Q4 2020 Tapestry Inc Earnings Call

[music].

Good day and welcome to this tapestry conference call.

Today's call is being recorded.

All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question and answer session.

If he would like to ask a question. During this time. Please press Star then the number one on your telephone keypad.

If your question has been answered and you wish to remove yourself from the Q plus the town key.

Yes that you please pick up your handset to allow optimal sound quality.

At this time for opening remarks, and introductions I would like to turn the call over to the Vice President of Investor Relations at Tapestry Kristina Cologne.

Good morning, Thank you for joining with me today to discuss our fourth quarter and yearend results as well, there's gotta, he's an outlook or join for voice route how the street interim Chief Executive Officer, Ambrish, I resonate catheters interim Chief Financial Officer, Pastime, President and interim CEO and brand President coach.

Ladies Frazier CEO and brand President <unk>, CEO, and George Yes, Arnie CEO and brand President of Stuart Weitzman.

Before we begin we must went out with this conference call will involve certain forward looking statements within the meaning of the private Securities Litigation Reform Act.

Hi, good production for business in the current or future quarters or fiscal year.

Forward looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward looking statement. Please refer to our annual report on form 10-K, our most recent quarterly report on form 10-Q, and the press release me issued this morning and or other filings with the Securities Exchange Commission.

For a complete last compress another important factors that could impact our future results and performance.

Non-GAAP measures are included in our comments today and in our presentation Slide you may find the corresponding GAAP financial information as is always the her latest reconciliation on our website www dot type of free Dot com forward class investors and then viewing the earnings release in the presentation posted today.

Now, let me outline the speakers and topics for this conference call Joanne will begin with a brief recap of our fourth quarter and yearend results for tapestry. She will then provide an overview of our multiyear growth agenda, Todd blazing Jordi I will speak to our individual brand strategies and initiatives.

Andrea will continue but our financial herself and our priorities going forward. Following that we will hold a question answer session. After today, we will conclude with brief closing remark.

I'd now like to turn it over chose Joanne Crevoiserat tapestry CEO.

Thank you and good morning, everyone I'm honored to have the opportunity speak with you today is cabinetry CEO, particularly given this pivotal moment in the company's history.

Have a passion for business and our brands and I see tremendous opportunity ahead.

In addition to having a portfolio of three strong brands tapestry has built a powerful platform to enable our brands to achieve higher heights than they could on their own.

Today I'll be sharing the work we're doing to strengthen this platform through the acceleration program that we announced this morning.

Programming aptly named as it will accelerate our path to stronger growth in operating margins in each of our brands in the years to comp.

I'm pleased to be joined on the call by our brand CEO is all of whom have significant experience and building businesses and brands.

Together, we've been hard at work laying the foundation of this plan and I'm excited to have Todd listen Giorgio share more details about the opportunities we see in each of our brands moving forward.

Over the past few months tapestry has been confronted by significant change both externally and internally.

Amidst these changes our steadfast commitment to our purpose in values as well is focused on our multiyear strategic agenda. It remains constant.

Looking forward I'm confident that tapestries next chapter of growth is ours too right.

Let me start by sharing the guiding principles of tapestries acceleration program, which include first sharpening our focus on the consumer.

Second leveraging data and leading with a digital first mindset and finally transforming into a leaner and more responsive organization.

These principles both in form our strategies and focus our execution, which will feel desire for coach keep speed and Stuart Weitzman driving accelerated revenue growth higher gross margins and substantial operating leverage across tapestries portfolio.

Before discussing the details of our strategic plan I want to briefly touch on the key financial highlights of our fourth quarter results.

We exceeded internal expectations across key metrics, demonstrating the power of our unique brand and the decisive actions taken to adapt our business to the rapidly evolving environment.

Our teams moved quickly to better support and engage consumers leveraging social and digital capabilities.

And our customers responded with digital growth, increasing triple digits year over year.

Performance in mainland China was also a bright spot returning to positive growth in the quarter.

We made progress in safely reopening our stores globally with the vast majority of our fleet fully open an operational by the end of the fiscal year.

Importantly, we delivered significantly better than expected margins by maintaining a disciplined promotional strategy, while implementing effective cost management initiatives.

We ended the year in a solid liquidity position with $1.4 billion in cash, reflecting the health of our balance sheet and inventories well position heading into the new fiscal year.

I'm incredibly proud of our teams passion resilience in focus during these unprecedented times.

Our people are the key to our future success and I'm confident that we will continue to execute at a high level as we move forward.

Further I'm convinced that tapestries ability to weather the challenges over the past few months is due impart to our culture of embracing diversity.

We've always strive to contribute to world that is inclusive we understand that we're better together with different voices life experiences in perspective allow us to develop entirely new ideas solutions and products. This principle drives everything that we do and it is embedded in the DNA of our company and in each of our brands.

Before jumping into the key pillars of our acceleration program I want to provide some context for the work we've been doing.

We began a comprehensive review of our business in the fall of last year. This diagnostic work crystallize the path to fuel accelerated growth for tapestry and each of our brands.

Of course, we're now clearly operating in a different environment, then when we began that review.

However, as I mentioned earlier, the changing landscape has not changed our priorities.

In fact, if it's been a catalyst to accelerate them.

I'll now walk you through the key elements of our acceleration program, which serve as shared priorities across our organization.

First we're sharpening our focus on the consumer.

We will operate with a clearly articulated purpose for each of our brands in an unwavering focus on the consumer at the core of everything we do.

Authentically engaging consumers is foundational to the success of any brand and we have strong brands with rich heritage to build from in this work.

To ensure that we deliver on the potential of our brands were more clearly defining the distinctive brand equities in key customer segments for each of our brands.

Clarity will guide decision, making and it will drive stronger consistent execution, it all brand touch points and deeper engagement with consumers.

This is critically important because we understand that to win in today's environment the bars high.

Tumors have more choice than ever before and consumers priorities are changing their increasingly driven by their values are more connected and seek brands with authenticity that engage seamlessly into line with their values.

Our three powerful brands, all with authentic heritage and distinctive positioning in the market are well positioned to thrive in this context.

We will deepen our connection with our consumers through our grounding and purpose authentic principles inherited and our relentless focus on the omni channel experience.

Todd lives in Georgia will expand on the specific work happening in each brand in a few minutes.

And to keep that customer friendly center, our second priority is to become more data driven and lead with a digital first mindset.

We are building industry, leading data and analytics capabilities in will operate with a digital first mindset to drive decision, making increases efficiency and personalize the consumer experience.

As we look to build on our strong foundation, we are focused on changing not just what we do but how we do it.

We understand that leveraging insight about our consumer requires us to become more sophisticated users of the data that we have which is why we're embedding data driven decision, making throughout the value chain.

It's really touches all aspects of our business, including product design development merchandise planning marketing and pricing.

For example, we're leveraging data to inform assortment choices at a store level to better reflect local consumer preferences, driving higher you ours and productivity.

In another example, where more dynamically influencing our marketing running small test to understand consumer response, measuring our results iterative process in scaling wins.

As we continue to develop resources and processes, our teams will be armed with more tools for real time measurement and analytics, where empowering them to champion. This test and learn approach that allows us together, new information quickly and move with speed to respond to changes in consumer preferences and demand.

Perhaps most importantly leaning into the momentum that we're driving in our digital channels, we will offer immersive customer experiences across our E commerce and social platforms I've been so impressed with the way. Our teams have responded to recent challenges in the innovation they've introduced to engage consumers over digital and social media.

