamorous cities in the world. The house of Versace has always had luxury craftsmanship as well as creativity and inspiration as a foundation since its inception. For over 20 years, Donatella Versace has had the vision for the brands iconic style. A true visionary with an intuition for having won fashion, design and culture Donatella continues to honor the rich and storied Versace heritage, while constantly evolving and adapting the luxury house ensuring the brand's continued relevance.

It is no surprise that Donatella has received endless design awards throughout her present career including most recently the British Fashion Council's, Icon Award, the CFDA Fashion Awards, Best International Designer and GQ's Designer of the Year award in the UK, China and Germany. Donatella's fashion has never been stronger. Her most recent collections for the House of Versace have received some of the greatest accolades in the Company's history, both from the press and from its consumers.

Donatella will continue to lead Versace's iconic design into its next chapter Baroque. Next, I would like to discuss the iconic codes of the House of Versace which are rooted in the Italian fashion heritage of its founders. Its unique DNA and signature style has led the house to become one of the most highly recognized luxury fashion brands in the world. Versace unmistakable look, which is equal parts bold and refined, evokes both a rock and roll spirit as well as runway glamour. Its comic signature prints often include the Medusa motif, signature Baroque and Greek TP telling, which have become status symbols for the brand.

Versace's collections are elegantly displayed in its unique and distinctive boutiques around the world. Versace is one of the most famous luxury brands in the world. For over 40 years Versace has continued to build this unique, innovative and powerful communication message to consumers worldwide. In many of its major markets, Versace has greater than 80% brand awareness. The brand also commands a leading social media presence with 13.5 million followers for Versace, and 3.5 million followers for Donatella. Both the brand and Donatella clearly capture the imagination of consumers globally. Given these incredibly powerful matrix, we believe that this creates a dynamic platform to accelerate our aspirations for the brand.

Turning to the Versace management team, since joining Versace, Chief Executive Officer Jonathan Akeroyd leadership has helped drive strong financial performance for the Company. In particular this year, the Company will have double-digit revenue earnings and comparable store sales growth. The Company has a world-class management team with the skills and experience to execute our strategic plan. We look forward to partnering with Donatella, Jonathan and other members of the Versace talented management team to further unlock the strong growth potential of the brand. We are thrilled to have Versace as part of our luxury group at such an exciting and dynamic point in the Company’s history. I would like now to discuss our expectations for the brand’s future performance. We believe the Versace will grow to $2 billion in revenue over time. There are five strategic initiatives that we will focus on to achieve this goal.

First, we plan to build on Versace luxury runway momentum. Versace luxury heritage holds both incredible appeals for fashion consumers globally. Second, we will enhance Versace’s powerful and iconic communication messaging. Third, we will increase Versace’s global retail footprint of approximately 200 to 300 stores. Our plan is to open stores at a faster rate to take advantage of expansion opportunities in untapped markets where we believe there will be strong demand for the Versace brand, particularly in Europe and Asia. Fourth, we will accelerate e-commerce development to create a full omni-channel experience. Fifth, we will leverage our group’s expertise to expand men’s and women’s accessories and footwear from 35% to 60% of Versace’s revenues.

Now, let me discuss how the addition of Versace will benefit our global fashion luxury group. I am pleased that this acquisition positions Capri Holdings to accelerate revenue growth, which now includes a goal to achieve $8 billion over time. Starting with Versace, we will focus on our five-pillar strategy for growing this luxury house to $2 billion in revenues as previously explained. With Jimmy Choo, we believe that our strategy of increasing new store openings, accelerating footwear growth with a focus on fashion active and expanding accessories penetration has us firmly on track to achieve $1 billion in revenues.

For Michael Kors, we continue to build on our runway 2020 momentum. Overall, we believe, we are on track to achieve 5 billion in revenues for Michael Kors. Taken together, these three brands will position us to achieve multiple years of revenue and earnings growth. The addition of Versace into our group also immediately enhances our already strong standing within the global luxury fashion market. The integration of this iconic fashion house will notably increase our presence in the fast growing Asia market, which is a key driver of our long-term growth.

