Okay, great. Thanks, everybody, for joining this morning. It's Matt Boss, Department Stores and Specialty Soft Lines here at J.P. Morgan. I'm happy to host this morning the management team from Capri Holdings. We have CEO and Chairman John Idol, as well as CFO and COO Tom Edwards. The format will be fireside chat with questions that I've compiled with feedback from investors on the line. With that, let's get started. John and Tom, thanks for joining us this morning. Maybe John to kick off, you've transformed into a global fashion luxury group. How do you envision Capri in the luxury space?
Good morning, Matt, thank you for hosting us today. Once again, I hope everyone who's on this call is safe and hopefully your families are as well. Matt, that's a really good question, and I think, as you know, a few years ago, we made a decision strategically to really diversify the company, and get much more significant exposure to the luxury space. We think that that's going to have a very strong long-term benefit to the company. We think that we have acquired two incredible luxury names. First being, the Versace name, and second being the Jimmy Choo name. One of the great things about the Versace acquisition is not only does it give us really the single biggest growth opportunity in this company, in a space that is continuing to grow. This year it will not grow, historically has continued to grow.
Is that it also gives us a very strong exposure to the men's business, which is not an area that the company has had a significant amount of exposure to. It also deepens our trajectory in China with both Versace and Jimmy Choo. As you know, luxury growth in that market has been very robust prior to the pandemic and post the pandemic. We really believe that the strategic acquisitions that we've made, while we made the decision to really reduce the profitability of both companies to zero as we made some strategic investments. In the case of Versace, we had to do some cleanup work, to shut down some additional lines that the company had. We had some store closures, and some other work that we had to do on the back end of the business, and that's really behind us now.
The same thing with Jimmy Choo, less on the store side, but we had some structural things that we needed to do and some inventories we had to clean up, et cetera. That's all behind us now. One of the great things that we believe over the next few years is that Versace and Jimmy Choo will account for north of a third of our revenues. In terms of profitability, approximately a third of our profitability. That's going to be a pretty significant improvement to the overall EPS over time with this company if we're able to achieve our objectives. In the case of Versace, we've said we think that company will approach $2 billion in revenues from the pre-pandemic levels that were at $800 and change. Jimmy Choo, which was just about $600 million, going to $1 billion.
If we can get to mid-teens and maybe even north of that in operating profit, that's going to be quite significant inflection for the company. Again, we've invested in two, what we think are very powerful names in the luxury business. We think that the trajectory of those two companies will be quite robust, post the pandemic, sadly, but quite robust and really give the company long-term earnings growth.
That's great. Maybe larger picture speaking to stay on the topic of luxury, how do you see the recovery of the luxury business overall?
Matt, as you know, the luxury business has really seen many of these cycles before. They've seen multiple downturns economically, globally. In our business and in the world of fashion, and luxury is obviously the higher part of that pinnacle, it's had a more robust recovery than any of the other areas across the entire fashion business. We're very pleased that we've made the investments in, again, the luxury world, and it's really grown at the mid-single digits historically year-on-year. We also believe that while it will shrink somewhere in the 3%-5% range this year globally, again, the projections are that it will robustly improve, beginning as early as next calendar year. Again, as you know, many of our competitors in the market space do 40-plus% of their business in the Asia market.
That market, in particular mainland China, has seen a significant recovery and actually pretty strong growth in that market. Now, we know some of that is coming from lack of tourism particularly in the Europe market. I think we feel strongly that the luxury business will continue to recover as it has done historically. As you also know, in Asia, in particular, it suffered a number of these health crisis as well and recovered very strong in those markets. We have a very good feeling about what's going to happen. I also might add, and I know we'll probably talk about this later. We feel so strongly about the luxury market that we're going to continue to take price increases in the Michael Kors brand significant. Our prices are going to go up well north of 15%, and maybe we could talk about that later.
Again, we're going to keep inching and pushing the Michael Kors brand up into that market as well.
Great. Maybe to help size up the market, how do you frame the size and growth of the market that Capri operates in? Could you break this down maybe both between the accessible luxury market that Michael Kors operates in and the true luxury market that Versace and Jimmy Choo operate in?
