Q3 2024 Tapestry Inc Earnings Call

Operator: Please stand by. Your program is about to begin. If you need assistance on today's program, please press star zero. Good day, and welcome to this Tapestry Conference call. Today's call is being recorded. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one keys on your telephone keypad. You may withdraw yourself from the queue by pressing star two. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone.

Please standby your program is about to begin if you need assistance on today's program. Please press star zero.

Speaker Change: Good day and welcome to this tapestry conference call today's call is being recorded.

Speaker Change: Later, you will have the opportunity to ask questions. During the question and answer session.

Registered to ask a question at any time by pressing the star and one keys on your telephone keypad, you may withdraw yourself from the queue by pressing star two.

Speaker Change: At this time for opening remarks, and introductions I would like to turn the call over to the global head of Investor Relations Christina Cologne.

Christina Colone: Good morning. Thank you for joining us.

Christina Colone: Good morning, Thank you for joining us with me today to discuss our third quarter results as well as our strategies and outlook, our Joanna for voice or at tapestry, Chief Executive Officer, and Scott Rowe, <unk>, Chief Financial Officer, and Chief operating Officer.

Christina Colone: With me today to discuss our third quarter results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes projections for our business for the current or future quarters or fiscal years.

Christina Colone: Before we begin we must point out that this conference call will involve certain forward looking statements within the meaning of the private Securities Litigation Reform Act.

Christina Colone: This includes projections for our business in the current or future quarters or fiscal years forward looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward looking statements.

Christina Colone: 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, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance. Non-GAAP financial measures are included in our comments today and in our presentation slides.

Christina Colone: Please refer to our annual report on Form 10-K. The press release, we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance.

Christina Colone: non-GAAP financial measures are included in our comments today and in our presentation slide for a full reconciliation to corresponding GAAP financial information. Please visit our website www dot tapestry dotcom forward Slash investors and then view the earnings release and the presentation posted today.

Christina Colone: For a full reconciliation to corresponding GAAP financial information, please visit our website, www.tapestry.com forward slash investors, and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brand, and Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. Following that, we will hold a question and answer session where we will be joined by Todd Kahn, CEO and brand president of Coach. After the Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry CEO.

Christina Colone: Now, let me outline the speakers and topics for this conference call Joanne will begin with highlights for tapestry and our brands Scott will continue with our financial results capital allocation priorities and our outlook going forward. Following that we will hold a question and answer session, where we will be joined by Todd Kahn.

Christina Colone: Oh and brand President of coach after Q&A Joanne will conclude with brief closing remarks, I'd now like to turn it over to Joanne for voice or at tapestry CEO.

Joanne C. Crevoiserat: Good morning. Thank you, Christina, and welcome everyone. As noted in our press release, our third quarter earnings results outperformed expectations, reflecting an unwavering commitment to disciplined brand building and operational excellence. Our talented global teams continued to advance our long-term initiatives, fueling innovation and consumer connections, while successfully harnessing the power of our customer engagement platform to navigate the dynamic backdrop with focus and agility. Now, touching on the highlights for the quarter.

Joanne: Good morning, Thank you Christina and welcome everyone as noted in our press release, our third quarter earnings results outperformed expectations, reflecting an unwavering commitment to disciplined brand building and operational excellence our talented global teams continued to advance our long term initiatives fueling innovation and.

Tumor connections, while successfully harnessing the power of our customer engagement platform to navigate the dynamic backdrop with focus and agility.

Joanne: Touching on the highlights for the quarter.

Joanne C. Crevoiserat: First, we deliver total revenue in line with the prior year on a constant currency basis consistent with the low end of our guidance range. These top-line results were led by international growth of 3% at constant currency, which included increases of 19% in Europe, 15% in other Asia, and 2% in Japan, with each region expanding versus the prior year fueled by traction with tourists. In Greater China, as anticipated, sales declined 2% against last year's strong revenge spending.

Joanne: First we delivered total revenue in line with the prior year on a constant currency basis, consistent with the low end of our guidance range.

Joanne: These topline results were led by international growth of 3% at constant currency, which included increases of 19% in Europe, 15% in other Asia and 2% in Japan with each region expanding versus the prior year fuelled by traction with tourists.

In greater China as anticipated sales declined 2% against last year's strong revenge spending we remain confident in the long term opportunity in China. Despite a more gradual recovery in the region than originally expected and we continue to invest in our brands teams and platforms to support our growth.

Joanne C. Crevoiserat: We remain confident in the long-term opportunity in China, despite a more gradual recovery in the region than originally expected, and we continue to invest in our brands, teams, and platforms to support our growth. Finally, in North America, revenue declined 3% compared to last year amid a challenging consumer backdrop. Importantly, we are continuing to drive a healthy business, underscored by significant gross margin expansion compared to last year and our plan. Second, we continue to put the consumer at the center of everything we do, to drive engagement and emotional connections with our brands.

Joanne: Finally in North America revenue declined 3% compared to last year amid a challenging consumer backdrop.

Joanne: Accordingly, we are continuing to drive a healthy business underscored by significant gross margin expansion compared to last year and our plan.

Joanne: Second we continued to put the consumer at the center of everything we do to drive engagement and emotional connections with our brands in the quarter. We acquired approximately 1.2 million new customers in North America alone of which over half were journey and millennials consistent with our strategy to recruit younger consumers to our brand.

Joanne C. Crevoiserat: In the quarter, we acquired approximately 1.2 million new customers in North America alone, of which over half were Gen Z and Millennials, consistent with our strategy to recruit younger consumers to our brands. And we continue to see new customers transact at higher AUR than the balance of our customer base. At the same time, we improved lapsed customer reactivation in North America.

Joanne: <unk>.

Joanne: And we continue to see new customers transact at higher AUR than the balance of our customer base.

Joanne: At the same time, we improved lapsed customer reactivation in North America.

Joanne C. Crevoiserat: Third, we deliver unique omni-channel experiences with a focus on driving brand desire, consumer connections, and cultural relevance. We launched immersive retail experiences across brands globally, with highlights that include the continued rollout of the Coach Play concept and Kate Spade's successful renovation of the Gotemba outlet in Japan. And just last month, we introduced the Stuart Weitzman Shop & Shop at Nordstrom in New York City.

Joanne: Third we delivered unique omnichannel experiences with a focus on driving brand desire consumer connections and cultural relevance.

Joanne: We launched immersive retail experiences across brands globally with highlights that include the continued rollout of the coach play concept and Kate Spade successful renovation of the good timber outlet in Japan, and just last month, we introduced the Stuart Weitzman shop in shop, and Nordstrom in New York City, We believe these locations drive awareness and customer acquisition.

Joanne C. Crevoiserat: We believe these locations drive awareness and customer acquisition, notably with younger cohorts. Furthermore, we maintained our strong digital positioning with sales more than three times above pre-pandemic levels, which represented over 25% of revenue. Importantly, our digital business is underpinned by Tapestry's data-rich platform and leading capabilities, which have enabled us to seamlessly meet consumers where and how they're shopping across their purchase journey. Fourth, we fueled fashion innovation and product excellence by delivering compelling assortments to consumers, with particular success at Coach, where we drove handbag AUR gains at Constant Currency.

Joanne: Zishan, notably with younger cohorts.

Joanne: Further we maintained our strong digital positioning with sales more than three times above pre pandemic levels, which represented over 25% of revenue.

Joanne: Importantly, our digital business is underpinned by tapestries data rich platform, and leading capabilities, which has enabled us to seamlessly meet consumers, where and how they're shopping across their purchase journey.

Joanne: Fourth we fueled fashion innovation and product excellence by delivering compelling assortments to consumers with particular success at coach where we drove handbag AUR gains at constant currency.

Joanne C. Crevoiserat: Importantly, this focus also continued to drive operational gross margin expansion, helping to fuel our highest third quarter gross margin in nearly two decades. We understand innovation wins with consumers, and we are committed to bringing creativity, quality, and compelling value to customers around the world. Overall, we generated third-quarter operating income and earnings above expectations, driven by stronger-than-anticipated margins, highlighting the power of brand building, consumer centricity, and operational agility. We achieved these results while making strategic investments in our brands to support healthy, sustainable growth into the future. Now, turning to highlights across each of our brands, starting with Coach.

Joanne: Importantly, this focus also continued to drive operational gross margin expansion, helping to fuel our highest third quarter gross margin in nearly two decades.

Joanne: We understand innovation wins with consumers and we are committed to bringing creativity quality and compelling value to customers around the world.

Joanne: Overall, we generated third quarter operating income and earnings above expectations, driven by stronger than anticipated margins highlighting the power of brand building consumer centricity and operational agility.

Joanne: We achieved these results, while making strategic investments in our brands to support healthy sustainable growth into the future.

Joanne: Now turning to highlights across each of our brands starting with coach.

Joanne C. Crevoiserat: Our team delivered another strong quarter, with the power of the brand's unique expressive luxury positioning once again on display. We continue to infuse innovation across all customer touchpoints, driving engagement, cultural relevance, and emotional connections with customers globally. Importantly, the success of our strategies, together with consistent execution, is evident in our financial results, with revenue growth at constant currency, significant gross margin expansion, and profit gains, with further runway ahead. Now touching on some details of the third quarter, we continue to drive growth in our handbag offering, led by our iconic platforms.