Our presence will also expand in Europe, which represents another growth opportunity for our group. As a result of this acquisition, we have decided to change the name of our company to Capri Holdings Limited. Our new name is inspired by the fabled island, which has long been recognized as an iconic, glamorous and luxury destination. The island’s spectacular three-rock information formed over 200 million years ago is symbolic of our timeless heritage and a strong foundation that is at the core of each of our three founder led brands in our global fashion luxury.

With the acquisition of Versace, we have succeeded in building one of the world’s leading luxury fashion groups in just over one year. We could not possibly envision a better family of brands in Capri Holdings. I want to take a moment out to recognize and thank our entire team for the tremendous amount of work and dedication they have demonstrated as we have been building Capri Holdings. It is nothing short of remarkable and I’m so proud of all that we have accomplished together in such a short period of time.

With that, I would like to turn it over to Tom.

[Tom Edwards, CFO and COO]

Thank you, John, and good morning everyone. Turning to Versace’s growth opportunity, we are thrilled to be adding a brand that is resonating with consumers and growing so robustly, and we believe the business has tremendous upside potential to deliver both revenue and margin growth. Under the leadership of Chief Creative Officer, Donatella Versace; and Chief Executive Officer, Jonathan Akeroyd, Versace is expected to deliver double-digit revenue growth in 2018 along with an approximately 50% increase in EBITDA. This performance is grounded in the compelling consumer connection with Versace's design aesthetic which has led to strong double-digit comparable store sales growth.

Looking ahead, we believe Versace has significant potential to contribute to our group. Over the longer-term, we expect to achieve $2 billion in revenue and EBITDA margins in a high-teens percentage range in line with peer luxury brands. Given the brand's current double-digit rate, we anticipate that Versace will achieve approximately $1.2 billion in revenue along with EBITDA margins in the mid teens in fiscal year 2022, the third fiscal year following the acquisition.

From an EPS perspective, we expect this acquisition to be EPS diluted in year one in the high single-digits as we plan to invest in Versace to drive accelerated growth similar to the successful strategy we put in place for Jimmy Choo. These investments will be focused on additional marketing initiative, accessories and footwear development, store expansion and the support of the Company e-commence platform. We expect Versace to be accretive in year two, in the low single-digit and accelerate to high single-digit accretion in year three.

Next, I’d like to discuss the details of this transaction. The value of the transaction is €1.83 billion or approximately $2.12 billion. This will primarily be a cash transaction. The Versace family will also receive a €150 million of the purchase price from shares of Capri Holdings. We are extremely pleased to welcome the Versace family as shareholders in Capri Holdings and view their equity investment as a testament to the strong support of our future plan and value creation opportunity.

We expect to fund the cash portion of the acquisition with a combination of cash on hand, drawings on our existing revolver and new term loans. The acquisition is expected to close in our fiscal 2019 fourth quarter. Post closing, we will prioritize our significant cash flow to rapidly pay-down our acquisition debt just as we have so quickly done following the purchase of Jimmy Choo.

Now, I would like to turn to the financial benefits, strategic advantages and shareholder value opportunity that the Versace acquisition provides to our group. Together with Michael Kors and Jimmy Choo, the addition of Versace positions Capri Holdings for enhanced growth. We believe Versace’s $2 billion revenue target will help drive our group’s revenues for approximately $8 billion.

We also believe that the addition of the high growth Versace brand will position our group to deliver multiyear revenue and EPS growth. From a strategic perspective Versace increases our geographic diversification expanding our presence in the fast growing Asia region. With Versace as our third luxury brand, we believe we now have the broad platform to leverage and create long-term synergy savings in the area of supply chain, information systems and back office support. We look forward to discussing more operational details after this transaction closes.

In conclusion, let me reiterate that we are extremely excited to have the opportunity to help develop the Versace luxury brand globally and further drive long-term shareholder value for Capri Holdings.

With that, I will turn the call back to John for closing remarks.

[John Idol, Chairman and CEO]

Thanks, Tom. The acquisition of the iconic House of Versace is an important milestone on the execution of our strategy to expand our global fashion luxury group. With this acquisition, we have set the stage for our company to significantly increase long-term growth and shareholder value.