That's a great question, Matt, and I smile because you and I had this discussion the other day, where you had asked me, you said, "John, the accessible luxury market is shrinking in North America." I said, "Well, sort of, but not really." I said, "In fact, the accessories market in North America is growing because when you add in the "luxury" part of the market, the market's robustly growing in dollars." Again, I know many times people think that ourselves and one of our large competitors only belong in the accessible luxury market. I would debate that, because what's happened actually is, we've seen customers migrate from at least our brand into many of our luxury competitors, and you know who those names are.
People are stretching up, which interestingly enough, gives us, and gave us a lot of comfort in raising our prices, which we've been doing for 12 months, and more to come. I think that the consumer wants to invest in a brand or a luxury house that has great meaning, great history to it. We believe that all three of our companies compete in that world. When we think about the world, we think about accessories. Accessories are about a $70 billion market worldwide. Obviously, when we look at growth, Asia is the strongest growth market, and there are projections over time that say that that market will represent well north of 50% of the global consumption. Again, we as an organization across all three of our luxury houses have to stay focused on China.
We have great opportunity to grow all of our brands in Japan. Southeast Asia has become quite a significant market over the years. Second biggest market, still the first today, but probably will reverse itself, is North America, and North America is going to continue to grow as well. We feel, again, strong about where we're going. Again, maybe we'll talk more about it, but Versace and Jimmy Choo, one of the cornerstones of both of those companies' growth is the luxury accessories market, which, as I said earlier, is projected to continue to grow 5%- 6% a year, and we think we'll participate in that. When we think about the global accessories market, we have to compete for market share and mind share. Yes, one of our brands, the Michael Kors brand, actually has two levels of product.
First off, we have the Michael Kors Collection, which is luxury, and then we have the MICHAEL Michael Kors brand, which is a slightly lower pricing. We have to remember that consumers really look across the spectrum, and when she's going to invest in an accessory or a sneaker, as you know, luxury sneakers are very strong today. You've got to really tell an incredible brand story around that. I think that's one of the areas where we're quite frankly blessed to have Donatella Versace still at the helm and very engaged. We're blessed to have Michael Kors, who is downstairs right now in our offices with us, and Sandra Choi, who's one of the original founders of Jimmy Choo. Still driving that vision and engagement with the consumer, in a market that's growing.
I think we feel very positive about the opportunity that we're competing in a market that's growing.
Okay. That makes a lot of sense. Geographically, you touched on Asia, but maybe following some of the recently announced lockdown measures across Europe, can you update us on what proportion of Europe stores are open today and just the overall sentiment in Europe today that you're seeing both from consumers and your wholesale partners?
Sure. Again, maybe I'll just take a second to say for everyone on this call, what we're seeing today is strong, robust growth, in particular in mainland China. I think we're, again, most of the luxury companies are seeing a similar trend. We're seeing recovery in some of the Japan and Korea market. Southeast Asia continues to be soft. North America has been relatively robust. I think you heard us talk about the fact that Versace, which globally had an increase in retail sales this quarter, which is really extraordinary, but quite frankly, on par with our luxury competitors. Jimmy Choo also had strong growth here in North America. Michael Kors was still down. North America is the second healthiest market in the world for, I think, all of us in the global fashion luxury business.
Europe, even before the recently announced lockdowns and restrictions in certain countries, was struggling for us across all three of the brands in the group as the most challenged market. I would say that was led primarily by the lack or complete lockdown of tourism travel in the major cities. In London and in Paris, Madrid, Barcelona, Milan, Rome. These are super important cities to all of us in the luxury business. There just was no tourism there. We did see, like we saw in many of our other retail, and this is a brick and mortar positive, we saw tremendous engagement with local consumers and our sales associates, who I want to give an incredible shout-out to around the world, who are doing a spectacular job, have really been engaging with consumers on a local basis.
We always had a pretty good relationship in that world. Things like Zoom and some other tools that we have inside of our stores have given us the ability to interact with that customer in store, online or at home. Clearly Europe now with a 30-day lockdown and six or seven very important countries for us, is going to be a negative, and I think we talked about that in our earnings call. We hope that that doesn't go any further. We also believe that we will pick up some of that business in our e-commerce channel and some countries we're actually allowed to go in and do some omnichannel work as well, and ship from store. I think that, I call it a wait-and-see situation. Obviously, we've got the all-important month of December coming up.