Joanne: Our team delivered another strong quarter with the power of the brands unique expressive luxury positioning once again on display.

Joanne: We continued to infuse innovation across all customer touch points, driving engagement cultural relevance and emotional connections with customers globally.

Joanne: Importantly, the success of our strategies together with consistent execution is evident in our financial results with revenue growth at constant currency significant gross margin expansion and profit gains with further runway ahead.

Joanne: Now touching on some details of the third quarter.

Joanne: We continued to drive growth in our handbag offering led by our iconic platforms. The tabby family delivered another quarter ahead of expectations and nearly doubled versus last year. The introduction of our quilted tabby was an incredible success fueled by the top selling black tabby with brass hardware at a premium AUR a 500 and.

Joanne C. Crevoiserat: The tabby family delivered another quarter ahead of expectations and nearly doubled versus last year. The introduction of our quilted tabby was an incredible success, fueled by the top-selling black tabby with brass hardware at a premium AUR of $550.

Joanne: $50 at.

Joanne C. Crevoiserat: At the same time, core tabby styles remain strong, and we see further opportunity ahead across the entire family. While we continue to animate this family, we're leaning into key styles, including quilted tabby, and see further opportunity ahead. Across the balance of the assortment, our timeless Willow and Rogue families remain foundational volume drivers, and we augmented our offering to build relevance with younger consumers, including the Coach Original Swing Zip, which has gone viral on social media, as well as the Ace Tote, both of which over-index with Gen Z customers.

Joanne: At the same time core tabby styles remains strong and we see further opportunity ahead across the entire family. While we continue to animate. This family, we're leaning into key styles, including quilted tabby and see further opportunity ahead.

Joanne: Across the balance of the assortment, our timeless Willow and Rogue families remain foundational volume drivers and we augmented our offering to build relevance with younger consumers, including the coach original swings up which has gone viral on social media as well as the Ace tote, both of which over index with Gen Z <unk>.

Joanne: Customers.

Joanne C. Crevoiserat: Overall, our creative and innovative products supported an increase in global handbag AUR at constant currency, including growth in North America. Looking forward, we see continued runway in the longer term, given our innovation pipeline and brand heat. At the same time, we advanced our focus on building out the lifestyle assortment to expand the brand's reach with consumers with the goal of powering customer recruitment, purchase frequency, and ultimately customer lifetime value. In footwear, sales rose against last year, reflecting success and our core styles, notably the low-line sneaker, as well as strength and newness, including our Bren sandal. In men's, the Gotham, Charter, and recently launched Hall families led in the quarter.

Joanne: Overall, our creative and innovative product supported an increase in global handbag AUR at constant currency, including growth in North America looking.

Joanne: Looking forward, we see continued runway longer term, given our innovation pipeline and brand heat.

Joanne: At the same time, we advanced our focus on building out the lifestyle assortment to expand the brand's reach with consumers with a goal of powering customer recruitment purchase frequency and ultimately customer lifetime value.

Joanne: And footwear sales rose against last year, reflecting success in our core styles, notably the low line sneaker as well as strength in newness, including our Bryn sandal.

Joanne: In men's the Gotham charter and recently launched haul families led in the quarter and in ready to wear we debuted classic denim styles contributing to the strong success of denim across all categories in keeping with market trends.

Joanne C. Crevoiserat: And in ready-to-wear, we debuted classic denim styles, contributing to the strong success of denim across all categories in keeping with market trends. Next, we created purpose-led storytelling, building meaningful emotional connections with the brand. We again blended purpose and product with our Spring Find Your Courage campaign, inspiring consumers to embrace confident self-expression. The campaign takes place between the physical and virtual worlds, brought to life with the help of members of the Coach family, including Little Nas X, Camilla Mendez, Young Gili, and Wu Jin Yan, as well as our newest member, IMA, a virtual model and digital creator.

Joanne: Next we created purpose led storytelling building meaningful emotional connections with the brand.

Joanne: We again blended purpose and product with our spring find your courage campaign inspiring consumers to embrace confident self expression.

Joanne: The campaign takes place between the physical and virtual worlds brought to life with the help of members of the coach family, including Little Nasdaq's, Camilla Mendes Young G Lee and wooed Jin Yan as well as our newest member EMA, a virtual model and digital creator.

Joanne C. Crevoiserat: Further, we launched deeply unique and immersive retail experiences across the globe, engaging the consumer across all five senses. We took Coach Play to Tokyo, opening our largest concept store yet on Cat Street, which celebrates the brand's heritage, self-expression, and local Japanese culture. Importantly, the store resonates with younger consumers and has outperformed expectations. In March, we launched the brand's first full-service restaurant at the Grand Indonesia Mall in Jakarta, highlighting Coach's expanding presence in Southeast Asia and our strategy to connect with consumers through experiences beyond product.

Joanne: Further we launched deeply unique and immersive retail experiences across the globe engaging the consumer across all five senses.

Joanne: We took coach play to Tokyo opening our largest concept store yet on Cat Street, which celebrates the brand's heritage self expression and local Japanese culture importantly, the store resonates with younger consumers and has outperformed expectations.

Joanne: In March we launched the brand's first full service restaurant at the Grand Indonesia Mall in Jakarta, highlighting coaches expanding presence in southeast Asia, and our strategy to connect with consumers through experiences beyond product.

Joanne C. Crevoiserat: Overall, the brand's marketing and focus on omni-channel experiences helped to drive new customer acquisition, including nearly 800,000 new customers in North America, of which nearly 60% were Gen Z and millennials. And we've seen gains in unaided brand awareness in the U.S., per our brand tracking work, underscoring that our investments in brand building are working. Finally, we continued to build our subbrand Coachtopia, our reimagination of the product creation process to evolve our vision of circularity, which has driven incremental brand relevancy and desire.

Joanne: Overall, the brand's marketing and focus on Omnichannel experiences helped to drive new customer acquisition, including nearly 800000, new customers in North America of which nearly 60% were gen Z and millennials and we've seen gains in unaided brand awareness in the U S per our brand tracking work underscoring that our.

Joanne: <unk> and brand building are working.

Joanne: Finally, we continued to build our sub brand coached hope you are re imagination of the product creation process to evolve our vision of circularity, which has driven incremental brand relevancy and desire.

Joanne C. Crevoiserat: During the quarter, we launched The Road to Circularity, a Coachtopia docuseries that explores how we're reimagining waste as a valuable raw material. And in April, we unveiled Coach Topia's inaugural store in Hainan, an initiative that combines our mission of sustainability and our commitment to investing and brand building in China and with Chinese consumers.

Joanne: During the quarter, we launched the road to Circularity, a coach Topeka Darkies series that explores how we're re imagining waste as a valuable raw material.

Joanne: And in April we unveiled coach Tokyo's inaugural store in Hainan and initiative that combines our mission of sustainability and our commitment with investing in brand building in China and with Chinese consumers.

Joanne C. Crevoiserat: While Coach Topia remains a small portion of the assortment, we're excited by the momentum we're building specifically with younger audiences. In closing, Coach is fueling consumer desire, bringing expressive luxury to life while driving sustainable, healthy profit growth that funds investments in brand building. We are confident in the future and the tremendous potential for this iconic brand. Now moving to Kate Spade.

Joanne: I'll coach Tobia remains a small portion of the assortment. We're excited by the momentum we're building specifically with younger audiences.

Joanne: In closing coaches fueling consumer desire, bringing expressive luxury to life, while driving sustainable healthy profit growth that funds investments in brand building, we are confident in the future and the tremendous potential for this iconic brand.

Joanne: Now moving to Kate Spade during the quarter, while topline results were challenged as anticipated profit exceeded expectations in prior year led by continued gross margin expansion and disciplined expense management.

Joanne C. Crevoiserat: During the quarter, while top-line results were challenged as anticipated, profit exceeded expectations in the prior year, led by continued gross margin expansion and disciplined expense management. Importantly, we advanced our strategic agenda, sharpening our execution to bring enhanced innovation to consumers, and where we've offered newness, we've seen our customers respond. This progress reinforces our path forward as we build a more profitable business while remaining focused on driving the top-line growth required to realize the long-term potential of the brand.

Joanne: Importantly, we advanced our strategic agenda sharpening our execution to bring enhanced innovation to consumers and where we've offered newness we've seen our customer respond this progress reinforces our path forward as we build a more profitable business, while remaining focused on driving the topline growth required to realize the long term potential of the brand.

Joanne C. Crevoiserat: Now touching on our strategic priorities and results in more detail. First, we remain focused on strengthening the brand's core handbag foundation, a requirement to win in today's dynamic consumer backdrop. During the quarter, we broadened the core assortment across channels through new introductions, including the suite, work tote, CB, and spade flower signature programs. Importantly, newness drove higher customer recruitment, AUR, and gross margin versus the balance of the offering. At the same time, the performance of newness also reinforces our sense of urgency to refresh our carryover families, which remain pressured.

Joanne: Now touching on our strategic priorities and results in more detail.

Joanne: First we remain focused on strengthening the brands core handbag Foundation, a requirement to win in today's dynamic consumer backdrop.

Joanne: During the quarter, we broadened our core assortment across channels through new introductions, including the sweet worked out Phoebe and spade flower signature programs importantly, newness drove higher customer recruitment AUR and gross margin versus the balance of the offering.