I will now open up the call for questions.

[Operator]

Thank you. [Operator Instructions] We will now take our first question from Omar Saad from Evercore ISI. Please go ahead.

[Omar Saad, Evercore ISI]

I was hoping you guys could elaborate on what's really changing at Versace, I think it has been a little bit of slower growth going for a few years and it's really turning the corner and the growth seems to be accelerating currently. Could you talk about what some of the key drivers are? And I would also ask if you could talk about the various brand positions of your three the fashion luxury brands now and how they're they complement one another across categories, price points, regions, brand ethos et cetera?

[John Idol, Chairman and CEO]

Thank you, Omar. Good morning again to everyone. Omar, the growth at Versace has been driven by a number of things. Donatella has never been more engaged than she is today. And the brand really is seeing a very fast pace of growth right now driven by her leadership that really starts with design and the runway. And also by the fact that they're very, very relevant in the modern culture today. So as we've talked about in the prepared remarks, Versace has incredible celebrity following, which gives us power across Instagram and across other social platforms. Secondly, Donatella herself is an actual icon and people follow her and they're very interested in what she has to say about fashion.

And again, I think for many of you on this call, we're going to be a more unique company that you cover because this is real true luxury and some of our competitors are different than what you might have thought about in the past. And so her voice and her leadership in the fashion field is a very key component to the Company's, its historical growth. But even, she's even more relevant today than any other time in her history. The second thing I would say as a key driver of this company is Jonathan Akeroyd. And Jonathan has really, he's got a long history without ever quitting the previous to that at Harrods and he is an excellent merchant.

So, he has really taken, all this incredible tool box at Versace and focused it a bit more than the Company has been historically looked at from a merchandising standpoint in the past. And you look at things from our company in terms of the power of the men’s brand. It’s almost 50% of this company’s business is men's. So that’s the kind of an unknown fact many people don’t really realize, so in men’s fashion is quite strong right now. So Versace has a very powerful place in the men's business. Secondly, Jonathan has really amplified that. Secondly, as you know, the active sneaker area is very strong Versace has one of the best selling luxury fashion items from that category.

The Company, while it doesn’t have the penetration of accessories of the sales of the third point that we would like to have still, it has been growing in that business. And so that’s been another leading platform for the Company. And so you have this power of Donatella, the power of her communication to a very broad set of consumers. You've Jonathan’s leadership, you have a dynamic women’s and men’s business and you have a footwear and accessories business that is actually growing, but really to be exploded given our expertise. I think it's really the right combination for us to be able to acquire this business.

And I also want to mention in the prepared remarks, the Company is experiencing double-digit comp store growth right now. And that’s really shows the power of the brands. And I would also say the approach showed how underdeveloped the brand is. That is -- so when you look at our three brands, I’ll answer your second part of your question. We prepared the roadmap for $8 billion. So, Michael Kors is going to grow, it’s going to grow more slowly because of its size. I mean we’re, obviously a very large brand globally. And so we think, we’ll go from our 4.5 billion to 4.6 billion today, to roughly $5 billion over the next few years.

Jimmy Choo, and by the way Michael Kors has two layers, it has a luxury layer and a more accessible layer. Jimmy Choo is pure luxury and will remain pure luxury. But I think we’ve shown, we’ve seamlessly integrated that company into our company. I want to reiterate that we have seamlessly integrated that company. It’s been a great acquisition, that’s gone perfectly. That’s well on its way to $1 billion target reported in our last quarter strong double-digit top-line growth for the Company and strong costs for growth.

So we feel great about that. And that’s obviously business has been in the shoe and accessory world and we’re going to build on the accessories. And then lastly Versace, which has both a ready to wear component and an accessories components we believe that we can grow more rapidly. So we think that we’ve got three companies that are balanced and they don’t really compete with one another. That being said, we have plenty of competition outside of our own company. But we've put together a portfolio of brands that really can complement one another as opposed to compete with one another.