Platforms, reaching consumers, where they are and how they want to engage with us.

We've seen tremendous traction across our digital channels as a result, evidenced in part by the recruitment of new younger customers to our brand at an accelerated rate.

In fact in the fourth quarter alone, we recruited nearly 1 million new customers across brands in North America through our digital channels.

We're also reengaging lapsed customers, who are shopping with our brands.

Not only are we driving revenue growth online, but we're driving profitability as well as our digital businesses carry higher operating margins in their respective bricks and mortar channels.

At the same time, we recognize the physical stores will remain an important touch point in the consumer shopping experience.

However, we are reevaluating the role of stores through an omni channel lender in the context of the evolving consumer backdrop.

We were taking a rigorous approach to assessing our brick and mortar fleet by raising the bar on profitability thresholds.

Our focus is to improve profitability across our fleet, while delivering a consistent brand experience for our increasingly omni channel consumer.

Finally, we intend to transform tapestry into a leaner and more responsive organization.

As part of this works, we reduced our global corporate headcount cost by 20% on a run rate basis.

As a result, we are emerging as a more streamlined organization that will drive faster decision, making leveraging scale and best practices.

In the near term this better aligns our cost base with current demand environment and over the long term it will support operating leverage and profitable growth.

We believe these actions will serve to unlock the potential of our global team and brands.

We also continue to leverage the tapestry sourcing model to drive efficiencies across our brand portfolio I.

I was pleased to have the opportunity to travel to Asia not long before the travel restrictions went in place to spend time in those markets with our teams and consumers as well as spending time with some of our largest service providers and suppliers.

We have incredible teams and strong partner supporting our business, who continue to innovate and adjust to the current environment, while maintaining our high standards.

Over the past few years, we've reduced production lead times from four months to three months without jeopardizing service delivery.

And we delivered significant synergy savings through the power of our skill.

Our work is continuing with an opportunity to drive more speed into our process and strengthen our strategic partnerships across raw material suppliers and service providers.

Our supply chain capabilities have always been a competitive advantage for our company and we will continue to improve driving more speed and responsiveness to deliver the beautiful high quality products, our customers expect from us.

In closing we believe the successful execution of these priorities will fuel desire for our brands, enabling us to accelerate growth across our portfolio, while enhancing the profitability and cash generation of the overall business.

I'm confident that our strategy is the right one for a future we have three powerful brands and tapestry is the enabling platform to help them do what they can't do alone by providing consumer insights across brands and across regions, providing the tools and consumer knowledge to unlock value.

Globally diversified supply chain, which we're now evolving to make even more responsive.

Technology infrastructure and robust digital capabilities available across the globe and access to global talent across brands.

Importantly, we have the right team a strong and seasoned leaders in place to work collectively to create and implement this plan and who are committed to seeing it through.

I'm confident that together with their fantastic global team, we have the ability to translate these initiatives into shareholder value creation through accelerated growth in revenue and profitability across our portfolio over our planning horizon.

Now I'll turn the call over to Todd to dive into the details of the coach brand Todd.

Thank you Joanne over the past five years articles written by team coach generated modest growth with excellent margins. It was viewed as the engine of our house of brands. However, our diagnostic work combined with leveraging our deep understanding of the coach brand showed that there is a significant potential for growth me.

Pension beyond what we have already accomplished.

Before I explained why we have so much conviction in the potential we see ahead of US I think it's important to provide some context aware we've come true.

Some of you may remember at our analyst and Investor Day in 2014, we presented three year plan to make coach modern luxury brands across product stores, and marketing driving fashion credibility and targeting the cool girl and God.

We added beautiful handbags at higher price points, such as the Swaggering Roe.

Opened engaging stores that would beacons for the brand create an unexpected and feminine ready to wear for a runway show used our digital channels, primarily as marketing vehicles.

And our efforts work, we successfully come back to the prior perception sameness, ubiquity and bill fashion credibility supporting a lumpy period of positive comps.

The next period, which we can call coach 2.0 focused on commercial appeal and broadening our marketing to include Genevieve and millennials.

We distorted our offerings in the sweet spot of the price pyramid with Parker and Charlie bringing footwear in house and sharpening our focus on select commercially ready to wear items, we started to use social and digital more fully but still led with a store first mentality now while we can.

The results of these initiatives a success they have in many ways limited.

Because that certain types, we have placed too much focus on the customer we want it and not enough on who our customer actually is and what we as a brand scan for.

With that recognition, we are ready to reignite the accessible luxury segment.

Evolving our message from one rooted in high fashion imagery to one that is inclusive culturally relevant and consumer centric.

Going forward, we will focus on authentic communications, but are grounded in our values antibodies that courageous spirits, New York City.

Simply put we're targeting the consumer who loves and appreciates coach who we are and what we stand for.

At the coach brand. This overarching strategy requires us to adopt consumer centric approach, combining instinct and data driven inside.

When we are looked at the greatest areas of opportunity to implement the strategy, we see for key pillars for the work ahead.

Product creation.

Infusing purpose into the brand.

Driving omni and digital sales in recruitment and finally accelerating growth in China.

And across each of these initiatives, we will remain focused on supporting growth in both revenue and profitability.

First our new approach will prioritize creating compelling product to meet the needs and exceed expectations of our target consumers by geography and segment and the cross fashion function price quality at our proprietary brand codes.

We've talked about this in the past the key difference today is we are embedding our consumer insight work into the product creation process rather than simply hindsight.

Our design Breeze will combine to create Tivity then you have come to expect from coach with clarity by styles.

Customer segments by geography age demographic and usage occasion.

We're also rightsizing, our assortment cross channel.

Over the last five months, we've taken a dramatically more critical lends to skew proliferation and inventory true.

For this upcoming holiday season, we shrunk our SKU count by approximately 50%.

We believe that this reduction is key to greater productivity and clearer brand messaging to the consumer.

Our customers are responding to our master styles like tabby and we will continue to offer extension be successful collections.

For this upcoming holiday we're excited to now so we have partnered with our global Ambassador Jennifer Lopez on the coach J. Lo design pardon.

Beautiful back at $495 will be the must have gifts for this holiday season.

Additionally for the first time in my over 12 years and coach we are now managing to tighter inventory turn goals, while maintaining gross margins.

I have made inventory turn a key performance indicator for the chain holding all of us accountable for this metric.

Second infusing purpose into the Brad.

Over the past few months, we've done the work to articulate our brand purpose and attributes we know that consumers today emotionally connect with brands that share their values and they are buying and supporting brands that resonate with them for that reason.

Therefore, the concept the excavation husky, we want to create relationships on the basis of off its just city.

So we are extracting what is late and real.

Based on our most recent North America brand tracking survey.

Coaches brand momentum remains at an all time high.

Of course, we must build on the historic key attributes of fashion function pricing called.

Furthermore, we will clearly articulate a brand purpose and promise to engage a younger consumer stay relevant and accelerate CLO.

Their upcoming fall and holiday marketing campaign, we are highlighting our global brand ambassadors in candid multi generational moments focusing on enduring themes of togetherness timelessness and family in many into many ways family is different.

We believe these images and themes will resonate with today's consumers.

Third we are expanding our digital and omni channel capabilities and services to drive sales and importantly, new customer recruitment while involving the role of the store should ensure an exceptional and seamless experience everywhere the customer chooses to shop.