Joanne: At the same time the performance of newness also reinforces our sense of urgency to refresh our carryover families which remain pressured.

Joanne C. Crevoiserat: To this end, the pipeline of handbag newness will continue to increase into fiscal year 25, building on the progress we're seeing today and supporting the brand's runway for enhanced revenue and profitability. And as we innovate our core handbag offering, we will also continue to deliver emotional lifestyle assortments, a differentiator for the brand. During the quarter, we delivered Growth in Jewelry, which is a key recruitment vehicle and profit driver for the brand.

Joanne: To this end the pipeline of handbag newness will continue to increase into fiscal year 'twenty five building on the progress we're seeing today and supporting the brands runway for enhanced revenue and profitability.

Joanne: And as we innovate our core handbag offering we will also continue to deliver emotional lifestyle assortments a differentiator for the brand during the quarter, we delivered growth in jewelry, which is a key recruitment vehicle and profit driver for the brand.

Joanne C. Crevoiserat: Now turning to our second strategic focus area, powering the omnichannel experience to drive customer engagement. As you know, we recently launched a dedicated katespadeoutlet.com site, replacing the brand surprise site and providing a more seamless way for outlet consumers to discover and shop the brand online.

Joanne: Now turning to our second strategic focus area powering the omni channel experience to drive customer engagement as you know, we recently launched a dedicated Kate spade outlet dotcom site, replacing the brand surprise site in providing a more seamless way for outlet consumers to discover and shopped the brand online.

Joanne C. Crevoiserat: As a result of this effort, our outlet omnichannel customer penetration increased in the quarter and remains an opportunity to drive customer lifetime value over time. Further, by bringing a more unified experience to consumers across all brand touch points, we can continue to more efficiently scale our marketing and merchandising efforts, supporting our goal of driving sustainable direct-to-consumer growth. Third, we are focused on creating emotional marketing that fuels brand relevance and heat. During the quarter, we launched a new global campaign, Time to Spring, anchored in the brand codes of joy, color, and New York City, which garnered significant media impressions and strong engagement on social platforms.

Joanne: As a result of this effort our outlet omnichannel customer penetration increased in the quarter and remains an opportunity to drive customer lifetime value overtime.

Joanne: Further by bringing a more unified experience to consumers across all brand touch points. We can continue to more efficiently scale, our marketing and merchandising efforts supporting our goal of driving sustainable direct to consumer growth.

Joanne: Third we are focused on creating emotional marketing that fuels brand relevance and heat during the quarter, we launched a new global campaign time to spring anchored in the brand codes of Joy color in New York City, which garnered significant media impressions and strong engagement on social platforms.

Joanne C. Crevoiserat: Our marketing investments supported the acquisition of approximately 400,000 new customers for the brand in North America. Moving forward, we will continue to devote our marketing efforts to top and mid-funnel activations that support brand building and growth. And finally, we will maintain a commitment to operational excellence, positioning the brand for long-term success. This focus has underpinned the brand's meaningful gross margin and profit expansion this year and is embedded in our strategies and ways of working for the future.

Joanne: Our marketing investments supported the acquisition of approximately 400000, new customers to the brand in North America.

Joanne: Moving forward, we will continue to distort our marketing efforts to top and mid funnel activations that support brand building and growth.

Joanne: And finally, we will maintain our commitment to operational excellence positioning the brand for long term success. This focus has underpinned the brand's meaningful gross margin and profit expansion. This year and is embedded in our strategies and ways of working for the future.

Joanne C. Crevoiserat: Overall, we continue to advance our long-term strategies with a relentless focus on accelerating our progress. Our path forward is clear, and our vision for the brand and its potential is unchanged. Turning to Stuart Weitzman, results in the quarter were pressured, reflecting headwinds in the brand's two key markets of North America and greater China. Despite the challenged financial performance, we remain focused on supporting brand health by investing in product and marketing to drive growth and profitability over the long term. Touching briefly on these focus areas,

Joanne: Overall, we continue to advance our long term strategies with a relentless focus on accelerating our progress our path forward is clear and our vision for the brand and its potential is unchanged.

Joanne: Turning to Stuart Weitzman results in the quarter were pressured reflecting headwinds in the brand's two key markets of North America in greater China. Despite.

Joanne: Despite the challenged financial performance, we remain focused on supporting brand health by investing in product and marketing to drive growth and profitability long term.

Joanne: Touching briefly on these focus areas during the quarter, we expanded our assortment of casual styles in keeping with market trends. This included new block heels wedges ballet flats, and loafers, which are performing particularly well across key full price wholesale accounts supporting strong sales gains at Pos in North America.

Joanne C. Crevoiserat: During the quarter, we expanded our assortment of casual styles in keeping with market trends. This included new block heels, wedges, ballet flats, and loafers, which are performing particularly well across key full-price wholesale accounts, supporting strong sales gains at POS in North America. Furthermore, our fall and pre-spring wholesale bookings are up meaningfully, reflecting our progress in delivering product innovation and relevancy. Furthermore, we continued to build out new categories with the launch of the brand's men's collection and an expanded sneaker assortment.

Further our fall and pre spring wholesale bookings are up meaningfully, reflecting our progress in delivering product innovation and relevancy.

Joanne: Further we continued to build out new categories with the launch of the brand's men's collection and an expanded sneaker assortment.

Joanne C. Crevoiserat: At the same time, our handbag collection, while still a small portion of the assortment, drove growth at high AUR. Now turning to marketing, during the quarter, we drove relevance by tapping into cultural moments to amplify our key product strategies. For example, we launched our pre-spring collection against the backdrop of Palm Beach and leveraged a multifaceted influencer approach to reinforce our recently launched sneaker offering with Sophia Richie Grange, Suki Waterhouse, and Jenna Dewan showcasing Stuart Weitzman trainers.

Joanne: At the same time, our handbag collection, while still a small portion of the assortment drove growth at high AUR.

Joanne: Now turning to marketing during the quarter, we drove relevance by tapping into cultural moments to amplify our key product strategies. For example, we launched our pre spring collection with the backdrop of Palm Beach and leveraged a multifaceted influencer approach to reinforce our recently launched sneaker offering with Sofia Richie Grange Suki wall.

Joanne: At our house and Jenna Dewan showcasing Stuart Weitzman trainers.

Joanne C. Crevoiserat: As a result of these efforts, U.S. Google search queries for the brand increased, while consideration also rose in the U.S., per YouGov. Overall, the Stuart Weitzman team is leaning in to accelerate progress and enhance profitability longer term through relevant, differentiated product and emotional marketing to fuel brand desire. In closing, Tapestry delivered third-quarter earnings ahead of expectations, successfully advancing our strategic agenda to power our iconic brands to move at the speed of the consumer in an ever-changing environment while investing in our future.

Joanne: As a result of these efforts U S. Google search queries for the brand increased while consideration also rose in the U S per U Gov.

Joanne: Overall, the Stuart Weitzman team is leaning in to accelerate progress and enhance profitability longer term through relevant differentiated product and emotional marketing to fuel brand desire.

Joanne: In closing tapestry delivered third quarter earnings ahead of expectations successfully advancing our strategic agenda to power our iconic brands to move at the speed of the consumer in an ever changing environment, while investing in our future we remain.

Joanne C. Crevoiserat: We remain confident in our vision and the significant long-term opportunity to drive sustainable, organic, top, and bottom-line gains and meaningful shareholder value. Before turning the call over to Scott to discuss our financial performance and outlook in more detail, I'd like to provide an update on our pending acquisition of Capri. First and foremost, we remain excited by the opportunity to expand our house of powerful brands, positioning Tapestry as a leader in innovation.

Joanne: I am confident in our vision and the significant long term opportunity to drive sustainable organic top and bottom line gains and meaningful shareholder value.

Speaker Change: Before turning the call over to Scott to discuss our financial performance and outlook in more detail I'd like to provide an update on our pending acquisition of Capri.

Scott A. Roe: First and foremost we remain excited by the opportunity to expand our house of powerful brands positioning tapestry as a leader in innovation.

Joanne C. Crevoiserat: The combined company will bring significant benefits to customers, employees, partners, and shareholders around the world. By investing in and growing Capri's brands, we will bring more innovation to more consumers globally, positioning us to better compete within the growing over $200 billion global luxury market for handbags, accessories, footwear, and apparel. Further, through this combination, we will be a home and incubator for talent, driving our purpose-led and people-centered mission and continuing to elevate the employee and consumer experience.

Scott A. Roe: The combined company will bring significant benefits to customers employees partners and shareholders around the world.

Scott A. Roe: By investing in and growing capris brands, we will bring more innovation to more consumers globally positioning us to better compete within the growing over 200 billion dollar global luxury market for handbags accessories footwear and apparel.

Scott A. Roe: Further through this combination we will be a home an incubator for talent driving our purpose led and people centered mission and continuing to elevate employee and consumer experiences with.

Joanne C. Crevoiserat: With regard to the transaction timeline, following unconditional approval from the European Commission and regulatory approvals in China and Japan, the FTC filed a suit on April 22nd to block the proposed acquisition. We remain confident in the merits and pro-competitive, pro-consumer nature of this transaction and look forward to presenting our strong legal arguments in court. Our timeline always contemplated the potential for litigation, and we continue to expeditiously work to close the transaction in calendar year 2024. In the meantime, and as always, we remain focused on continuing to execute on our current business and strategic growth agenda. I'll now turn it over to Scott.