So that’s kind of our thought process on how we built the group. And we couldn’t be more pleased than to have these three highly recognized brands. And as you can see by the data that we released even Jimmy Choo has 8.5 million Instagram followers on a brand that is not nearly the size of what its social media presence is and that gives us again great confidence that this brand will continue to grow from a revenue standpoint. But thank you very much for that question Omar.

[Operator]

We will now take the next question from Oliver Chen from Cowen & Company. Please go ahead.

[Oliver Chen, Cowen & Company]

Our question is about the product categories at Versace. Which ones you think have the most opportunities and are you most excited about? And as you think about the value creation over time, which actions will be sooner versus longer term? I also, by the [versus] brand and the collection and atelier, so what do you see happening with respect to the brands within Versace? And how you'll think about maximizing what should happen with the brand structure as well?

[John Idol, Chairman and CEO]

Thank you, Oliver. First and foremost, Versace is a runway led brand and it's really from Donatella's vision, and hope all of you will get the chance to meet her overtime. She's a dynamic force in her own right and has really along now with Jonathan has built this company year in year out obviously with her brother and previously with Gianni, but has been really steadfast like condition for this company. So I would always tell you that the runway for Versace both in men's and women's is where we will start with our focus.

We believe that given the size of the Company, the majority of the Company's business is done with the first Versace first line. And so that only leads one to the conclusion that you spend most of your time and effort on building that it is having, as I said before, double digit comp store growth in every region in the world in our brick and mortar stores, not give a bit of all the non-existent e-commerce business which is a great opportunity for us as well. So that is the first focus, inside of that, we view accessories as having the biggest impact on the business.

Jonathan has done a terrific job at the management team, improving the profitability of the Company and we've shared those figures with you because we want you to understand the great turnaround that this company has had in profitability. And we believe as Tom indicated in his prepared remarks that that profitability is still significantly under where our luxury peers are. And we know that the only way to get there is to have stronger accessories business. So we will be putting a tremendous amount of initiative and effort behind accessories and footwear.

And I might add with both men's and women's. Because remember, men's again is almost half of this company's business. And given that, the men's accessories market is powerful and we have a very strong following amongst men around the globe. So, we view that having the biggest return in revenue and margin improvement for the Company. So we'll do the same thing that we do at Jimmy Choo. We will step back the profitability for a very short period of time some 12 to 18 months most likely, invest heavily and design canvas that will bring on for the Company, marketing initiatives that we will build around the Company. And you will see that layer up relatively quickly.

Again, we don't need a lot more distribution than we have today and we have -- the locations of our stores are spectacular. In every single city, we just need to take those stores and really build out the accessory category in there and then online. And we think that it will deliver some pretty powerful growth quickly. So, I think that's really what's going to happen inside the value creation for Versace. And again Oliver, nobody knows this better than you quite frankly. If you look at some of the other Italian luxury brands which will remain nameless, they are doing in the billions of euros today.

So, Versace is terribly underdeveloped and that’s really going to change now that they'll have the resources of Capri behind them, and Jonathan will have full reign to execute against our strategies that he's been very much a part of building with us. And I just left the entire corporate team here and everyone is thrilled and excited to really take the next step in the development of Versace. So, we’re excited and we think we've got a excellent platform to build out from. Thank you, Oliver.

[Operator]

We will now take our next question from Kimberly Greenberger from Morgan Stanley. Please go ahead.

[Kimberly Greenberger, Morgan Stanley]

John, I wanted to follow up a little bit on Omar’s question. Can you talk about what the revenue growth of Versace was over each of the last three years? And then if there has been a more recent inflection. Is it the fashion execution and sort of merchandizing prowess that’s driving that or are there other drivers? And then longer-term as you think about brand development, are you -- is the intention here to keep Versace as a strictly luxury brand or you contemplating a diffusion line or sort of lower priced more aspirational line in addition?

[John Idol, Chairman and CEO]

Thank you, Kimberly. Kimberly, I’m going to let Tom talk again to the growth rate. We’re only going to discuss the last projected 12 months just as a final, because again we weren't here with the Company before, we don’t know what was happening in the previous years. We can only speak to what we have seen and really understand kind of over the last 12 months for the Company or the projected 12 months. But in terms of again, we will focus on the luxury part of this line, as I just said before with Omar’s question I mean with Oliver's question is that our competitors here in the Italian luxury market are doing in the billions of euros.