We believe Europe is going to be challenged, and maybe I'm the most pessimistic, but I think it'll be at least 18 months until we see that really return, because we need air travel to return. As you and I were speaking earlier, I think we're all feeling much more confident knowing that there is a vaccine that's coming to market. I don't think any of us know the exact timeline of how and where that gets rolled out to and how the distribution of that happens. We're all hopeful that by this time next year, a significant amount of people around the globe will have taken the vaccine. It appears the efficacy rates are quite high. That will give the opportunity for social interaction, again, people to go out and move around, and then hopefully air travel.
I think Europe, to a degree, not to a full degree, but to a degree, is going to go as air travel goes, and also our travel retail business. In conclusion, we believe that that's the most challenged market for us and going to take the longest period of time to recover.
Okay. John, maybe to take it brand by brand and dig a little bit deeper. Maybe first on Versace. Could you walk through the path to more than doubling the size of the brand to $2 billion in sales, as you outlined? Maybe where we stand today on progress with your key growth drivers. I think you've outlined accessories, digital, and new stores.
Matt, again, as you and I have spoken about recently, there's many examples in the luxury industry of businesses going from as small as $40 million, $50 million over a 10-year period of time to $2 billion. There are examples of one of our competitors who—an Italian competitor— who went from $3 billion to over $10 billion in a five-year window of time. there's lots of examples of luxury companies being able to grow. obviously the first thing you have to have is a brand that is desirable. we know for sure that Versace has that. It's one of the most globally recognized luxury brands. We rank in terms of awareness with the likes of Chanel, Hermès, Vuitton, Gucci, etc . We're in there, and in many cases, we're actually even higher than some of those.
That gives us incredible belief that we have the opportunity to take this business to a much bigger level. The company previous, really to our current CEO, Jonathan Akeroyd, was run more as a growing business, but a bit more of a family business. There's nothing wrong with that. That's a very positive thing, quite successful, and has really grown almost every single year of its history, which is quite interesting. We're taking a different approach to this business. There are very few successful luxury companies that have gone to a $2 billion level that don't have a significant accessories business. It accounts for typically around 50% of its revenues. Interesting, the Versace company has never had a significant accessories business.
I want to say that in my conversations when we first acquired the company with Donatella, and in particular, Jonathan as well, they're both excited and engaged to get at this. Donatella, right out of the gates, came up with our new Barocco V, which we're very pleased with because the company actually didn't have a logo. It has an icon with the Medusa, but really didn't have a logo. That's something, consumers, when you're paying a lot of money for a luxury product, they want to have an identification for what they're having and wearing. All of our luxury competitors have a logo. I'm very pleased with what we've come up with and how quickly that's come into place.
We've made some investments as part of the, bringing our operating margins down, incredible design talent, who've joined the company. These are designers who know the luxury business quite well and the accessories business in particular. We're off to a very good start. If you get a chance to go into our stores, you'll see, especially in the renovated stores, because we are renovating the entire fleet worldwide. Approximately a third of the space in all the stores now is dedicated toward accessories. The company didn't even have the space dedicated towards the accessories area. Proper dedication to accessories, small leather goods, great new logo. Hopefully, you've seen some of our Instagram and some of our emails going out. Lots of activity around accessories and how we're going to market that.
I dare say that, we have a couple of the most powerful voices in the fashion marketplace in Donatella Versace and Michael Kors. We have the opportunity to lead and to influence, and I believe we're going to be able to do that. Early indications show that we are. I also want to add, when I said to you, there's a lot of examples of smaller companies getting to that $2 billion and companies that are larger getting to that. We're operating off of a fairly sizable base. I mean, to have a $900 million business, that's not a small business to start from the luxury category. Now to be able to focus. We'll have probably our entire fleet renovated within the next 24 months.