Scott A. Roe: With regard to the transaction timeline following unconditional approval from the European Commission and regulatory approvals in China, and Japan. The FTC filed the suit on April 22nd to block. The proposed acquisition, we remain confident in the merits and pro competitive pro consumer nature of this transaction and look forward to presenting our <unk>.

Scott A. Roe: Strong legal arguments in court or timeline always contemplated the potential for litigation and we continue to expeditiously work to close the transaction in calendar year 'twenty 'twenty four.

Scott A. Roe: In the meantime, and as always we remain focused on continuing to execute on our current business and strategic growth agenda.

Scott A. Roe: I'll now turn it over to Scott.

Scott A. Roe: Thanks, Joanne, and good morning, everyone. As Joanne mentioned, our fiscal Q3 operating income and EPS exceeded expectations, demonstrating our disciplined execution and agility. Importantly, we significantly expanded gross margin and generated strong free cash flow while investing in future growth drivers for our brands and business. Now moving to the details of the quarter, beginning with revenue trends on a constant currency basis. Sales were in line with the prior year and at the low end of our guided range.

Scott A. Roe: Thanks, Joanna and good morning, everyone as Joanne mentioned, our fiscal Q3 operating income and EPS exceeded expectations, demonstrating our disciplined execution and agility importantly, we significantly expanded gross margin and generated strong free cash flow, while investing in future growth drivers for our brands.

Scott A. Roe: And business.

Scott A. Roe: Now moving to the details of the quarter, beginning with revenue trends on a constant currency basis sales were in line with the prior year and at the low end of our guided range. These results were led by a 3% growth internationally driven by gains in Japan, Other Asia and Europe, even as we anniversaried growth from the prior year.

Scott A. Roe: These results were led by 3% growth internationally, driven by gains in Japan, other Asia, and Europe, even as we anniversaryed growth from the prior year. In Japan, sales grew 2%, and in other Asia, revenue rose 15%, with growth in each country in the region, notably Korea and Malaysia. In Europe, growth continued, with revenue 19% above last year.

Scott A. Roe: In Japan sales grew 2% and in the other Asia revenue rose, 15% with growth in each country in the region, notably Korea and Malaysia.

Scott A. Roe: In Europe growth continued with revenue, 19% above last year.

Scott A. Roe: Greater China, as expected, revenue declined 2% as we lapped last year's resurgence in traffic and spend following the end of COVID-related restrictions in the region. In North America, sales declined 3% compared to the prior year amid a challenging consumer backdrop, though gross margin rose significantly and outperformed planned as we supported brand health. Now touching on revenue by channel for the quarter, our direct-to-consumer business declined 4% due to declines in North America and Greater China.

Scott A. Roe: And in greater China as expected revenue declined 2% as we lapped last year's resurgence in traffic and spend following the end of Covid related restrictions in the region.

Scott A. Roe: In North America sales declined 3% compared to the prior year amid a challenging consumer backdrop, though gross margin rose significantly outperformed plan as we supported brand health.

Scott A. Roe: Now touching on revenue by channel for the quarter, our direct to consumer business declined 4% due to declines in North America in greater China and in wholesale revenue grew over 20% led by strength in international supported by our strategic growth initiatives on digital platforms.

Scott A. Roe: And in wholesale, revenue grew over 20%, led by Strengthen International, supported by our strategic growth initiatives on digital platforms. Moving down the P&L, we delivered the strongest third quarter gross margin in nearly two decades, which was ahead of our expectations and 190 basis points above last year. This year-over-year expansion was driven by the benefit of 100 basis points from lower freight expense, FX tailwinds, as well as operational outperformance. SG&A was relatively flat with last year and favorable to our forecast on both a dollar and rate basis, reflecting operational savings as we continue to tightly control costs while making ongoing strategic investments in our brands, people, and business platforms. In addition, SG&A benefited from an expense timing shift of approximately $20 million into the fourth quarter, primarily relating to marketing.

Scott A. Roe: Moving down the P&L, we delivered the strongest third quarter gross margin in nearly two decades, which was ahead of our expectations at 190 basis points above last year. This year over year expansion was driven by the benefit of 100 basis points from lower freight expense FX tailwind as well as operational outperformance.

Scott A. Roe: <unk>.

Scott A. Roe: SG&A was relatively flat with last year and favorable to our forecast on both a dollar and rate basis, reflecting operational savings as we continue to tightly control costs, while making ongoing strategic investments in our brands people and business platforms. In addition, SG&A benefited from an expense timing.

Scott A. Roe: And shift of approximately $20 million into the fourth quarter, primarily relating to marketing.

Scott A. Roe: So taken together, operating margin expanded 110 basis points and operating income rose 6% compared to the prior year, well ahead of plan, and third quarter EPS of 81 cents beat our expectations by approximately $0.15, fueled by an operational beat as well as the previously mentioned favorable expense timing shift, worth roughly $0.06. Now, turning to our balance sheet and cash flows, we ended the quarter with $7.4 billion in cash and investments and total borrowings of $7.7 billion, which reflects the bond financing related to the planned acquisition of Capri. Free cash flow for the quarter was an inflow of $79 million. Capital expenditures and implementation costs related to cloud computing were $29 million.

Scott A. Roe: So taken together operating margin expanded 110 basis points and operating income rose, 6% compared to the prior year well ahead of plan.

Scott A. Roe: Third quarter EPS of 81 cents.

Scott A. Roe: Our expectations by approximately 15 cents fueled by an operational beat as well as the previously mentioned favorable expense timing shift worth roughly six cents.

Scott A. Roe: Now turning to our balance sheet and cash flows we ended the quarter with $7 $4 billion in cash and investments and total borrowings of 7.7 billion.

Which reflects the bond financing related to the planned acquisition of Capri free cash flow for the quarter was an inflow of $79 million Capex and implementation costs related to cloud computing were $29 million inventory levels at quarter end were 12% below the prior year underscoring our focus.

Scott A. Roe: Inventory levels at quarter end were 12% below the prior year, underscoring our focus on disciplined inventory management and driving inventory turn. Looking forward, our inventory is well controlled and current. And we continue to leverage the benefits of our supply chain navigating the Red Sea disruption with only a modest impact, which has been incorporated into our. Importantly, we expect to end Q4 with inventory in line with the prior year, well positioned into fiscal year 25. Turning to our Dividend Program, our Board of Directors declared a quarterly cash dividend of $0.35 per common share, representing $80 million in dividend payments for the quarter.

Scott A. Roe: On disciplined inventory management and driving inventory turn looking.

Scott A. Roe: Looking forward, our inventory is well controlled and current and we continue to leverage the benefits of our supply chain navigating the red sea disruption with only modest impact which has been incorporated into our outlook.

Scott A. Roe: Importantly, we expect to end Q4 with inventory in line with the prior year well positioned into fiscal year 'twenty five.

Scott A. Roe: Turning to our dividend program, our board of directors declared a quarterly cash dividend of <unk> 35 per common share representing $80 million in dividend payments for the quarter for the fiscal year. We continue to expect to return approximately $325 million to shareholders through the dividend at an annual rate of $1 four.

Scott A. Roe: For the fiscal year, we continue to expect to return approximately $325 million to shareholders through the dividend at an annual rate of $1.40 per share, a 17% increase compared to last year. Now moving to our guidance for fiscal year 24, which is provided on a non-GAAP basis and does not include any potential impact from the planned acquisition of Capri. We are maintaining our fiscal year 24 EPS outlook, supported by the third quarter's outperformance, while taking a prudent approach to fourth quarter planning.

Scott A. Roe: <unk> per share a 17% increase compared to last year.

Scott A. Roe: Now moving to our guidance for fiscal year, 'twenty, four which is provided on a non-GAAP basis and does not include any potential impact from the planned acquisition of Capri.

Scott A. Roe: We are maintaining our fiscal year 'twenty for EPS outlook supported by the third quarter's outperformance, while taking a prudent approach to the fourth quarter planning for the year, we're modifying our topline outlook to incorporate more moderate trends in both North America, and greater China across brands that said, our EPS outlook is.

Scott A. Roe: For the year, we're modifying our top-line outlook to incorporate more moderate trends in both North America and greater China across brands. That said, our EPS outlook is unchanged, supported by stronger margin results and a commitment to being disciplined stewards of our brand. Moving to the fiscal year in further detail, we expect revenue of over $6.6 billion, approximately in line with the prior year, on a reported basis and representing growth of about 1% on a constant currency basis. Moving on to sales details by region at constant exchange rates. In North America, we expect revenue to decline slightly versus last year. In Greater China, we anticipate low single-digit sales.

Scott A. Roe: Unchanged supported by stronger margin results and our commitment to be disciplined stewards of our brands.

Scott A. Roe: Moving to the fiscal year in further detail, we expect revenue of over $6 $6 billion approximately in line with the prior year on a reported basis and representing growth of about 1% on a constant currency basis moving to sales details by region at constant currency in North America.

Scott A. Roe: We expect revenue to decline slightly versus last year, and greater China, we anticipate low single digit sales growth in Japan revenue is forecasted to grow mid single digits. While other Asia is expected to increase at a low double digit rate.