About meeting with engaging and empowering the consumer and connecting with their about.

We understand that many shopping journey started online even to stand in the store.

Oh Midnight team has served to accelerate the consumer shift to digital that was already happening over time. It is clear that online will gain increasing parity with brick and mortar.

In retail E commerce channels, we will be making significant investments in the digital and omni channel experience globally, well fueling aspiration brand relevance and building welty through CRO co creation.

We certainly launch made to order cities, so on coach Dot com, allowing our customers to design one of a kind sneakers featuring a new innovative three D and augmented reality experience.

While in the value channel, we've re thought our online outlet focusing on the inherent value proposition of our product rather than primarily on price promotion.

We're also investing investing in marketing to drive customer acquisition.

In late April.

We commenced this new approach in North America with coach outlet Dot com.

Since that time, we have acquired nearly 600000, new customers across our digital channels.

These new customers have we're generally and millennials. This is a strong example that our strategy at our product resonate with the younger consumer our next step is to offer special membership benefits to our online outlived loyalist starting this fall.

Concurrent with our focus on digital we are rethinking the role will be store with a test and learn mindset, including new store formats.

Smaller square footage locations such as station buildings in Japan.

As Joanne had mentioned we are focused on maximizing free profitable share.

Stores, our commercial ventures, they're not marketing exercise and they will be held globally to higher profitability steps. This may result in store closures over our planning horizon, if our profitability requirements through productivity increases or significant.

Since our not met.

Fourth we are accelerating growth in China to tailored and optimize the assortment, including products specifically for the Chinese consumer enhanced marketing and expanded reach across direct channels and third Party party online distribution.

Since we began working with team all about a year ago, we have experienced tremendous results under luxury pavilion more recently, we were the first to partner with them on their luxury Soho platform focused on the younger brands Savi consumer and we would the number one handbag Brad on the plan.

I'd form in the month of June.

Potential for coat the coach brand in China, given the rapidly growing middle class, who will likely focused their spend domestically is bass.

Finally, driving enhanced profitability is critical we will accomplish this through continued a are you are improvements and higher gross margins with more focused assortments to improve productivity in fact in the fourth quarter, our global him back and you are lows over 25%.

In addition by Rightsizing, our SGN day cost structure and store fleet, we will achieve operational excellence.

So while coaches results have been strong largely consistent with our expectation. We believe that we have an opportunity now to unlock accelerated growth in the years ahead, both on the top and bottom line and once again grow market share.

And now I will turn it over to list to discuss Kate Spade. This.

Thanks, Todd and good morning, everyone I'm, so excited to be here with you today to speak about Kate Spade I did want to brand for five months and the work we've done has been highly clarifying.

Kate Spade is a brand unlike any other we're known for Joy optimism and color you have a loyal and passionate following that is emotionally connected to us and inspired by the Kate Spade brand story.

Over the past few years, our focus was on expanding to brand by attracting a different consumer which in turn caused us to move away from our brand DNA in core customer our efforts were geared toward the consumer we wanted to have and we weren't getting it right, but the ones we did have.

The good news is that she still loves our brand and what we stand for as we look to address our past missteps. Our go forward strategy is rooted in consumer centricity and on more fully delivering on our brand promise.

We've learned that we are best when we're just ourselves.

The foundation of our strategy is to refocus on the core of our Brad.

The successful execution of our priorities, which I will take you through in detail will allow the brand to capture market share and drive both top and bottom line growth.

This multiyear growth agenda includes four strategic pillars, each of which will support our ambition to capture market share and improve profitability.

First we will crystallize the brands purpose and return it to position of strength you will do despite leaning into the fundamental elements of the brand that we know our customers value.

Specifically, our branches joyful optimistic it's feminine colorful unfold, it's clever and welcoming.

He's tried and true brand attributes that we are known for it will be amplified through our unique and best in class storytelling.

Second we are instilling a laser focus on our consumers across all touch points and fostering a community of women, who were emotionally connected to and inspired by the brand story and values, we know who our customer is she stylish and drawn to color and playfulness. She uses fashion to express her opt.

Mystic and carefree spirit, but at the same time she's practical.

Our data insights team will be crucial to developing a deeper knowledge a better insight into our key customers to become truly consumer centric. We will bring these insights to all decisions being made at the Brad across product marketing and customer experience.

In fact over the past few months I simply refocusing our communications to our core consumers, we've seen a significant increase in our social engagement. If we engage chart with the brand that she knows it loves we've seen a 20% to 25% year on year increase in engagement on Instagram just in the past few months.

Third we're focused on re energizing and growing leather goods I reintroducing, our non negotiable brand elements rebuilding to core offering and capitalizing on a new signature platform.

We're incorporating brand a central and proprietary elements that our customers love their colors happy prints and novelty, we know that our novelty offering not only drives traffic, but it has an outsized impact on brand perception. It resonates with our most loyal and highest value customers. The novelty penetration in North America increase consist.

Currently across all our channels throughout the year up from 4% in F. Why 19, 7% in Q4 flight 20.

Starting with the spring 21 collection.

We focus our offering to capture market share and improve profitability, we're using product hierarchies differentiating our assortment between core fashion and novelty to create a much stronger collection architecture or core offer will be stronger and or certain size will be reduced by 30% to 40%. So we will have a much higher SKU productivity.

This will allow us to be focused on global hero products until a clearer brand story.

We've also just launched a signature platform with the state flour and initial reads have been really strong you will maximize it by making a pillar make it a pillar of the brand and animated seasonal colors, Prince and novelty offerings outside of handbags, we're taking a much more streamlined if you have ready to wear.

Rather than creating a pure halo, we're pivoting to a commercial offering with an optimized fit and pricing that speaks to our core customers.

Fourth we're leaning into our digital strength by modernizing and creating engaging brand experiences across all of our digital platforms to fully unleash the power of the Kate Spade community and brand.

As we discussed the global pandemic has acted as a catalyst to accelerate the shift to digital Kate Spade, our digital penetration was already strong and ahead of the market as our customers skews younger and is therefore more digitally native we're continuing to build upon this strength by meeting all consumers, where they want to shop.

In the fourth quarter, we attracted over 350000, new customers to the brand in our digital channels in North America, an increase over 100% from the prior year.

Finally, we reactivated nearly 140000 lapsed customers as compared to last year.

Overall, nearly 20% of all digital customers need to were more purchases for the quarter.

From a marketing channel perspective, it's also very encouraging to see growth from organic channels, especially for our full price site.

This fall, we're upgrading our north American web site with the revamped aesthetic best in class video streaming capability and a dramatically improved site performance.

However, our focus is not simply transactional in an increasingly digital world, we need to deploy our website and other digital platforms to create an emotional immersive and engaging brand experience, we need to cultivate our Kate spade community.

Tumors want authentic engagement and we are focused on developing meaningful relationships to play a more active role in the consumers' lives specifically to contact development.

Well, we accelerate digital growth our store fleet will continue to be an important part of our long term omni channel strategy in an effort to maximize productivity and profitability, though we will evaluate our footprint, we're focusing on markets, where we already have high awareness and engagement, notably in North America in Japan, once we build momentum in these regions.

Will explore additional international opportunities, including China.

Across all of these initiatives, we are focused on capturing market share and improving our profitability.