And we have brand awareness and consumer following that gives us a platform to really be as good, if not better than some of these other brands. And it’s really interesting Donatella has built a very unique vision here at this company over the years, which is as I said before we’re part rock and roll, so we clearly appeal to a broad customer, we're young and fun and millennial and we’re very much glamorous. I mean Versace if you go by historically, Gianni was one of the first people who really brought high glamour to the runway and Donatella has always held true to that vision for the Company.

So, we look at those two brand DNA characteristics as giving us an opportunity to really talk to a very broad base of the customer. And you will see us from a merchandizing standpoint build that out even more developed and again we have incredible stores, incredible locations where we know we can do significantly more volume than we’re doing today given what our competitors are doing that’s really buildings away from us, so very, very positive platform to build from that standpoint. So, again we’re going to focus on the first line that’s where all of our initiatives will be focused. And we'll look at the portfolio and decide if there's rationalization needs to be done with that over the next few months or post when we close on the acquisition.

Tom, why don't you speak to the growth?

[Tom Edwards, CFO and COO]

Sure. So Kimberly in terms of growth over the last three years, I'd love to take it back a little bit further that the brand has grown very strongly over a longer time frame from 2010 to '18 it's been a double-digit CAGR of 12% moving from a $350 million business to the current forecasts of $850 million for this year, so tremendous growth over time for the overall business. Under Jonathan's leadership, there was a slight pause in '17. And then as John mentioned, growth and very significant growth coming into '18 had a double-digit rate for both overall revenues and comparable stores sale. And we see that growth is something that we're going to build on in terms of momentum and invest and as the key value drivers for the business.

[John Idol, Chairman and CEO]

And Kimberly also -- Kimberly, not to get into each year, but also during that slight pause, you have to understand that Jonathan closed a lot of stores that his predecessor had opened in some not very good locations and actually were wrong for the brand. So he's done an excellent job in cleaning up what was probably not looked at the appropriate way. And so, when look at that of what he accomplished as well as the strong increasing EBITDA in the Company and he has been here for basically two years. It's really extraordinary and the management team I have to give them compliments for that as well.

[Kimberly Greenberger, Morgan Stanley]

Okay. Thanks.

[Operator]

We will now take our next question from Dana Telsey from Telsey Advisory Group. Please go ahead.

[Dana Telsey, Telsey Advisory Group]

As you think about the acquisition of Versace and getting to that high teens EBITDA growth rate margin line that you've talked about. What is the path to get there? How should you look at the buckets for that to move to that level?

[John Idol, Chairman and CEO]

Thank you and good morning Dana. Dana, there's really three things that will help us get there. First and foremost, again, accessories by us being able to develop the Company to where accessories will penetrate at approximately 60% will have significant improvement on margin. And our luxury competitors that are here in Milan are all at that rate or greater. So, we feel very confident given our knowledge of that space and how we're going to develop that with the Company. And many long conversations and meetings with both Donatella and Jonathon, and everyone, is completely on board for what we're going to do.

And again, remember, we have Donatella's voice too. It's not just the designer, she is an iconic figure in modern social media today, and we're going to be able to use the power of her. Also, some of you watched the last runway show. We've had every major model who wants to come and be part of Versace's shows. And that's because some of the greatest models in the world started their careers here with Donatella. And so, she is viewed as an icon for many of those people, and that also gives us strong ability to put product on or with many of these celebrities. So we think we'll be able to socially amplify our accessories through Donatella through our association with models and celebrities.

And our consumers are, I think there’s a pent-up demand given the fact that there have been buying such a great amount of our ready to wear. So, it would make sense that we would be able to achieve that. So that’s the first part of the path. The second part is Versace has a family run business and they’ve done a wonderful job. What we believe, we’ll be able to bring many efficiencies to the Company and as Tom mentioned in his prepared remarks we’re not going to discuss at this point in time synergies in the group. But just some of the processes that we will bring to Versace, we believe it’s going to impact the margin of the Company.