Scott A. Roe: In Japan, revenue is forecasted to grow mid-single digits, while revenue in other Asian countries is expected to increase at a low double-digit rate. And in Europe, we anticipate low double-digit growth. In addition, our outlook assumes operating margin expansion of 110 basis points. We anticipate gross margin to expand by approximately 230 basis points, which includes a benefit for moderating freight costs of roughly 130 basis points. On SG&A expenses, we expect a deleverage of roughly 120 basis points, reflecting reinvestments in our brands, people, and business in support of growth initiatives.

Scott A. Roe: And in Europe, we anticipate low double digit growth.

Scott A. Roe: In addition, our outlook assumes operating margin expansion of 110 basis points, we anticipate gross margin to expand approximately 230 basis points, which includes a benefit from moderating freight costs of roughly 130 basis points on SG&A expenses, we expect deleverage of roughly a 120 <unk>.

Scott A. Roe: This points, reflecting reinvestments in our brands people and business in support of growth initiatives.

Scott A. Roe: Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $12 million, which incorporates higher yield on cash and investments compared to the previous outlook. The tax rate is expected to be approximately 20 percent, and our weighted average diluted share count is forecasted to be in the area of 233 million shares. So, taken together, we continue to expect EPS of $4.20 to $4.25, representing 8% to 9% growth versus last year.

Scott A. Roe: Moving to below the line expectations for the year net interest expense is expected to be approximately $12 million, which incorporates higher yield on cash and investments compared to the previous outlook.

Scott A. Roe: <unk> rate is expected to be approximately 20% and our weighted average diluted share count is forecasted to be in the area of 233 million shares.

Scott A. Roe: So taken together, we continue to expect EPS of $4 20 to $4 25.

Scott A. Roe: Representing 8% to 9% growth versus last year.

Scott A. Roe: Finally, before contemplating any deal-related costs, we still anticipate free cash flow of approximately $1.1 billion, and we expect CapEx and cloud computing costs to be in the area of $140 million. This forecast includes nearly half of the spend to be related to store openings, renovations, and relocations, mostly in Asia, with the balance primarily related to ongoing digital and IT investment. Quickly touching on our outlook for the fourth quarter specifically, our guidance implies an expected sales decline in the area of 1% at constant currency or roughly 3% below the prior year on a reported basis, including an FX headwind of approximately 150 basis points.

Scott A. Roe: Finally, before contemplating any deal related costs, we still anticipate free cash flow of approximately $1 $1 billion and we expect capex in cloud computing costs to be in the area of $140 million. This forecast includes nearly half of the spend to be related to store openings renovations and re.

Scott A. Roe: <unk>, mostly in Asia with the balance primarily related to ongoing digital and it investments.

Scott A. Roe: Quickly touching on our outlook for the fourth quarter, specifically, our guidance implies an expected sales decline in the area of 1% at constant currency or roughly 3% below the prior year on a reported basis, including an FX headwind of approximately 150 basis points.

Scott A. Roe: In addition, we anticipate an operating margin decline in the area of 50 basis points, which incorporates the expectation for continued strong gross margin gains, offset by higher SG&A, in part due to the negative impact of the expense timing shift from the third quarter. Taken together, EPS for the fourth quarter is forecasted to be in the area of $0.85.

Scott A. Roe: Further we anticipate an operating margin decline in the area of 50 basis points, which incorporates the expectation for continued strong gross margin gains offset by higher SG&A in part due to the negative impact of the expense timing shift from the third quarter.

Scott A. Roe: Taken together EPS for the fourth quarter is forecasted to be in the area of 85 cents.

Scott A. Roe: Now to outline our capital allocation priorities looking forward, which are unchanged. First, we will invest in our brands and businesses to support sustainable growth. Second, we will utilize our strong free cash flow for rapid debt repayment. We're committed to maintaining a solid investment grade rating. To this end, we have initiated a long-term leverage target of less than two and a half times on a gross debt to adjusted EBITDA basis and expect to achieve that within two years of the Capri transaction closing.

Now to outline our capital allocation priorities looking forward, which are unchanged first we will invest in our brands and businesses to support sustainable growth second we will utilize our strong free cash flow for rapid debt repayment, we are committed to maintaining a solid investment grade right.

Scott A. Roe: To this end, we initiated a long term leverage target of less than two five times on a gross debt to adjusted EBITDA basis, and expect to achieve that within two years of the Capri transaction close.

Scott A. Roe: Finally, we will return capital to shareholders through our dividends. Importantly, we believe our strong cash flow profile provides us with further opportunities for investment and capital return. Following the achievement of our leverage target, over time, we expect to increase our dividend with the goal of achieving our stated target payout ratio of 35% to 40% and see the opportunity to resume share repurchases in the future. Before closing, I'd like to touch on the acquisition of Capri and reiterate our confidence in the excellent strategic fit and value creation opportunity it presents.

Scott A. Roe: Finally, we will return capital to shareholders through our dividend.

Scott A. Roe: Accordingly, we believe our strong cash flow profile provides us with further opportunity for investment and capital return.

Scott A. Roe: Following the achievement of our leverage target over time, we expect to increase our dividend with the goal of achieving our stated target payout ratio of 35% to 40% and see the opportunity to resume share repurchases in the future.

Scott A. Roe: Before closing I'd like to touch on the acquisition of Capri, and reiterate our confidence in the excellent strategic fit and value creation opportunity. It presents we believe the transaction will enhance our strong organic growth N T. S art potential supported by double digit EPS accretion on an adjusted basis.

Scott A. Roe: We believe the transaction will enhance our strong organic growth and TSR potential, supported by double-digit EPS accretion on an adjusted basis, enhanced cash flow, more than $200 million of cost synergies, and compelling ROIC, accelerating benefits for our consumers, employees, partners, and shareholders for years to come. In closing, for the quarter, we build on our track record of operational excellence, driving margin and EPS outperformance against the challenging demand backdrop, advancing our long-term growth initiatives, and controlling the controllable.

Scott A. Roe: <unk> enhanced cash flow more than $200 million of cost synergies and compelling ROI I see accelerating benefits for our consumers employees partners and shareholders for years to come.

Scott A. Roe: In closing for the quarter, we build on our track record of operational excellence driving margin and EPS outperformance against the challenging demand backdrop, advancing our long term growth initiatives and controlling the controllable. In addition, we generated strong free cash flow, while continuing to invest for.

Scott A. Roe: In addition, we generated strong free cash flow while continuing to invest for the future. Our consistent earnings delivery demonstrates the power of our operating model and talented global teams. Looking forward, we remain confident in our vision and in our ability to realize it with a steadfast commitment to drive sustainable, profitable growth and shareholder return.

Scott A. Roe: The future our consistent earnings delivery demonstrates the power of our operating model and talented global teams looking forward, we remain confident in our vision and in our ability to realize it with a steadfast commitment to drive sustainable profitable growth and shareholder returns.

Operator: I'd like to now open it up to your questions. At this time, if you would like to ask a question, please press Star 1 on your telephone keypad. To withdraw yourself from the queue, you may press Star 2.

Speaker Change: I'd like to now open it up for your questions.

Operator: At this time, if you would like to ask a question, please press star 1 on your telephone keypad. To withdraw yourself from the queue, you may press star 2. We'll take our first question from Bob Durbel of Guggenheim.

Speaker Change: At this time, if you would like to ask a question. Please press star one on your telephone keypad to withdraw yourself from the queue you May press star two.

Speaker Change: We'll take our first question from Bob durable of Guggenheim.

Robert Scott Drbul: Hi, good morning.

Robert Scott Drbul: I was wondering.

Robert Scott Drbul: Can you talk a little bit more just about your <unk>.

Robert Scott Drbul: Confidence that you have in your ability to maybe hit the FY 'twenty five investor day, EPS target of $5, given I guess the environment the backdrop.

Robert Scott Drbul: In the second half performance.

Joanne C. Crevoiserat: Sure, you know, maybe, Bob, starting with this year, fiscal 24, I want to acknowledge that we just delivered a strong earnings beat in our third quarter, and we reiterated our outlook for fiscal 24. That's an important step in getting to our fiscal 25 target.

Robert Scott Drbul: Sure.

Robert Scott Drbul: Maybe Bob starting with this year fiscal 'twenty four I want to acknowledge that we just delivered strong earnings and our third quarter and we reiterated our outlook for fiscal 'twenty four that's an important step in getting to our fiscal 'twenty five targets and.

Joanne C. Crevoiserat: And I would say, despite the dynamic environment that we've operated in since sharing those targets three years ago, we remain confident in our ability to deliver the earnings target we set. That really reflects our commitment to brand building and our track record of disciplined execution, both of which are driving our results. And hats off to our teams around the world who are maniacally focused on serving our customers with the agility required in this environment.

Robert Scott Drbul: And I would say despite the dynamic environment that we've operated ends and sharing those targets three years ago, we remain confident in our ability to deliver the earnings target we said.

Robert Scott Drbul: That really reflects our commitment to brand building and our track record of disciplined execution, both of which are driving our results and hats off to our teams around the world who are maniacally focused on serving our customers with the agility required in this environment.