We're confident we will continue to acquire reengage and retain customers as we execute on these priorities driving profitable growth.

Part of this we will leverage our multi category lifestyle portfolio to drive purchase frequency and build customer lifetime value.

For example are ready to wear and footwear customers have the highest repeat rates and lifetime value.

In addition, jewelry is a true extension of the Kate spade lifestyle, but at a lower price point, which makes it perfect for recruitment and cross selling.

Lastly, we're focusing our assortments and optimizing our store fleet to increase the brands productivity.

In closing I am incredibly optimistic about the long term potential for Kate Spade, we have a brand that has a universal language of joy optimism and color.

Customers have historically been deeply connected to our brand emotionally if we embed this language in our product or marketing and our customer experience.

We are more confident than ever that we can delay our existing customers and attract new wins with that I will turn it over to Georgia and thank you.

Thanks leaves and good morning, everyone.

Well normally 55 years Stuart Weitzman I was in part where we feel confident stylish and sophisticated threed some mccombie national feed Comscore equality.

However over the past several years, you have lost touch with our core values and Brian expected.

Compounded by because if you should issues. These are resolved the significant price should dollar revenue and profit.

Despite these challenges our customers I remain no yelp.

Looking ahead, our long term strategy sensors on one principal falls focus on the customer focus on the product offering and focus on the most important geographies and trying to lucky.

We have identified five chief strategic initiative, which I will talk to each.

Yes, we are renewing the brand reputation for FY <unk> Horton quality listening gotta responding to our customers needs the design beautiful and own friends shoes, which complements lifestyle and that 30 minutes French I'm sure.

We got infusing consumer century city and that that they're driven mindset across our run them be.

So we are rolling out new in response to listen to our customers.

At the heart of our decision making process.

North America, we surveyed 1002 I'm going to go by our customers now what I don't design. It may look a steel added one on one beautiful body concessions origin.

We will make bold moves one piece you've got done response to market trends. For example, we got off to quickly address the causes one session chief operating in the marketplace, we called for and fall.

We shouldn't be launching our new only funny one off the top boot new groups from the recent street went to one markets.

These exciting new fun create some more casual and use for few size and based on our friends, who would you sense on those new and not watching what.

In addition, one above or knew what size the might have good.

I'm trying to high quality, just luxury was extremely well if we see sending out you know mascara who meets.

Second we're going broke you've got the ways, one clarifying and simplifying the product offering.

Yeah.

It would you switched Bridgend market leadership through design innovation around by what I can styles, such as the 50 seat.

These young adults wouldn't be as funding on our friends I think our newly fun launching new companies five key items, a compelling price funds at the same times, we have a using shoes, you know that could drive yes, she's all messaging white and what do you just saltzman would win win.

In Canada, we believe these withdraw our gross margin, while reducing promotional activity as we maintain our position the gateway to lunch.

So we expect to restore they picked up by focusing distribution on those markets and Sean those upgrade to stop working.

Using on existing wrong moment.

We believe these would be an important driver or improving operating results.

Most definitely we are talking outsized growth in our highly profitable China business, yes, she's always calkins local ambassadors selective new distribution and the strong digital expansion.

That's also means baldly exiting from repeatable doors and international direct markets women rationalized, the north somebody's got to be tensely, using the nominal doors and that's why couldn't you on why smoking all direct locations you will jump on Australia.

And Malaysia.

Fourth we are strengthening our relationship we don't since bossiness by providing right on products and foster more consistent execution.

First and foremost we can't get you can see.

Finally, buddies to react publish our relationship it is more important than ever.

Increase I want to GTT to allow for longer Sunday times and of course can you just for drop ship.

Importantly, the reaction to the for spring is free to one collection I'd be boasting about cross all global markets due to the well balanced all three between Cogs well, they and occasions thoughts you have seen increasing by segments in newness, we clients see parties you just responding to our causal crawled.

Exactly but I mean, it's jump buys one is that.

Fixed and finally, we established our robust digital presence <unk>, I think blossom musical and ductile muscle.

Investing you know me trying a lot force utilizing the website twop and extended sides options, while I'm voting rights and personalization throughout the customer Jordan.

Yeah, I've only got the new block home well update our site technology, which will allow us to creates a more personalized frictionless customer experience.

We are also leveraging our store associates for customer care and I wouldn't like Charles.

Ecommerce remains an important repeat medtronic for stroke bozman, when we saw new customer share in the U.S. B piece last 9% seen before.

I have all the good fortune of bobbing being up the company for 70 years, why leading do you have bozman for almost six months.

I'm very fortunate above the brown industrial buys one cost.

And I'm optimistic about the future.

Through our strategic initiatives I'm confident we'll return to profitable growth.

Now I was told me tolbert ones right.

Thanks, George Yeah, and good morning, everyone I hope to sign you all safe and well before I begin. Please keep in mind that my comments are based on non-GAAP results corresponding GAAP results and the related reconciliation can be found any earnings release posted on our website today.

As Joanne mentioned, our fourth quarter results exceeded our internal expectations from a top and bottom line perspective, as we continue to take decisive actions to mitigate the impact of the coated 19 pandemic on our business.

Total sales declined 53% on a reported basis and 52% in constant currency, we achieved sequential improvement throughout the quarter supported by phased store reopening in key regions, notably North America, Europe, and Japan, why we drove a return to positive growth.

In mainland China in May June.

You know was the best performing month of Q4, and we exited the quarter with revenue down approximately 30%.

Importantly, with the vast majority of stores opened as we entered the new fiscal year, we drove further material progress in July.

Our digital.

Sales rose at a triple digit rate in the quarter with strong growth in every month as we successfully recruited new consumers into our brands at an accelerated pace, while continuing to serve our existing customers who are increasingly omni channel.

This is a key element of our go forward strategy and we're pleased with the current momentum we're achieving in our ecommerce businesses.

Gross margin expanded 370 basis points compared to the prior year in the fourth quarter, driven by lower levels of promotion as well as the benefit of geographic mix, given the higher penetration of international businesses.

Gross margins increased at each of the coach Kate Spade and Stuart Weitzman in the fourth quarter, and we will lean into this opportunity in a year ahead with a keen focus on racing AIU ours, and maintaining pricing discipline across brands.

S Genie declined 27% year over year, driven by variable savings on the lower revenue base, including the cancellation of the company's annual incentive plan for F. Why 20, as well as the realization of fixed cost savings.

I will touch on additional X gene a actions underway in a moment.

The operating loss for the quarter totaled $70 million and earnings per diluted share was a loss of 25 cents non-GAAP tax rate for the quarter was 22.3% compared to 16.4% in the prior year.

As you saw today in our press release, we took a number of charges in the quarter in part related to the Kobin 19 crisis. The primary charges were as follows on a pre tax basis.

First 117 million in store impairment charges as a result, the decline in both current and future expected cash flows exacerbated by covered 19.

Second $87 million in charges under our acceleration program. These costs were primarily due to organizational related charges driven by sovereign as outlined in our Q3 earnings release as well as store closure cost inventory reserves and accelerated depreciation.

We expect to incur an additional 102 $115 million in charges in fiscal 21 associated with this plan.

Turning to a discussion of our balance sheet and cash flows.

We successfully implement implemented several mitigating actions and enhanced our financial flexibility and liquidity, while positioning the company for long term growth.

We ended the quarter in a strong position with $1.4 billion in cash and equivalents.