And then lastly, we really think that the productivity of our stores is below where it needs to be. Again it’s in the luxury world with very solid number, but we could be at a much higher sales per square foot than we're at today. And we know that by doing that that will have a significant impact on the Company’s profitability. So we think those three initiatives which quite frankly, we’ve already been working with the management team on will come to together here over the next 12 months. Thank you, Dana.

[Operator]

We will now take our next question from Alexandra Walvis with Goldman Sachs. Please go ahead.

[Alexandra Walvis, Goldman Sachs]

We had a question about the shape of the store base. And firstly, what gives you the confidence the 300 stores is the right size of store base for this business? I believe you said in response to a prior question that you have been closing some stores in recent years. What gives you the confidence now that the opening is, there’s opportunity to open further stores? And then finally, will those new stores differ at all from the existing fleet or are you anticipating any material changes to the look and feel of size of the stores as you go through this process.

[John Idol, Chairman and CEO]

So number one, as I said earlier, Jonathan spent the last 24 months or so, really closing some stores that were in some wrong locations or had some bad leases or et cetera. He’s done a great job cleaning that up. So we have a few more to go that we will look to close over the next 12 to 18 months. Now that being said, we have such a huge runway of opportunity and locations where we don’t have stores in incredible markets. So I would give you the following examples Japan, the Company, I would present any significant revenue base in Japan. Years ago the Company, withdrew the brand from the marketplace for various reasons. And it’s, that is such an opportunity for us as a group and a company with very strong business with Michael Kors. Multi-hundreds of millions of dollars, we have a very strong business with Jimmy Choo.

So, we know the market and we think we can build the business there quite rapidly. Secondly, in Europe, there are many markets that the Company has not really developed in a significant way. So we will go into the marketplace and be able to move rapidly in opening stores there. Again, also in Korea, the Company basically has a very, very small business. So we think that’s a big opportunity for us. So when you look at the amount of locations. They’re going to be sitting on the same street as the best known luxury brands in the world. And some of our competitors actually have more stores than 300. We think that’s the right number for us, given where we want to be in terms of productivity per square foot on size of stores.

I would tell you that the newer stores we’re going to open will probably be on this front -- they won't be as large as some of the flagships that we have today. I think you can probably look at something around the 5,000 foot store, 4,000 to 5,000 foot as a close to kind of benchmark for us on a going forward basis. So when you model it, I would think in that kind of a range. So, we believe it also we do a lot of this research previously when we brought Jimmy Choo and assessing that model as well. So it was relatively easy for us to come in and assess the Versace opportunity given what we had done in terms of research with Jimmy Choo.

[Operator]

We will now take our next question from Chethan Mallela from Barclays. Please go ahead.

[Chethan Mallela, Barclays]

So you've talked about the opportunity to accelerate the e-commerce in omni-channel business for the Versace brand. And I think you mentioned it's relatively insignificant currently. It sounds like investing behind that channel for near term focus. But can you provide a little more detail on investment priorities. How you're think about the pace of development and just how that fasters into your margin outlook? And when you do your benchmarking, how large do you think this Chanel could be?

[John Idol, Chairman and CEO]

Thank you and good morning. I would tell you the following. Number one, we spent over $100 million Michael Kors developing a global e-commerce platform that we think is very robust. And we have mentioned in our previous calls that that platform has the capability of having other brands on it along with Michael Kors. And so we are going to work very rapidly to develop with the Versace company to come on to our platform. We have also got very, very good omni-channel capabilities. So from a systems standpoint, we will get Versace up to a much better position than they have today.

So between e-commerce, omni-channel, we believe that this will represent over time at least $100 million business for Versace online. Again so it'll take us some time to develop that. We also we'll be investing on different digital marketing initiatives that will drive consumers to the platform as well as further broadening the reach of the Versace. And again these are disciplines and initiatives that we think we know quite well at Michael Kors. And today also Jimmy Choo has a very robust both e-commerce and omni-channel capabilities. So we think that that something that the Company will benefit from.

[Operator]

We will now take our next question from Camilo Lyon from Canaccord Genuity. Please go ahead.