Joanne C. Crevoiserat: And what gives us confidence? I would say Coach, our largest brand, is in a position of strength. Expressive luxury is driving new customer acquisition, new and younger customer acquisition, and strong engagement globally. We have brand heat and a pipeline of innovation to come, and I am pleased with the execution and the discipline that's allowed us to grow profit, even in a challenging environment. But we do have a sense of urgency to drive stronger top-line growth across our portfolio. We remain focused on those initiatives and investments that will fuel that long-term growth. And we see a tremendous runway ahead, but maybe I'll turn it over to Scott to share a little more detail. Sure, Joanne.

Robert Scott Drbul: And what gives us confidence I would say coach our largest brand is in a position of strength expressive luxury is driving new customer acquisition, new and younger customer acquisition and strong engagement globally, we have brand heat and a pipeline of innovation to come and I am pleased with the execution and the discipline that has allowed us to grow prop.

Robert Scott Drbul: But even in a challenged environment and we do have a sense of urgency to drive stronger top line growth across our portfolio. We remain focused on those initiatives and investments that will fuel that long term growth and we see tremendous runway ahead, but maybe I'll turn it over to Scott to share a little more detail.

Scott A. Roe: Sure, Joanne, and hey, Bob, good morning. You know, I'll just start by reiterating what Joanne said. We are on track to deliver the investor's AEPS targets, even despite a more modest top line. And how are we doing that? Through consistently driving gross margin outperformance coupled with disciplined expense control. And just remember that $5 is impacted by the pause in share repurchases, which we quantified as about a 35 cent impact, and now APEX is working against this a bit. But the best evidence that we can achieve this $5 as adjusted going forward is to look at what we're doing right now. We've already done it.

Scott A. Roe: Sure Joanne Hey, Bob Good morning.

Scott A. Roe: I'll just start with reiterating what Joanne said, we are on track to deliver the Investor day, Yes.

Scott A. Roe: Targets.

Scott A. Roe: Despite a more modest topline and how are we doing that through consistently driving gross margin outperformance coupled with disciplined expense control and just remember that $5 is impacted by the pause in share repurchases, which we quantified at about 35 cents impact and now.

Scott A. Roe: FX is working against that but the best evidence that we can achieve this $5 as adjusted going forward is to look at what we're doing right now we've already done at our performance over the last three years, we've delivered double digit EPS CAGR, even in a challenged market and look at this year, we're on track to deliver high single digits earnings.

Scott A. Roe: Our performance over the last three years, we delivered double-digit EPS CAGR, even in a challenged market. And look at this year; we're on track to deliver high single-digit earnings growth, even on flat sales in fiscal 24. And so as you look forward, I'm not providing explicit guidance here, but just to give you some idea of our expectations, we'll continue to focus on the factors in our control. Operational gross margin drivers remain in tact.

Scott A. Roe: Growth even on flat sales in fiscal 'twenty four.

Scott A. Roe: And so as you look forward I'm not providing explicit guidance here, but just to give you. Some idea of our expectations will continue to focus on the factors in our control operational gross margin drivers remain in track intact inventories are well controlled and correct and we're continuing to focus on tightly man.

Scott A. Roe: Inventories are well controlled and current, and we're continuing to focus on tightly managing our SD&A, investing in growth drivers, and finding leverage throughout the P&L. And I think one of the things you see on display is that we've remade this P&L to a more variable model since 2019 pre-pandemic, and that allows us to invest, but also to flex and react when we see challenging market conditions such as what we So when I put that together, these factors all reinforce our confidence and our ability to achieve that $5, as adjusted, that we laid out as a commitment in our investment.

Scott A. Roe: And our SG&A investing in growth drivers finding leverage throughout the P&L I think one of the things you see on display is really we've remade this P&L to a more variable model since 2019 pre pandemic.

Scott A. Roe: And that allows us to invest but also to flexibly react when we see challenging market conditions, such as what we're experiencing right now so when I put that together.

Scott A. Roe: These factors all reinforce our confidence in our ability to achieve that $5 as adjusted that we laid out as a commitment in our investor day.

Speaker Change: Great. Thank you very much.

Operator: We'll move next to Ike Boruchow of Wells Fargo. Your line is open.

Speaker Change: We'll move next to Ike Morocco of Wells Fargo. Your line is open.

Speaker Change: Okay.

Scott A. Roe: Good morning, everyone. Congratulations on the quarter and a tough day. I guess a question and clarification. I guess maybe Scott, just can you give us a little, unpack Q4 a little bit more, specifically the Coached North America and China expectations that are embedded in that quarterly guide? And then I just wanted to make sure I understood, so when you have said the double-digit accretion on the deal for some time, I guess what I'm trying to understand is that a year-one number?

Ike Morocco: Good morning, everyone on congrats on.

Ike Morocco: Congrats on the quarter and an update I guess a question on a clarification I guess, maybe Scott just can you give us a little impact Q4, a little bit more specifically coached North America, and China expectations that are embedded.

Ike Morocco: In that in that quarterly guide and then I just wanted to make sure I understand so when you've said with double digit accretion on the deal for some time I guess, what I'm trying to understand is that a year. One number I mean, I think we all know that.

Scott A. Roe: I mean, I think we all know that since the deal went through, I think that the company's EBITDA, at least on the street estimates, has been cut 30-40%. So is that more of a multi-year accretion expectation, or is that still, is that a year-one double-digit accretion number that you guys are kind of talking to? Just trying to understand more. Thank you. Yeah, yeah, sure.

Speaker Change: Since the deal went through I think that companies EBITDA at least on the street estimates have been cut 30%, 40%. So is that more of a multi year accretion expectation or is that still about a year. One double digit accretion number that you guys are kind of talking to just trying to understand more. Thank you yeah, yeah sure Ike maybe I'll start with the second yes.

Scott A. Roe: Yeah, sure, Ike. Maybe I'll start with the second one, just to knock that one out.

Ike Morocco: Knock that one out.

Scott A. Roe: You know, it obviously depends on the timing of when we close, but we're talking about a first year accretion. You know, there's seasonality in the business, and there's some variability there, but yeah, on a full year basis, we expect that double-digit EPS if you look at a calendar year. What gets a little tricky is when you compare and where we are in our year, but if you look at a 12-month period, that duration, that's what we are. And as it relates to what's in the guide, I think you asked about China and Coach.

Ike Morocco: Obviously depends on the timing of when we close but we're talking about a first year accretion.

Ike Morocco: There is seasonality in the business and there is some variability there, but yeah on a full year basis, we expect double digit EPS. If you look at the calendar year.

Ike Morocco: What gets a little tricky as when you close and where we're at in our year, but if you look at a 12 months period that duration. That's that's what we're speaking to.

Ike Morocco: And as it relates to like when the guide I think you asked about China and Cochin.

Scott A. Roe: And so, you know, first of all, remember in the second half, this has been a strange quarter by quarter if you think about China. So in Q2, we were up against the COVID comparison. We had really high growth, and the back half was up against revenge spending, which put pressure on the Chinese business. So if you look at Q4, it's in the area down double digits from a Chinese standpoint year on year.

Ike Morocco: So.

Ike Morocco: First of all remember in the second half this has been a strange quarter by quarter. If you think about China. Sir in Q2, we were up against the covered compares we had really high growth in the back half we're up against within spending which puts pressure on the China business. So if you look at Q4, it's in the <unk>.

Ike Morocco: Area down double digits from a from a China standpoint.

Scott A. Roe: But let me remind you, for the full year, we're growing at a low single-digit rate, even with all that noise in China for the full year. And as it relates to Coach, maybe I'll throw it over to Todd to comment on Coach. Good morning. Thanks, Scott.

Ike Morocco: Year on year, but let me remind you of her that's all year, we're growing at a low single digit rate, even with all that noise in China for the full year and as it relates to coach maybe I'll throw it over to Todd to comment on carriage.

Todd Kahn: Good morning. Thanks, Scott. You know, again, we feel very good about where we are at Coach. As you saw this quarter, we delivered our highest gross margin in almost 20 years, and we see continued growth. We're not chasing the last dollar. We're being very disciplined and prudent, but we're growing with the people we want to grow with. In North America, Joanne mentioned, we grew 800,000 new consumers, 60% of whom are young Gen Z and millennials.

Todd Kahn: Good morning, Thanks, Scott.

Todd Kahn: Again, we feel very good about where we're at at coach.

Todd Kahn: As you saw in this quarter, we delivered our highest gross margin in almost 20 years.

Todd Kahn: And we see continued growth.

Todd Kahn: Not chasing the last dollar.

Todd Kahn: We're being very disciplined and prudent but we're growing with the people we want to grow with in North America.

Todd Kahn: Joanne mentioned, we grew 800000, new consumers, 60% are young.

Todd Kahn: Gen Z and millennials.

Todd Kahn: And what's exciting about that is there.

Todd Kahn: That is the future fuel for.

Todd Kahn: <unk> long term growth so I'm pleased where we're at I'm pleased with what we're going to deliver.

Todd Kahn: And what's exciting about that is that it is the future fuel for sustainable long-term growth. So I'm pleased where we are. I'm pleased with what we're going to deliver this year in total and what it means for our future.

Todd Kahn: In the year in total and how and what it means for our future.

Operator: Great, thank you. We'll take our next question from Matthew Boss of J.P. Morgan. Great, thanks. So, Joanne, could you elaborate on that?

Speaker Change: Great. Thank you.

Operator: We'll take our next question from Matthew Boss of J.P. Morgan. Great, thanks.

Speaker Change: We'll take our next question from Matthew Boss of JP Morgan.