We're going to be coming from, I think, a position of strength, which will really help us grow. Not only are we going to renovate the stores, but we have a very small fleet. We have 210, 215 stores. Most of our luxury competitors have up to 400 stores. We're not going to go that big. We all know what's happened to brick and mortar and how we need to be much more careful. We will open up another 80 plus stores, over the time period. Again, we're going to kind of take a pause on that given that where we are in the COVID cycle. That's going to be a great opportunity for us. The other area is e-commerce. Again, Michael Kors is very good at e-commerce. We're one of the best players in this industry in that.
Jimmy Choo happens to be quite good in this area and space. Versace is getting good, but we're not quite there yet. We're going to get there. When we get that piece of our operations really running at the levels that we want, there's going to be tremendous growth opportunity for us. I reported that we saw triple-digit growth in Versace last quarter, which is incredible in e-commerce, in this environment. Our database grew again, close to 20%. Again, customers are engaging with us. We'll have the proper omni-channel capabilities really towards middle of next year, where we'll be able to ship from our stores and do click and collect, et c. From an operational standpoint, Versace is going to be in a great place to be able to do that.
Additionally, I said on our earlier call, the men's opportunity is something quite substantial. If you look at many of our luxury competitors, they're running in the 30%+ range in menswear. These are on big numbers. We think that's a great opportunity for us. Of course, we've got our ability to really grow our footwear business and our active category, which we reported on in our previous call, which as you know, in luxury, is becoming an incredibly important category, has seen very strong growth for us. I think Versace, again, it's not all going to happen in 12 months or 18 months, but the pathway is very clear, and I think we've got the management team in place to execute against that.
If we do, and we do what we're going to do on Jimmy Choo, then we've made a very good strategic move for this company.
Perfect. That's actually a great segue to move to Jimmy Choo. You've targeted to double the size of that brand to $1 billion in sales. Could you just walk through the drivers of that sales target, progress that you've made to date on Jimmy Choo and just what's the timeline to get there?
Thank you. Jimmy Choo is a company. When we first started our decision to move into the luxury space, literally, it must have been 90 days after our board meeting. All of a sudden, Jimmy Choo became available. We made a very quick decision to acquire this brand. I might add, I know that many people in the financial industry think that we've overpaid for Versace and Jimmy Choo, and I would contest that. While we paid approximately 20 times multiple and approximately two times sales, there's a lot of evidence in the industry of those acquisitions being made, and in particular by the largest competitor in the luxury space who's done extraordinarily well with acquisitions at those type of levels. Again, we feel very comfortable in how and the prices that we acquired these companies.
Jimmy Choo is going to be 25 years old next year, which we're excited about. Very iconic brand. As you know, it's a predominantly footwear company. It, at one point in time, had quite a sizable accessories business. Over the years, I don't think it was the company's priority. The company also never had a logo to drive off of. Today, again, as I've made clear, every luxury company that is very successful, there's one that kind of is famous today that doesn't have it, but everyone basically has something that identifies. When you've paid the kind of prices that you've paid for this product, that you have an identification. We very quickly came up with the 'JC' logo that you've seen on our Varenne accessories collection and on many of our footwear styles.
That's taken off quite nicely for us, so we're very pleased with it. You're going to see a very robust expansion of that program. Just got off the phone with our design teams a couple of days ago. If I'm smiling, it's because I really think they hit it. We're in a really good place. We'll be accelerating that quite significantly. That's going to be, over time, up to 50% of this company's business. Again, there's other examples of companies that have been able to do that. Again, this will be a little bit more challenging than Versace. Versace obviously has a very powerful voice, has incredible brand awareness. Interestingly enough, Jimmy Choo has a similar outweighed brand awareness versus the size of its company. What gives us great confidence is that we're already in her closet.
When you talk to luxury customers, probably about 60% of them plus have Jimmy Choo in their closet. What we need to do is to work harder to get them to our website to understand that we offer more than shoes, and we have a very sizable fragrance and eyewear business. We need to do more to get her engaged. That's, I think, something the new management team, led by Hannah Colman, Chief Executive Officer, will really be focused on, is engaging storytelling. As a luxury brand, you have to story tell. The other thing that we'll be really pushing on is our heritage as being a London luxury company. The last thing is Jimmy Choo, and I've talked about it before the pandemic. The dress shoe business has been challenged.