Total borrowings outstanding at the ended the quarter were 2.3 billion, including the $700 million, we drew down on our 900 million dollar revolver.

Total inventory ended the quarter down, 5%, which was significantly favorable to our expectation due to our better than anticipated revenue results.

As previously announced we moved swiftly to Reflow, our late spring and early summer product introductions, we also reduced and canceled future were seats where appropriate.

We continue to expect these actions to preserve over 500 million of cash through lower inventory purchases through the end of F. why 21.

All of which approximately 135 million was realized in at Fytwenty.

In addition, our ending inventory balance also reflected the incremental obsolescence reserves taken primarily in the third quarter in light of the environment.

Well the backdrop remains uncertain, we believe our inventories are well positioned entering F. Why 21.

As Todd mentioned as an organization, we are managing to tighter inventory turn goals, while maintaining gross margins.

Capex for the quarter was $33 million, representing a decline of over 60% versus prior year as we took prudent steps to delay and cancel new store openings. This spot capex down to $205 million for the year as compared to our most recent guidance of 200.

25 million and our normalized run rate spend of approximately 275 million moving forward. We will continue to prioritize investments in high return projects, notably in digital while tightly controlling overall spend and reducing our outlay for new stores.

As a result, we expect capex to be the area $150 million for fly 21, representing a decline of approximately $125 million compared to our normal annualized spend and in line with our previously announced target.

Free cash flow for the year was approximately $200 million well ahead of our most recent expectation and a standout achievement and underscores the resilience and effective management of our brands in business as we have continued to successfully navigate this global pandemic.

Now touching on our capital allocation priorities in the near term our priority is to preserve our cash on hand in light of the environment.

Longer term as strategic intent is to return to sustainable top and Bottomline growth and strong free cash flow generation, which we intend to utilize for debt pay down beginning with our revolver as well as capital returned to shareholders.

Turning to our outlook as noted in our release, we're not providing specific guidance for the fiscal year at this time due to lack of visibility however, assuming a continuation of the slow and steady recovery from the pandemic, we project revenues to be roughly even with the prior year for the full year for.

Fiscal 21 on a 52 week basis.

This includes the expectation for sales inflection in the second half well the topline in the first half will remain pressure.

That said, we are laser focused on controlling the Controllables UNEV why 21 in order to create a strong foundation for profitable expansion over our planning horizon.

Importantly, we currently expect it to be a year ago efficiency led profit growth. This includes taking deliberate actions to lower promotional activity and increase AIU ours across brands.

Driving gross margin expansion.

We're also taking further steps to aggressively controller S. Feeney spend as previously announced in light of the environment, we are reducing fixed costs, such as rent and driving procurement savings, including curtailing external third party services. We're also decreasing corporate costs through temporary come.

Sensation reductions for our board, our management team and employees.

And more importantly, we're also continuing to implement structural changes as part of their acceleration program, which are designed to create a scalable agile framework.

These actions included 20% reduction in the company's global corporate head count expense on a run rate basis, while changing the way we work to create a culture of empowerment and entrepreneurship. In addition, we were assessing our global store fleet and holding individual doors to a higher production or higher productivity trends.

Called which is expected to result in store closures and if I 21.

We estimate that we will realize approximately 300 million in gross run rate expense savings from these initiatives, including approximately 200 million an f. why 21 alone.

Overall, we believe our ability to grow to drive gross margin increases and reduction reductions in M&A will be the initial indicators of progress along our multiyear gross journey with traction already under way as evidenced by our strong fourth quarter results. Looking ahead, we are creating a virtuous cycle or.

Flywheel that should as revenues inflect drive bottom line growth well in excess of topline gain more specifically, we expect to drive profit growth in each of F. Why 21, and why 22 and half why 23.

In closing, we're committed to strengthening our brand and organization by focusing first and foremost on the consumer leveraging digital and data more fully and transforming into a leaner and more responsive organization importantly, our view of the long term opportunities for our brands is unchanged in our strict.

And you can Jan to drive organic growth and profitability is unwavering further and his Joanne mentioned, we're confident that together.

Benefiting from tapestries, enabling platform our brands can achieve greater size and share then they could on their own.

We look forward to keeping you posted on our progress as we move forward.

I'd now like to open it up to QNX.

Thank you Sir the floor is now open for questions.

If you wish to ask a question at this time. Please press star one on your telephone keypad.

Our first question comes from line of Bob Dribble of Guggenheim.

Good morning.

Think transformation I guess, just two quick questions. The first one really.

What gives you the confidence in the multi brand platform in this environment and your branch specifically in.

I guess no disrespect intended but would you be better off with your brands being separate individually. Thanks.

Good morning, Bob.

We believe in the benefits of our multi brand by model and we're confident we have the right strategy to drive accelerated growth and profitability for tapestry as well as in each of our brand.

Yeah, we have three powerful brands and we see tapestry as me, enabling platform to help those brands do what they can't do alone.

An important ways really four important I think he ways.

The first is really.

Through consumer insights, we've consumer insights across brands and across regions and we provide the brands with tools and consumer knowledge to unlock value.

We also have a globally diversified supply chain, which has always been a competitive advantage for a company and we're now evolving that could make it even more responsive.

Third we have a technology infrastructure and digital capabilities that our brands can leverage to engage consumers and I think we saw in the fourth quarter how powerful.

Platform can be for our brands.

And finally, the access to global talent that we have across brands as a real competitive advantage I think our Q4 performance is a real proof point illustrating the power of that platform.

Great. Thank you very much trend.

And ladies and gentlemen, as a reminder, these for the interests of time limit yourself to one question. Our next question will come from the line is like for child of Wells Fargo.

Hey, Good morning, everyone. My question wrong on the top on recovery or it sounds like the North American recovery has been fairly linear based on my comments on July but anything that Colo just oh, if that is accurate and then if there's any didn't pull out you know outlets tourist location versus in close watch any divergence and then all along up along as long.

On the back half your you're trying to get that you're talking about getting back to growth, but when you guys are modeling out or so forget your expectations restore volumes are you assuming that those little volumes are back the fiscal 19 levels in the back half where are you assuming a little bit more gradual <unk> any color there would be helpful. Thank you.

Sure I.

Go ahead Hadria no I know if you want to take it Joanne I was just going to say you know as we as we look at the year and as we talked about our expectation is for slow steady recovery over the year with a significant inflection in the second half.

The year, Oh, we have seen that as we've gone through and we opened stores on a phased opening so far and you know as we as we look at the year and and look at.

The revenue rebound you know we've seen it slow and steady we thought first in China as we reopened here in North America, we feel that that slow and steady read down stores continue to be pressured on the traffic side, but where are we seeing this astronomical growth has really been on me on the digital side.

Which as you know I think as well as much more profitable for us than the bricks and mortar, but I know that Joanne wanted that to happen here too. So please give joanne.

Hi, I think you covered it well we have seen a slow and steady recovery in North American to your question what specific to North America. We were pleased to see I'm. The China market, you know with Andrea mentioned returned to positive comps in the quarter and positive inflection in the quarter I am.

And as Andrew mentioned, you know, we're engaging our consumers in the way they they want to engage with us and increasingly in today's environment. It is through digital so again nice you know we've seen a slow steady improvement in our store business, but importantly, we're engaging a very fully answer I did.

A little channels with our consumers.

Our next question comes from one of Erinn Murphy of Piper Sandler.