[Camilo Lyon, Canaccord Genuity]

John clearly, this is a brand that's bigger than the business that it's currently generating. I was curious to get your thoughts on what untapped opportunities from the customer perspective. You've touched on a little bit when you're describing the DNA and the heritage of the brand, but I just curious to see to hear how you think about reaching the new consumer and bringing the new consumer to the brand? And then secondly, you spoke much about the retail opportunity with the stores and how you expect to penetrate market that the brand is not currently represented. Is there a wholesale opportunity that also a part of this longer term plan?

[John Idol, Chairman and CEO]

So, the first interesting issue is that, I believe Versace is actually reaching its broader customer today than the revenues would indicate and we can only see that through some of this social media metrics. So, clearly there is a larger interest in the brand than the revenues are generating. So, we have obviously convert those metrics and we think one of the first things that we’re going to do is by getting the e-commerce capabilities up to speed much more quickly for the Company and then marketing through that channel. We’ll be able to generate increased revenues not only online, but in stores, as you know many companies consumer shop it make 80% of the purchase decision online, but quite frankly they’ve made 80% of the purchases in store.

Our merchandize stores are not robust enough online today and we need to be able to offer the full array of products of consumers we have, that we able to offer very, very fast service to that consumer. So we think that by amplifying our e-commerce capabilities that the Company will just, will have a much broader base along with the obviously CRM, the Company have a huge opportunity to develop a much bigger CRM base to market too. And again, our luxury competitors are doing a very good job with that today. They’re spending a lot of money on marketing directly to their consumers. And they have a very sophisticated database, and that’s going to be a big opportunity for us to work on with as a Versace team, and again we think we can bring that up to speed that to pretty quickly.

So, I think that getting brand awareness off to higher levels in certain markets like Japan, like Korea, like Germany those will be important things for us. But we have so much low hanging fruit today with the existing customers who are in love with the brand and quite frankly who are in love with Donatella that we can really kind of formal that to begin with. In terms of wholesale absolutely, this is going to be a big opportunity for the Company. And when I say wholesale this will be the luxury department stores in the world, so whether that's [Lexington] whether that's Harrods, whether that's Galeries Lafayette, whether that's a Bloomingdales. All the luxury stores around the world, we could have a stronger presence in, but that presence really being equal to our luxury Italian competitors. And there is clearly a void in the Company for that today.

Again that’s being said, what I’m so proud of Jonathan, Donatella and the team is, they focus on retail first, their own retail business. And Jonathan has done an amazing job of really organizing this company in a way that, that is more disciplined, that is focused on profitability and that is focused on driving up the sales performance in our existing stores. And all the metrics show that that’s all coming true with a reality. And he is really letting Donatella do what she does best, which is to tell the customers what’s exciting, what’s the next fashion inspiration, and why they want -- why that should have a Versace as a part of their wardrobe.

[Operator]

We will now take our next question Mark Altschwager from Baird. Please go ahead.

[Mark Altschwager, Baird]

Hi. Good morning and congratulations.

[John Idol, Chairman and CEO]

Operator, I can’t hear when you’re introducing people. I need you to speak up. Could you please say that again?

[Operator]

Please go ahead caller. Your line is open.

[Mark Altschwager, Baird]

This is Mark Altschwager from Baird. Hi, John, congratulations just wanted to ask about supply chain. It looks like nearly 80% of the growth you're planning at Versace is coming from men's and women's accessories and footwear. Just curious your assessment and the capabilities in place within Versace's existing supply chain to execute on that plan and to what extent are you looking to leverage Kors and Jimmy Choo supply chain in those areas? And then separately I wanted to quickly follow-up just on the margins long-term plans going for the high teens, EBITDA margin, that comparison to broader luxury landscaping and including Michael Kors that's in the low to even mid 20s, just maybe help us understand the delta there in terms of developing the long range goal and perhaps the opportunity to generate EBITDA margins, more in line with where Kors is today?