As we've mentioned, the sneaker or active business in the luxury world has become very sizable. We need to do a better job to compete in that, and we're doing that now. We were a little bit behind. We're not quite where we want to be yet, but we're moving rapidly. Active is continuing to grow in penetration to the total. In fact, one of our active styles called Hawaii is our best-selling item in the company. We're making that move, and we're really pushing forward with our accessories. Again, we were touching on $600 million. Jimmy Choo, for 23 years, not this past year, but for 23 years, grew every single year. We don't need tremendous compounded growth there. We need that 10%-15% compounded growth.
I think we're going to reach the $1 billion relatively, I won't say easily, but it's consistently, given the company's history and heritage. Again, both of these companies, Versace and Jimmy Choo, we believe we can attain mid-teen operating margins. Jimmy Choo was around 11% when we bought it. For us to get to 15% and above is not really going to be a huge leap of effort for us. Versace was around eight or nine. Again, and those are not best-in-class operating margins. Imagine if we could actually get to best-in-class operating margins, which is north of 20%. I think we'd rather be a little bit conservative in our own internal planning and hopefully see the upside to that.
Great. Maybe lastly on the Michael Kors brand. You now see the brand as a $4 billion brand longer term. I think that's down from $5 billion prior projection. What drove the billion-dollar reduction in your view of that long-term size for the Michael Kors brand?
Yeah, very good question. We thought it was important, at a recent conference that we spoke at, to reset the expectation of the Michael Kors. It was really driven by two things. First and foremost, our wholesale business is going to decline, and we've talked about that, and I know that many of the people on this call are excited to hear that. We've always said and been consistent that we're very proud and enthusiastic, and we think our wholesale partners are spectacular. Whether it's Selfridges, Harrods, Galeries Lafayette or whether it's Neiman's and Saks and Macy's and Dillard's, these are great partners. They've been terrific with us. We think they represent and present the brand in an outstanding way. That being said, we'll start with North America. North America, we have seen many of our partners closing door locations.
That's going to impact us. I've had the question asked by me, how much of that transfers back into the e-commerce channel or to another store? We see it predominantly transferred to the e-commerce channel. Most of our North American department store partners, we're doing north of 40% of our business and in some cases, 50% of our business online today. It's not that those doors aren't important, they are, but as those stores close, we don't know where the volume goes. We see about 25% of it come back to e-commerce. The rest of it, we don't actually understand where it goes. That volume will go away. We expect about $500 million of that billion reset will have come from wholesale. The second part of wholesale will also be lower.
Until the travel retail business comes back, that's a significant number for us on a global basis. As I've mentioned before, again, many people think of us only as a North American wholesale business. That's actually not correct. We do a very significant part of our business in North American wholesale. Our second biggest part of our business is actually Europe wholesale, which that will also see a decline. Many of our specialty stores are closing there for obvious reasons. Everything from powerful e-commerce only players to what's happening in this crisis, and some of the disintermediation. Our third largest business is the tourist business, where we have close to 200 locations around the world, that are operated by other partners. Those are, for all intents and purposes, shut down. We don't expect the travel retail business to come back for 24 months now.
It will ease back up to a level, but we don't know what that level is actually going to look like in the future. We felt it was prudent to share with the financial community, the reduction in what we think is the wholesale business. Lastly, I forgot to mention, there have been quite a few bankruptcies that have seen some of our partners go out of business, and so that's an impact as well. The other $half a billion comes from our retail business. First piece of it is the 150 stores that we recently announced that we're going to close over a 24-month period of time. Those stores, on average, do about $1 million. You can figure that number out pretty quickly. Again, while we're going to lose the revenue, we'll actually increase in profitability because all those stores are unprofitable today.
As you recall, we've said that in the Michael Kors, we will actually see operating margin expansion over the next couple of years from its historic 20% levels to something north of that, maybe as high as 25% over the next couple of years. Part of that is going to be based upon our fleet optimization program. The balance of that is just us taking a more prudent view of the North American market. It will still grow for us in retail. We just think it's going to be a little bit slower than we had anticipated. Lastly, the European market, which we believe is going to be, as I said, 18 months minimum until that gets back to a level that we think is appropriate.