Great. Thanks. Good morning, My question for you and on the 1 million new customers that came through in the fourth quarter on digital platforms can you contextualize that for US a bit you know what is the run rate or what's the run rate in prior quarters, maybe what brands are consumers coming in from and what product categories are attracting a these new consumers to.

Great. Thank you so much.

Thanks, Aaron and I and I think the story, maybe slightly differently in terms of different in terms of product categories by age for each brand. So I'll, let the brand Ceos chime in but we are you know excited about the traction, we're seeing and new customer growth and the demographic of that new customers, particularly in some of our.

Brands and and the engagement, we're seeing both with new customers and also with lapsed customers and I think you know the drivers we see behind that are really really clarifying and doubling down behind our key brand equities and our brand purpose and some of the changes that we've made to really and embed and.

Analytics and be more agile and our marketing and our approach to engaging these consumers. So I'm really really encouraged by the traction we saw in Q4 and look forward to more to come but but I'll pass it over to the brands. He has maybe with starting with you.

Sure. Thanks.

Yes, it would be at Kate <unk>, an enormous increase and new customers digitally ticket was.

Over 350000, new to the brands through the digital channels. It was predominantly driven by our tried and true products, our leather goods, but there were some bright spots and things that perhaps are very kobin related so the dramas like Crazy for example in a lot of our home.

But we really we feel that it mostly because we have dialed down on our brand story. Our equities. You know were fund were optimistic we're happy that and this time, we feel like that's exactly what everybody needs needs to to buy.

Yeah.

On behalf of a coach <unk> you know we couldn't be more excited I mean, we saw.

I'm over 600000, new customers come into the brand it as one could expect a it is primarily handbags, but what's really interesting in engaging is we're seeing a younger customer come into the brand as we indicated 50% of the 600000 are generally.

Your millennials and that really bodes well for what we're doing and we're excited about them and we're now focused on increasing that number but increasing purchase intent with that group Ah because it's one of the things you know the most valuable customers are not just getting them and being what it.

Doug, but continuing them on the journey and making them lifelong customers said, we're really focused on that and we're seeing early days, but very encouraging.

Repeat purchase intent.

No for let me say a few awards the most your buys one what what three UBS she needs Valiant quota bearing because we have seen not a strong being so it's going to know shooting for sport on what I'd call. It styles and also we have seen how strong the interest for our four hour Connie size.

Where we have infused I would say a structural casual Cogs Raul Castro position is becoming a b tran.

Helped you very quickly to these sorts of these new trend I'm very pleased to see what the teams are preparing.

For the next the seasons.

I also mentioned the we saw an unbelievable oh.

For four months, So Obama was bad yearly basis, but we had the Bob that he'd though would be is beautiful a red color on that so about seeing them up for a week. So it's it's that in college.

Our next question comes from one of Alexandra Wallace of Goldman Sachs.

Good morning. Thanks, so much for taking the question you mentioned the opportunity for gross margins across from where I wonder if we could pick inside a little bit more historically, there was a very strong gross margins.

Rich unreasonably high gross margins elsewhere can you talk about how high those can go.

Yeah, well if its he drives our across brands.

Before he is a big piece of that.

Yeah. The AIU our story is definitely a piece of the of the gross margin expansion and where we're incredibly excited about the traction we're seeing to the work we're doing and it's a combination of you know getting closer to our consumer and and leveraging data and analytics to make our.

Our assortments even sharper.

Stepping away from discounts and really driving more relevance in our product and and I think theres a.

A theme across all of our brands and how we're doing that but again I'll I'll turn it over the brand Ceos to let them speak to how that's coming to life in each of their brands.

So I do want to start.

Sure and you hit on it I mean, we ended the quarter I'm really pleased with the 73.6 gross margin we delivered for coach HM.

Kogut has presented us an opportunity to be very focused and really reduce the promotionality and the discounting that you've seen and we're encouraged by that and so we're really shifted the conversation both digitally but also in stores to one of value.

Instead of Promotionality and I see that trend continuing our inventories are in really good shape and so we're not we don't have that outside pressure I'm that perhaps others do in terms of discounting so I see a trend continuing through through the year.

I can jump in a bit in on keep <unk>, Oh, we have a big opportunity to raise or you are and we've already we've already begun partially by reducing our our promotionality, but as we go forward. We're building a collection that's really based on a strong core one where we.

Can really creep hero products, and I kind of products that people will pay for and you know you need to really have a good better best to strategies do you have the opening price points that we can go all the way Oh, we got a best selling back right now that the pineapple and its $340 and she happy to pay for that because it makes her.

Happy So you know really it's a it's drilling into how to create the song hero products and will not nothing else is are you ours.

And and put US your bozman is again, a very important the products. So we are really walk you can go on not dotting the product offering.

And then also focusing on the most importantly, rossington and trying to opportunities or so so we when we when we look at the products and bad chronic size. We are we kind of leverage decides even more but with about three nobody it's important to view, we can reduce the skewed gone through we are using the screen columns.

In order to drive the seasonal messages and then DC Jordan or when the world will grow our gross margin, while reducing the promotional activities.

One thing and got position on the gateway to luxury.

And and I can just to wrap tie that's all up [laughter]. If I can just I'll tie. This all up that Alex what I would like to say is then obviously, we had 370 basis points in this last quarter and why we wouldn't necessarily expect that going forward I would like to know that we did that with very low wholesale.

Exposure and we did that you know with a 90% direct business model, we get it on the back of lower promotional activity hiring you are as and when we look at this going forward. We do think we'd have a lot of growth left not only through the lower AIU ours and.

Lower and hiring you aren't in the lower promotional activity, but do you keep in mind that as we move towards digital and I think this does set us apart from some of our other peers out there as we grow digital and digital went to a mid teens percentage of our business. This quarter excuse me this fiscal year versus only 10%.

Last year it is a higher.

Ah channel profitability, then the relevant store or whether its outlet dotcom and versus outlet or our E commerce retail businesses versus retail as that increases in penetration that will also be tailwind to gross margin. So were not looking for another 370 basis.

As points in F. Why 21, what we do believe that we'll continue to be a tailwind and gross margin does have significant outside for all brands and tapestry as a whole.

And then at the risk of piling on I do think there's one more important point that said I want to call out as we deliver value for our consumers and you get even closer to our consumers and each brand you know we're doing that with a balance what we like to call a balance of magic and logic.

So we're understanding how to tailor our assortments to be more relevant to the consumer, but there's a creativity element and delivering value for our consumers and it means maybe something different in each brand, but the closer we get to our consumer in the more we understand and deliver against that value proposition the more the consumers willing to pay.

Okay for the value, we deliver and and as I think about that in coach. It has been in it and it is about driving cultural relevance. The teams done a great job through collaborations and design aesthetic to deliver that cultural rats relevance and Kate you heard you heard was talking about novelty is one of the aspects of real brand signature.

And the creativity that that is driving consumers to want to spend $395 for a pineapple bag, bringing them a little bit of joy in their lives and in Stuart Weitzman, just that that real creativity behind casual that is an emerging trend, but doing it in its Stuart weitzman.

With the Stuart Weitzman aesthetic and with the signature comfort Inn and it's that the brand is known for so it's it's when those elements or come together that that we really see traction with the consumer and that's what drives our gross margins.

Our next question comes from one of Oliver Chen of Cowen.

Hi, Thank you regarding outlets and your journey going forward in outlet on how are you going to balance.