[John Idol, Chairman and CEO]

Thank you, Mark. A couple things, number one, as a company we now have a two of our --actually, small piece of Michael Kors and two piece, two of our brands now are heavily focused on manufacturing is made in Italy. So as a company, we will be embarking on developing a factory base that the Company will own. So, we think that's going to be -- we now have enough scale to create leverage on the manufacturing side. And so over the next 24 months, you will see us making some investments into actual ownership of factories to produce and control our product. And again that it's very much consistent with our luxury peers.

Secondly, we have -- definitely have fine power now with our existing factory base and some of our material suppliers. We know that that's going to flow through in all 3 companies both Michael Kors, Jimmy Choo and Versace. And again, I'll take us a little bit of time to get organized but we're very clear on what our strategy is and how we benefit from that as a group. In terms of the margin, we know that there are companies in the luxury space that have higher EBITDA margins than what our projections are.

We feel that given our goal to reach $2 billion and to have not only an accessories business, but also to have our historical ready-to-wear business. But that's a margin level that will not do anything to compromise quality. And we want that always to be at the forefront. Versace is known for that, whether it's a dress you buy, whether it’s some shirt you buy, whether it’s a beautifully made handbag or shoe, you always know when you buy Versace, it is incredible quality.

In fact Versace receives some of the highest resale of its products of any luxury goods company in the world when you look at it on some of the locations that resell luxury products. So, we know that's because of our quality, and we think that is something that we must maintain as we're building this company which has such an incredible history of craftsmanship that we maintain that and don't do anything so to lose that as we move forward. Thanks Mark.

[Operator]

We will now take our last question from Erinn Murphy from Piper Jaffray. Please go ahead.

[Erinn Murphy, Piper Jaffray]

I wanted to follow up on an earlier question on wholesale and just trying to understand the complexion of growth going forward. So could you just speak to how you’re thinking about the comp store sales assumptions from '19 and to '20? And then what your plan is for wholesale distribution growth? And then where does the licensing business fit today? And are there plans to grow that segment of your overall Versace business?

[John Idol, Chairman and CEO]

I’ll start with the last first. The licensing business, we have no plans on growing, obviously with our existing licensing, yes. We have no plans on adding any licensing business for the Company and consistent with Jimmy Choo and Michael Kors, we believe in manufacturing as much of our own product as we can ourselves with the exception of those products that are, have disciplines that don’t believe with the core competencies for us. So I wear fragrance et cetera. And we have incredible partners there. And by the way, the Company has a very, very large fragrance business, which again gives us another data point for how big this company could potentially be given the size of the fragrance business worldwide.

In terms of the comp store growth, we’re not going to be giving projections on Versace projected through your comps from growth at this point. We will be talking to you more in our February call, a little bit more directionally in terms of the financials. And then we will give you a full overview in-depth in our -- we will be conducting an Investor Day in June, where we’ll be really going into significant depth and you’ll meet some of the management team of Versace at that point in time. In terms of the wholesale business, it’s just an opportunity for us in, there’s probably 50 locations around the world.

Again, I think, I’ve mentioned a few the names of those places whether it’s Galeries Lafayette, Boulevard Haussmann or [indiscernible] or those are, where you will see the ground floors of these stores are basically 100% luxury. And they have a very, very high-end consumer shopping in those stores Versace will be a perfect complement for their offerings to their consumers. So again, that’s an early days on that thought process. We have to develop our accessories line to a place where it will be sought after by the consumer. And we think we’ll have the right tools to do that with Donatella at the helm of design and vision and communications, and she’ll really help us lead the consumer on that journey. We’re terribly excited about that opportunity for us.

And on that note, I want to say thank you for everyone joining us today on the call. We, Capri Holdings is now one of the largest global fashion luxury groups. We’re very, very proud of the management team and what we’ve put together in a very short period of time. We will remain focused on the three brands that we have right now. We are not going to be focused on any further acquisitions for the moment. Our priority will be to grow and deliver for our shareholders on the Versace acquisition to continue the growth of Jimmy Choo, which we believe, is on plan and to continue our efforts with Michael Kors, with runway 2020.

We believe that all those things along with our ability to quickly pay down the debt from the acquisition of Versace, will position this company for long-term revenue and earnings per share growth. Thank you for joining us today. Look forward to speaking to you in the future.

[Operator]

That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.