That, again, brings us back to that comment that I made earlier, that if you think of Michael Kors as a $4 billion business and Versace and Jimmy Choo as $2 billion and $1 billion, you're going to be dealing with well north of a third of our revenues coming from the luxury category. About a third of the operating profits will come from that world. As I've also said, while we believe next year we won't reach pre-pandemic earnings per share, we believe that post next year, we will exceed pre-pandemic earnings per share. That's based upon the reshaping of the business and the way we're looking at it going forward.
Great. John, one of the more interesting things recently has been average unit retail, AUR. What inning do you think you're in in increasing AUR at the Michael Kors brand, and do you believe AUR can continue to increase multi-year? If so, what gives you the confidence in that?
Sure. I'll just go through the three houses. The first two will be quick. Versace, we are where we want to be in pricing. I think that one of the greatest things that the pandemic has taught us is we can do almost the same amount of business, and in the case of Versace, we're actually doing more in our own retail stores with line sizes that are 30-plus% smaller. That's going to raise the gross margin at Versace over time. We're very excited about the results that we're seeing there. At Jimmy Choo, which is very much like Michael Kors, we've always had this philosophy that we should be slightly below the marketplace. Jimmy Choo is underpriced versus our luxury peers by a considerable amount. We started the price increases in September. We've seen very little, if any, pushback from that.
There'll be more price increases through the balance of the year, and we will end those price increases by the end of next calendar year. Most of it will be complete by September. Again, those prices are going to go up similarly to Michael Kors, 10%, 15%. Again, we're just going to get to competitive levels. Which really, first thing that our new CEO asked me was, "Is this a strategy that you would endorse?" I said, "Absolutely. This makes all the sense in the world." Again, Jimmy Choo has, I believe, a powerful enough brand that the consumer wants our product, interestingly enough, not only for design, but we have one of the best fits in footwear in the luxury business. We feel good about that. In Michael Kors, as I said, we've been raising prices for about a year.
You'll see more significant price increases starting in January through the end of calendar year. Again, it will only get us to competitive pricing. Over time, we could possibly be the most expensive player in this world. Again, we are led by, I think, the greatest American designer in Michael Kors. He continues to demonstrate his talent, and his drive for growing this company. As I said to you, he was the first one calling me asking us to go back to work during the pandemic. Michael's been here. We're open generally around three days a week, and Michael's here with the design teams, and he's never stopped driving this company and all of our talented teams for great success and for innovation and for excitement for the customer.
When you look at how our accessories business, which is our lead category for the company, while revenues were down for the Michael Kors brand about 27%, accessories was significantly better than that. It was also when I look at our Michael Kors signature business, it's been extraordinary. Two years ago, I set out on fixing something that I had personally made a mistake on and really walking away from that category, and de-emphasizing it for the company. I believe it was an impact on us. We've done exactly the opposite, and now we're really leading, and the sell-throughs are great, not only in our own stores, but our wholesale partners online, and in the midst of us taking price increases.
I feel really good about what we're doing, and again, I don't think it's hugely going to put us in a position where we're not competitive. In fact, it'll put us, quite frankly, competitive. Again, that's going to be part of the margin expansion story that you're seeing happening. We believe that margin expansion story is not only for this year, but it's going to be multi-year. The impact is exciting, and our teams are behind it. By the end of next year, we should be complete with that price increase strategy.
Perfect. Another great segue. On the margin front, can you break down your long-term EBIT margin targets? It's mid-teens for Versace and Jimmy Choo, and then more than 20% for Michael Kors. Just the drivers and the timeline you think is reasonable to get there.
I'm going to turn that question over to Tom.
Thanks, John, and thanks, Matt. I'd like to start with Versace and Jimmy Choo, because there are some consistent drivers across both brands to get to a mid-teens operating margin. As John mentioned, that's not far from where they were historically, and compared to peers, it's very reasonable and realistic target, as peers could be significantly higher, 22% up to 40% in the luxury market. The first thing is the growth of the accessories business. That is a critical part of both the businesses' strategies going forward. We have already begun to work on both of them and have seen traction. As that business grows, it comes with a higher gross margin and a lot of other efficiencies associated with it. We think that that's important and critical to our growth profile and margin story.