Some credibility relative to what you're doing an outlet and what are some of the guard rails, you're thinking of and should outlet.

Become a much bigger percentage of total as you broadcast directly to the consumer would also love your thoughts on that could you rationalization just trying to ensure that your rationalizing the right products in the past.

There's risk factors around.

<unk> rationalizing the wrong products relative to what customers want thanks a lot.

Yeah, let me start with the with the outlet question that you know I think the way we're thinking about it Oliver is really how do we deliver for our consumers and we have consumers in that space really broad market of consumers, who were meeting and and delivering the right value the right product a in the right experience for those can see.

Tumors, and we're meeting those consumers more and more where they are that includes digital channels, we're making the right adjustments to our stores in an increasingly omni channel world. So that we are you know our focus is 100% on delivering for consumers no matter, where they choose to shop with us and in terms of few rash.

Generalization I think the brand because we've done the work to get I'm more focused behind our key brand equity and knowing our consumers. We're also getting more focused in our assortment and presenting actually much more clear stories for our consumers its helping us deliver a more clear message its helping us.

With execution, all the way down or through our supply chain and even as we bring it to life on our on our digital channels and in our stores, but again I'd love for the brand T O. It's the to chime in on.

Hi, Nexgate yeah.

You know, it's an interesting question that what I feel that we've gotten for a very very long time outlet first and foremost.

We have a fashionable customer in outlet and they they love fashion and they love it whether it's in brick and mortar whether it's all combined and we Boston, we will continue to innovate product across all of our channels all of our channels are important so we believe in brick and mortar full price we.

We believe in coached our columns, a full price digital channel as well as the coach outlets dotcom channel and as well as the brick and mortar outlet or mindset regarding skew proliferation. When you really take a look at it and we've done a lot of the work here is what we're coming out of the tail.

We're cutting out the lease relevant the lease productive skews and really focusing and allowing us to have greater clarity of message going further with the winners and really getting that focus and you've seen it you've seen it with tabby you've seen.

In our history, where we have great product it resonates across.

Geography.

And it's having that high higher productivity by skew allows us to keep these families alive longer.

That's really important, particularly that's in the world we live in today. So we're excited about the productivity that were sick.

Our next question comes from one of Mark Altschwager of Baird.

Good morning, Thanks for taking my question.

Just a quick follow up and then bigger picture question just on the follow up Andrea I think you mentioned June sales down 30% and then you said material progress a in July in your prepared remarks, and I just want to clarify that given you also said expectations for a gradual recovery earlier early this year.

Maybe if you could just speak any more specifically on the quarter to date sales trends by brand that would be helpful. And then just bigger picture question on coach. So pre pandemic coach was up 4.3 billion dollar brand generating 27% operating margins just with respect to Tom's comments about your work showing that the brand has been.

Actual for significant growth and margin expansion does any way you frame up the revenue and margin potential of your bigger picture.

Does the increased focus on digital it affects the long term margin structure, especially if we approach purity there overtime. Thanks.

Uh huh.

Sure Mark So I'll start with we exited the quarter at 30% or lost a first sales and so as I said it include over the quarter and we exited the quarter or exited June at a down 30 and made substantial improvement in our meaningful improves.

And then in July on a quarter to date basis.

With stores continues to improve and digital continuing to be strong beyond that I'm not going to get any more specific obviously, we have the remainder of the quarter ahead of us and September last year remember, we benefited specifically in Japan from the pull forward of volume due to the consumer tax increase coming in.

In October so we do expect on July excuse me Q1 to be show continued sequential improvement out with stores continuing to be pressure in traffic. Although I will tell you that we've seen mainland China continued to be strong and as I said improvement everywhere.

Hello.

But we would expect still to be a fairly negative in Q1, and then continuing kids move more positively as we go through the remainder of the year, but not to see positive results until we get into Q2 in terms of a sales inflection. So we have been.

I'm pleased but the bricks and mortar continue to be pressured in terms of traffic in terms of the opportunity for coach I can turn that over to Todd.

Speak specifically on the opportunity long term for the brand Todd Yes. Thank you Andrew and I think you were talking about the inflection taking place in the second half spot in second half sorry, I, Yes, I think I misspoke instead second quarter second half. Thank you very much sad, if you're very rare and my history.

To ever be able to correct Andrea Resnick, so on a number [laughter] app on anything but.

What are the issues is.

It's hard to have full visibility given the world. We live in today, we know, though we feel very good about the profitability of the digital.

Handle and we see that growing we have expectations to still grow the brick and mortar. So we're not going to completely a ban that and just see all of our growth come from digital we think we can have tremendously outsize growth growth in digital also were very very excited about what country.

He needs to be the opportunities in China, and the opportunities in China are both digital and brick and mortar. So we see that growth really outstripping some of our prior growth and so you know again not to get to ahead of our skis, but.

We're excited about the opportunity ahead of us as soon as you can tell me when the world returns to normal I can tell you exactly when we'll see that massive inflection.

And I'll just add to that Mark I'm at you know throughout through all brands, where we're focused on the digital business and Ah for an inflection and top and bottom line growth as you know as the environment in backdrop of covers what positioning our company to be able to take advantage of that and it's Andrew.

We have pointed out our digital margins are you know ahead of our margins in brick and mortar we do see that as an accretive strategy for us, but again, our focus is on meeting the consumer where they are and you know responding and being available with the right experience.

And ensuring that we can drive further profitability moving forward.

We have confidence that strategy helps us I'm like that.

Our next question comes from one of Jamie Merriman of Bernstein.

Oh, thanks, very much with respect to your digital growth ambitions and the incident or the the shifts to really being much more data. Okay. I'm Keith talk a little bit about you know, how you're able to leverage your existing customer file or you know are there in that.

Means that you need to make in terms of being able to really tap into you know that that data driven.

Decision, making process still ahead. Thanks.

Sure I can kick that off and then maybe the couple of the brands can provide some anecdotes that we we're well positioned to take advantage of other shift to digital we have you know a pretty robust technology infrastructure and digital capabilities globally, but we are continuing to invest in that space.

Particularly with our customer file being able to add tools that allow us to better utilize and batteries. The the information that we do have so those investments we're making this year I and we expect to continue to make them going forward, but you know a few anecdotes in terms of.

Our ability to leverage that and drive both digital growth as well as profitability I'll start with the traction, we're seeing and new customer acquisition and some of the changes that we've made in our marketing process.

We have embedded data and analytics more fully into our marketing operations and enable those teams to really drive a test and learn mindset and test a lot of of new things I think we managed over 50 path.

In the fourth quarter alone a true that platform and we're learning a lot it's interesting because its test and learn platform allows us to learn new information really that we didn't have before about how our customers respond and some of those things work. Some of them don't we we learned fast which is part of the.

Agility, we're learning fast and where we're scaling the wins and we saw again a lot of traction in the fourth quarter behind that you know really pleased with the new customer acquisition and the engagement of lapsed customers. So we are seeing traction there and then as it is it really as it relates to being data driven I talk a little bit.

In my prepared remarks about some of the assortment analytics were using Ah to determine the right assortments that a door level again unlocking more productivity out of our assortments more productivity in our stores and that's really a key enabler to driving.

Our growth and gross margin.

I don't know you know lives if you want to talk about some of the traction you've had in the marketing on the marketing side with the with the Cape brands, but some real traction there as well.