Matthew Robert Boss: Great. Thanks.

Matthew Robert Boss: So Joanne could you elaborate on the progression of North America demand for the coach brand, maybe as the third quarter progressed and in more recent trends that you've seen in the fourth quarter to date and then Scott to your bottom line confidence could you speak to the drivers of the roughly 200 basis points gross margin expansion.

Matthew Robert Boss: In the fourth quarter, and just runway for operational gross margin multiyear.

Joanne C. Crevoiserat: Sure, I'll, I'll kick it off with an overview of North America. And it's really a continuation of what we've been seeing in the market. You know, the consumer is becoming more choiceful. Despite some positive factors in the market, certainly the labor market is a positive in the market, we do see consumer confidence is low in North America, likely impacted by sticky inflation.

Matthew Robert Boss: Sure.

Speaker Change: I'll kick it off with.

Speaker Change: An overview of North America and it's.

Speaker Change: Really a continuation of what we've been seeing in the market the.

Speaker Change: The consumer is is being more choice full.

Speaker Change: Despite some positive factors in the market certainly the labor market is a positive in the in the market. We do see consumer confidence is low in North America likely impacted by sticky inflation.

Speaker Change: And so we are seeing an overall more cautious consumer but in that context, we're seeing innovation continue to win and coach has been doing a phenomenal job at delivering innovation and we're being quite disciplined in terms of how we manage our business for the long term and.

Joanne C. Crevoiserat: And so we're seeing an overall more cautious consumer. But in that context, we're seeing innovation continue to win. And Coach has been doing a phenomenal job of delivering innovation, and we're being quite disciplined in terms of how we manage our business for the long term. And our expectations for the business reflect that we're we're we're meeting the high bar, we're winning, we're driving higher gross margins, and Todd just mentioned the highest gross margin in nearly two decades.

Speaker Change: And our expectations for the business request that we're where we're meeting the high bar, where we're winning we're driving higher gross margins as Todd just mentioned highest gross margin in nearly two decades.

Speaker Change: We're driving higher AUR, and we're delivering the innovation and we're acquiring more new consumers to brands and those new consumers are transacting at higher AUR and higher gross margin.

Joanne C. Crevoiserat: We're driving higher AUR, we're delivering innovation, and we're acquiring more new consumers for brands. And those new consumers are transacting at higher AUR and higher gross margin. You know, as we see the business unfold, we're planning prudently to continue to build our brands for the long term. And then maybe for the second part of your question, Scott, I'll toss it to you.

Speaker Change: Now as we as we see the business unfold, we're planning prudently to.

Speaker Change: To continue to build our brands for the long term.

Speaker Change: And maybe for the second part of your question Scott pass it to you.

Speaker Change: Okay.

Scott A. Roe: God, I kind of feel you're on mute. Thank you, Todd. Sorry about that.

Scott A. Roe: Got it I got it.

Scott A. Roe: I think.

Scott A. Roe: Thank you, Todd. Sorry about that.

Scott A. Roe: Yeah, so in the fourth quarter, we're going to grow almost 200 basis points. In terms of gross margin, I'd say for the full year or two, if you just think about the overall performance, 230 basis points for the full year, which includes about 130 basis points of freight. So that freight benefit, we said, starts to wane as you move through the year, but it's still a contributor in Q.

Scott A. Roe: Thank you Todd sorry about that.

Scott A. Roe: [laughter].

Speaker Change: Yes, so in the <unk>.

Speaker Change: First quarter, we're going to grow.

Speaker Change: Almost 200 basis points.

Speaker Change: In terms of gross margin I'd say for the full year. Two if you just think about the overall performance 230 basis points for the full year, which includes about 130 basis points of freight so that freight benefit we said starts to wane as you move through the year, but it's still a contributor.

Speaker Change: Q4, as you think about going forward you know as I said in an earlier comment the gross margin drivers are still intact right. We are investing in our businesses. We are increasing our marketing investment consistently over time, it's about triple where it was several years ago and.

Scott A. Roe: As you think about going forward, you know, as I said in an earlier comment, the gross margin drivers are still intact, right? We are investing in our businesses. We are increasing our marketing investment consistently over time. It's about triple where it was several years ago, and that engagement with the consumer gives us confidence in our ability to continue to get them to vote. The consumers in charge, they decide that they continue to vote in terms of our products and the AUR that comes with that, as well as opportunities on the cost side. We see that we have AUC benefits that we're achieving this year, and we see that continuing on a go forward. Our next question from Lorraine Hutchinson of Bank of America

Speaker Change: Engagement with the consumer gives us confidence in our ability to continue to get.

Speaker Change: To get them to vote their consumers in charge they decide that they continue to grow in terms of our.

Speaker Change: Products and the AUR that comes with that as well as opportunities on the cost side, we see.

Speaker Change: You see that we have a you'd see benefits.

Speaker Change: Benefits that we're achieving this year and we see that continuing on a go forward basis.

Speaker Change: Great Best of luck.

Speaker Change: Yeah. Thanks, Matt.

Speaker Change: We'll take our next question from Lorraine Hutchinson of Bank of America.

Operator: We'll take our next question from Lorraine Hutchinson of Bank of America. Thanks, good morning.

Lorraine Corrine Maikis Hutchinson: Thanks, Good morning.

Lorraine Corrine Maikis Hutchinson: Joanne you just discuss the challenging macro environment in North America are conditions deteriorating enough to cause you to change your strategy would you give up some of this gross margin strength to give some of the value back to consumers and drive sales growth.

Joanne C. Crevoiserat: Absolutely not, you know; we are and have been really focused on brand building and building our brands and creating emotional connections with consumers. First, we know that the category we play in is both durable and resilient and powers through downturns historically because the consumer has an emotional connection with it. And we see strong growth in the category going forward, and we want to be sure that our brands are well positioned, regardless of the macro environment, as strong brands.

Lorraine Corrine Maikis Hutchinson: No absolutely not.

Lorraine Corrine Maikis Hutchinson: We are and have been really focused on brand building and building our brands and creating emotional connections with consumers first we know that the category. We play in is both durable and resilient and powers the category powers through downturns historically, because the consume.

Lorraine Corrine Maikis Hutchinson: <unk> has an emotional connection with it and we see strong growth in the category going forward and we want to be sure that our brands are well positioned.

Lorraine Corrine Maikis Hutchinson: Regardless of the macro environment as strong brands and that's been our work for the last four years and.

Joanne C. Crevoiserat: And that's been our work for the last four years, and we're gaining traction. We offer incredible value in the marketplace to consumers, and that won't change. Where we represent and how connected consumers are to our brands continues to grow. Their affinity for our brands continues to grow, and that's where we're investing. It's not just about gross margin and the product and the innovation that we're delivering, but it's also about the marketing investments we're making to reach consumers, the investments in digital to reach consumers where we are.

Lorraine Corrine Maikis Hutchinson: And we're gaining traction we offer incredible value in the marketplace to consumers and that won't change.

Lorraine Corrine Maikis Hutchinson: You know the the where we.

Lorraine Corrine Maikis Hutchinson: You represent and how connected consumers or to our brand.

Lorraine Corrine Maikis Hutchinson: Continues to grow their affinity for our brands continue to grow and that's where we're investing that's been it's not just about gross margin and the product and the innovation that we're delivering but it's also about the marketing investments, we're making to reach consumers the investments in digital to reach consumers, where we are.

Lorraine Corrine Maikis Hutchinson: And that's the virtuous flywheel that we've been developing and it's working so we will remain committed to it.

Joanne C. Crevoiserat: And that's the virtuous flywheel that we've been developing, and it's working, so we'll remain committed to it. Thank you. We'll take our next question from Brooke of Goldman Sachs. Good morning, and thank you for taking our question.

Speaker Change: Thank you.

Speaker Change: Mhm.

Speaker Change: We'll take our next question from Brooke Roach of Goldman Sachs.

Operator: We'll take our next question from Brooke Roach of Goldman Sachs.

Brooke Siler Roach: Good morning, and thank you for taking our question.

Brooke Siler Roach: If you think about the opportunity for tapestry to gain share in North America against this challenged macro can you talk a little bit more about the innovation pipeline you have on the horizon and how youre thinking about engaging customers between the outlet and the value focus channels relative to the full full price channels and what youre seeing.

Speaker Change: They're currently thank you.

Joanne C. Crevoiserat: Yeah, innovation is winning. That's what I'll say, and we're very focused on delivering the innovation that consumers respond to and recognize. It starts with knowing the customer.

Speaker Change: Yeah innovation is winning that.

Speaker Change: What I will say and we're very focused on delivering the innovation that consumers are.

Speaker Change: Respond to and recognize it starts with knowing the customer and again, our direct to consumer platform, our data and analytics capabilities and our consumer insights cable capabilities are what helped fuel. This innovation right, we're staying close to consumers and their behaviors and.

Joanne C. Crevoiserat: And, again, our direct-to-consumer platform, our data and analytics capabilities, and our consumer insights capabilities are what helped fuel this innovation, right? We're staying close to consumers, and, you know, their behaviors and their preferences change rapidly. They have changed over the last four years, and I expect they'll continue to change. And so we're connecting with consumers, understanding consumers at a deeper level, and then building products and experiences that speak to consumers. That's the innovation that wins. And we're doing that exceptionally well at Coach, and maybe I'll talk about it with Todd to share some of his insights on innovation. Thank you, Joanne.