The second piece is really improving store productivity, and there are a number of components to this. At the core of it is product, and as John mentioned, it's increasing, for instance, the penetration of sneakers or increasing the breadth of a core offering across both businesses, and that will improve our productivity. The second is the build-out in omni-channel capability. Jimmy Choo is fairly advanced in this. Versace is in the process right now of launching in Europe and soon to be in the U.S. There's a lot of opportunity here to continue to build that out. Linked to that is clienteling, which we're building out, of course, across all our brands, but will certainly help in the luxury market. Pricing for Jimmy Choo, as John mentioned as well, will help increase productivity.
Above all of this is the database size and the extensive brand awareness for both brands, which are very large and frankly, outsized for the size of their business compared to peers. We think we'll be able to leverage this and build on that extensive awareness and engagement with our consumers. As that occurs, we'll leverage sales growth on SG&A. Expect to see SG&A leverage over time and normalized investments as we've made a number of investments and changes in the businesses and cleaned up, so to speak, some of the things that we wanted to work on already. We'll see that benefit. Would expect to see this improve over the course of the next several years. Expect year-over-year improvement for both brands. When we turn to Michael Kors, Michael Kors gross margins were 20% last year.
We expect to be at that level or above, up to 25% over time. When we look at the components, the first piece is gross margin. As John mentioned just before this, we do expect to see a multi-year progression in gross margin. It starts with AUR, led by pricing as well as higher full-price sell-throughs, which is led by better inventory management and lower SKUs as we really turn inventory a little faster and manage the overall business with a lower number of product out there. The second is manufacturing efficiencies. We expect to see this as we have in the past, but would continue to see it in the future. Procurement savings around raw materials and leather procurement. As one of the largest procurement and buyers of these products across the globe in the luxury space.
In gross margin, expect to see a multi-year expansion. When we look at costs, we've already streamlined the organization, and prior to COVID, Michael Kors was seeing a year-over-year decline in SG&A. We would expect that to continue. In terms of managing our SG&A, adding to that is the additional fleet optimization of closing 150 unprofitable stores. Then finally, for Michael Kors growth in Asia, this will benefit all three of our brands. In Michael Kors, Asia is a higher gross margin, higher operating margin business, and that's going to be a structural tailwind over the next several years, both for that brand, for Versace, Jimmy Choo, and the overall Capri Holdings. In terms of timeline for Michael Kors, since we've been there as last year, we expect that that will be a little faster timeline than the other brands.
Overall, expect to see margin expansion year-over-year over the next several years.
Great. Maybe lastly, to close, from a balance sheet perspective, could you just update us on your capital allocation priorities, how we should think about the pace of debt pay down from here?
Sure. Happy to do that, Matt. First, I'd start with our free cash flow generation, and it's been robust in the past at over $600 million. Over the course of COVID, in the first half of this year, we've been free cash flow positive in both quarters. We would expect to see the pace of that increase in the back half of this year and then expand even further as recovery pace out of COVID accelerates into next year. Our first priority is always to invest in our current business, so invest in the plans, the capital, marketing and other activities to support the business and execute our current growth plans. Second priority is to pay down debt. As we get into the back half of this year with higher free cash flow, we would expect to pay down even more debt.
Next year, with that continued progression, we'll be positioned to pay down even more. That's the second priority. Third is a share repurchase, and that's to return cash to shareholders. It certainly supports and demonstrates in the past our strong free cash flow generation. In the past, we've also clearly been able to generate cash, pay down debt, and return cash to shareholders at the same time. Longer term, we would be open to another luxury acquisition, and certainly after COVID and integrating Versace, Jimmy Choo, and paying down some debt. That was definitely something that could be added to the platform and be considered in the future.
Great. Well, look, I think this is a perfect way to, and place to close it. John, Tom, thanks again for your time and transparency. Stay safe and best of luck navigating this continued changing dynamic across the board.
Thank you very much, Matt, and thank you for hosting us.