Yeah. Thanks, Thanks Ren.

Absolutely the of the a platform that we have from the tapestry data labs as well as all the work that we're doing with the test and learn on our marketing costs have been a key driver and I was getting all the new customers that we have gotten and we match that with kind of our tweaking our marketing to be much.

Or.

About the customer that we have really dialing up the tone of fun unhappy joyful everything that says he can speak with.

Has has shown actually remarkable.

And immediate response in terms of driving our business.

This for US is a key levers you know, we think that we're well on our way to becoming the $2 billion brands, we want to be and because digital is also a much much higher profit margin you can be much more profitable I'm. So this is a key kiki lever for us we're super Super excited about what we've already started.

How do you want to and.

Thank you Liz.

What are the things that I think has always been so great about coach and what attracted me a long time ago I think we were really.

Best in class and using data.

And he and you heard Joann mentioned it before this is part of though a magic logic or combination I think now what's so exciting is we're not just using it for hindsighting, we're really using it's to be predictive focused predictive in our business, but also being predictive.

And using it as a tool for helping you been inform our designs and our merger and our merchandising breeze. So that is really exciting and so what we're able to do under the tapestry umbrella and using all of the resources. There is exciting sometimes people thing.

The coach doesn't always benefit from all of that but we actually do and we're using that quite a lot. So I think you're going to see us be much much more data driven but again, we're always going about that and it's not going to overshadow creativity, because we move both but we have the opportunity to do both.

Really really well.

And you know I joined leveraging the top history a follow soon.

Ladies and an hour and the.

The tools, we have you have to say what were seeing Austria buys monies that we got understanding more but customer journey the needs. They all whether they want to where they want to buy and up and what is interesting is that we are really.

Utilizing the web sites and the Doctor to offer a SIFI size is extended sizes are and embedding greater personalization throughout all the Jordan is so it's very exciting to see walk. So we are seeing that were leverage even more this this forward.

Two.

Our next question comes from minus Lorraine Hutchinson of Bank of America.

Thanks, Good morning, [laughter] stabilizing sales at a higher margin would be a big positive for free cash flow can you talk about plans for the capital structure in any change to your thinking under the new plan.

Sure sorry about that Lorraine My I was on that I was on you there.

Yes, when we look at a capital allocation you know obviously, what our priority is right now is first and foremost on preserving cash and and financial flexibility to navigate the current environment. As you know we made the decision to suspend our quarterly dividend to enter.

Share repurchase.

And that's going to save us about 700 million on an annualized basis compared to 2020. Our intent is as you noted on to return to sustainable top and bottom line growth and strong free cash flow generation, which we first intend to use for debt pay down as you know we've taken out 700 million or.

And our 900 million dollar revolver, we do expect to start paying that down in fiscal year 21 longer term. We're gonna you know, we'll certainly look at shareholder returns as part of our priority priorities for cash returning both cash excuse me boasts a dividend and share repurchase.

Sure, but we're gonna be prudent before I reinstating those and we have to consider near term liquidity needs of the business and we have to look at credit metrics, we understand what it means to the investment grade and it is important to us. So we have to balance those things as we look going forward and obviously you know keeping an eye on the macro.

Environments, and ER and the pandemic.

And ladies and gentlemen, we have time for one final question. Our final question will come from the line of Paul Trussell of Deutsche Bank.

Well good morning, and thank you.

Thanks for squeezing me and I appreciate all the color.

There has already been providers.

My question would be just a little bit more color.

On your efficiency led profit growth plan, or maybe just speed and even more detail on how we should think about.

The can do contributors to the 300 million gross run rate savings and maybe more specifically how to think about.

Oh, the timing of the 200 million batch projected.

School 21.

And somewhat related to that.

You know, it's maybe speak a little bit more around your view of the current stork sleep.

And what could transpire from a closing standpoint over time, especially just given you know your you're kind of higher level the store profitability standards.

The triple Axel Thank you.

I'll, let Joanne and Tom start with the a store fleet and then I can come in on that 300 million and where that's coming from if that's okay.

Yes. Thank you Andrea Yeah. Paul is is we think about our management of the business, particularly moving through this year.

It is what we what we're calling efficiency led profit growth. You know we are monitoring very closely the environment and driving and have more agility and the organization to respond to demand changes as we see them, but really focused on gross margin expansion through the.

The opportunities that we talked about being closer to where consumers embedding data and in our decisions some of the SKU rationalization.

Driving that gross margin expansion and then the operating expense and SGN a.

Management is very tight, but I think importantly, we're positioning the company for long term growth to be in a position to accelerate growth and take market share when the economy recovers. So not only do we do we see.

Efficiency led profit growth this year, but we're positioned to be able to accelerate the topline and drive margin expansion significant margin expansion as we returned to growth.

As it relates to our store fleet you know we believe the you know in in the physical presence in touch point of our stores, but we know that the rule the stores changing and our focus is really on delivering a great experience for consumers regardless of how they engage with our brands whether that be through a physical or a digital touch point.

As Todd mentioned, you know we have raised the profitability thresholds and standards on our fleet and you know we expect to drive more profitability.

But also an improved experience for what we see as an increasingly omni channel consumer like in a kind of the Todd for a little bit more color on how that those negotiations are going.

Yeah, I mean, you Joann hit most of the Highpoint again, I think we're going to see overtime changes, we believe very much in the in the brick and mortar a channel. We obviously look the consumer decides don't think there's a formula in terms of exact mix <unk>. It is not.

Formulaic.

We think over time, you'll see us try new things in Japan, We did station stores much smaller square footage for the coach brand, but profitable. So I think how the stores look how they interact with the customer how they participate in the all new journey of across the number will train.

Over time and that our landlords you know globally, a many have been very responsible to being a good partner for us dealing with co, but we're still working with some domestically and I'm hopeful that there'll be a recognition that where we are.

In this together and it is about having great brands in their malls I'm like.

Coach Kate Spade, then Stuart Weitzman.

And I think Paul when you're looking at the the a structural contributors to the 300 million, we did outline some of them on the call, including the 20% reduction in our global headcount expense includes the associated expense savings.

With closing some of their stores, which is gonna be both fixed rent and depreciation and amortization of course.

Well, it's pulling back on third party outlays, we did were two smarketing, we don't expect to reduce it further but we're going to hold it on that lower level. This year up from where we took it to in asked why 20. So those are a number of big contributors to the lower levels of excess.

And the 200 million, we're not giving specific guidance on how it's going to flow through this year. It obviously thought hit for Q and we'll still have that coming through as we go through this fiscal year, we would expect substantial X gene a dollar decreases in each quarter.

And I think Kristina I do we Oh, we ending at here and returning to bill and for some closing.

Thanks Andrea.

Thank you Andrea.

I want to thank all of you for joining the call. This morning, and spending a little extra time with us I'm pleased with the brand Ceos, we're able to join me today to provide more details on the work happening in each of our brand I'm confident in our strategy and the opportunity for tapestry and each of our brands to accelerate top and bottom line growth moving forward.

But importantly behind all the numbers are people, we're operating an unprecedented times and I. Appreciate the continued passion and focus of our global team.

Especially those in our stores and D. C are providing exceptional service for our customers every day. Thank you.

And ladies and gentlemen, this does conclude today's conference call. You may now disconnect and have a wonderful day.

Well done.

Joanne.

Oh.

They telesat.

[music].