Speaker Change: And their preferences change rapidly they have changed over the last four years and I expect they'll continue to change and so where we're connecting with consumers understanding consumers at a deeper level and then building product and experiences that speak to consumers. That's the innovation that wins and we're doing.

Speaker Change: That exceptionally well at coach and maybe I'll pass it to Todd to share some of his insights on innovation.

Todd Kahn: Thank you, Joanne. I couldn't be more excited about what I see, what we're seeing now, both in our stores, but, you know, I have the benefit and the privilege of walking through our showrooms and seeing what we're going to deliver nine months from now. And what we're seeing is innovation across all price points. We're not just innovating at the top; we're innovating in our value channels and at our retail channel. And we're doing some really interesting things. We talk a lot about the strength of Tavvy.

Todd Kahn: Thank you Joanne.

Todd Kahn: I couldnt be more excited with what I see what we're seeing now both in our stores, but I have the benefit and the privilege of walking through our showroom and see what we're going to deliver.

Todd Kahn: Nine months from now and what we're seeing is innovation across all price points, we're not just innovating at the top we're innovating.

Todd Kahn: At our value channel and at our retail channel and we're doing some really interesting things we.

Todd Kahn: One of the things you're going to see when you visit stores in June, we're going to take Tavvy at full price to a hundred outlet stores in North America. Because what we've recognized is we're spending quite a bit on marketing our image, leaning in on Tavvy. Consumers don't always see the difference like we see between an outlet store and a retail store. And with taking those Tavvy, they will be sold at full price in the outlet because the consumer is coming in with their iPhones and saying, I want this back.

Todd Kahn: We talk a lot about the strength of Cathy one of the things youre going to see when you visit stores and.

Todd Kahn: Two we're going to take kabi at full price to a 100 outlet stores in North America.

Todd Kahn: Because what we recognize is we're spending quite a bit on marketing or.

Todd Kahn: Image leaning in on tabby consumers don't always see the difference like we see between E outlet store and a retail store and we're taking those tabbies they will be sold at full price.

Todd Kahn: Outlet because the consumers coming in with their iphones and say I want this bad and we wanted to make sure we deliver what our customers want wherever they shop and that's what's so exciting and ultimately yes, we talk a little bit about the overall backdrop, but we are in an emotional.

Todd Kahn: And we want to make sure we deliver what our customers want wherever they shop. And that's what it's so exciting. And ultimately, yes, we talk a little bit about the overall backdrop, but we're in an emotional category. And what we've seen, we haven't seen any degradation in consumers at our economic level. So again, we win when we deliver newness, when we deliver emotion, when we have purpose-led campaigns. You're seeing that at Coach.

Todd Kahn: Category and what we've seen we haven't seen any degradation in <unk>.

Todd Kahn: Consumers.

Todd Kahn: At our at our economic levels. So again, we win when we delivered newness willing to deliver emotion. When we have purpose led campaigns youre seeing that at coach. This year, we will earn over $5 billion.

Todd Kahn: This year, we will end over five billion dollars. It's the first time in over a decade that Coach has done that, but we're ending at five billion dollars in a very healthy, sustainable way. And that's why I feel so good about our future.

Todd Kahn: First time in over.

Todd Kahn: A decade, where coach has done that but we're ending at $5 billion.

Todd Kahn: Very healthy sustainable way and that's what I feel so good about our future.

Todd Kahn: Okay.

Operator: Our next question is from Michael Binetti of Evercore ISI.

Todd Kahn: Our next question is from Michael Binetti of Evercore ISI.

Operator: Hey, guys. Thanks for taking our questions here. Congratulations on a nice quarter. I have two.

Michael Binetti: Hey, guys. Thanks for taking our questions here congrats on a nice quarter I have two I guess, if we think about what's baked into the guidance you just gave us our fourth quarter and some of the dynamics and what it could mean as we look to the second half of calendar year. Scott would you might help us think through maybe the upside and downside scenarios after year fourth quarter or maybe the puts and takes around the multi.

Operator: I guess if we think about what's baked into the guidance you just gave us for the fourth quarter and some of the dynamics and what it could mean as we look to the second half of the calendar year, Scott, would you mind helping us think through maybe the upside and downside scenarios after your fourth quarter or maybe the puts and takes around the multiyear revenue cagers you spoke to at 2022 Analyst Day in regards to fiscal 25? And then on the AUR comments that you guys made earlier, I know you mentioned some confidence in the ability to keep driving handbag AURs. Maybe walk us through some of the drivers that you look at to build on that.

Michael Binetti: Year revenue CAGR as you spoke to at the 2022 analyst day in regards to fiscal 'twenty five and then on the AUR comments that you guys made earlier I know you mentioned some confidence in the ability to keep driving AUR handbag AUR, maybe walk us through some of the drivers that you look at build to that we've heard I guess this earning season starts to reach.

Joanne C. Crevoiserat: We've heard, I guess, as earnings season starts, some retailers may be pointing to some concerns that the luxury brands have taken too much pricing on handbags and may need to start moderating a bit. Have you seen anything in the marketplace yet? What levers do you think about in your business if you need to kind of defend pricing? If you do see that spread to luxury brands, it's provided a nice umbrella for you and the people you've spoken to over the last few years, starts to reverse.

Michael Binetti: Sellers, maybe pointing to some concerns that the luxury brands have taken too much pricing on handbags and they need to start moderating a bit have you seen anything in the marketplace yet what levers do you think about in your business. If you need to kind of defend pricing. If you do see that that spread to luxury brands has provided a nice umbrella and you've spoken to over the last few years.

Michael Binetti: <unk> starts to reverse level.

Joanne C. Crevoiserat: Yeah, let me speak to the second part of that first; maybe then, Scott, I'll toss it to you. As it relates to AUR and margin growth, you've seen us consistently deliver. We've been on this path, we started even before the pandemic, and it really starts with understanding customers and what they value. I mean, AUR, at the end of the day, is a function of what's sold, not what's offered. So, you know, ultimately, it's the consumer's decision. You mentioned the top of the market. The top of the market has moved the price considerably higher.

Yeah, Let me, let me speak to the second part of that first maybe then Scott toss it to you.

Joanne C. Crevoiserat: As it relates to AUR and margin growth and you've seen us consistently deliver we've been on this path. We started even before the pandemic in it it really starts with understanding customers and what customers value I mean AUR at the end of the day is a function of what sold not what's offered so.

Joanne C. Crevoiserat: Where ultimately the consumers decision you mentioned the top of the market. The top of the market has moved to price considerably higher and in that context, the value that we deliver to consumers is incredibly stronger.

Joanne C. Crevoiserat: And in that context, the value that we deliver to consumers is incredibly stronger. And so, as we play within the dynamics of this, you know, this very fragmented market where the consumer has a lot of choice, we have an opportunity to know the consumer better, understand what they value, and deliver that value in the form of innovation. And that's what's been driving AUR and our gross margin growth over the last few years.

Joanne C. Crevoiserat: And so as we play within the dynamics of this.

Joanne C. Crevoiserat: It's very fragmented market, where the consumer has a lot of choice.

Joanne C. Crevoiserat: We have an opportunity to know the consumer better understand what they value and deliver that value in the form of innovation and that's what's been driving AUR and our gross margin growth over.

Joanne C. Crevoiserat: Over the last few years and those are deeply embedded capabilities at tapestry.

Joanne C. Crevoiserat: And those are deeply embedded capabilities at Tapestry. And that's how we're winning. So, you know, that's why we expect to be able to continue to do this. The value that we deliver in the marketplace is incredibly strong. We know our consumers. And we can then take those insights and deliver innovation behind them. And then, Scott, over to you.

Joanne C. Crevoiserat: That's how we're winning so that's why we expect to be able to continue to do this the value that we deliver in the marketplaces incredibly strong we know our consumers and we can then take those insights and deliver innovation behind it and then maybe Scott over to you.

Scott A. Roe: Yeah, sure. You know, Michael, you're probably not surprised.

Scott: Yeah sure Michael you're probably not surprised we're not given any guidance on 25 right.

Scott A. Roe: We're not given any guidance on 25, right? So I would just repeat a couple of things that I said earlier. First of all, there's agility in the model. It's on display. It has been since investor day and our ability to deliver earnings under a lot of different conditions and difficult backdrops. The other thing I'd say is, you know, we continue to invest in the brands, continue to invest in marketing, but we're also reading and reacting, right?

Scott: I would just repeat a couple of things that I said earlier first of all there's agility in the model. It's on display has been since.

Scott A. Roe: The Investor day, and our ability to deliver earnings on a lot of different conditions and difficult backdrop. The other thing I'd say is we continue to invest in the brands continue to invest in marketing, but we're also reading and reacting right and so I'll give you. An example, we talked about in this last.

Scott A. Roe: And so I'll give you an example we talked about in this last quarter. We have made a decision within our brands to spend more on the top of the funnel and less on the bottom of the funnel. That can hurt sales in the short term, but from the quality of sales and the acquisition of new customers, which you saw 1.2 million in the quarter, about half of which are millennials and Gen Z, that really speaks to confidence in the future. And these are some proof points that help us or give us confidence that we can grow both the top line and the bottom line. Thanks a lot, guys. I appreciate it.

Scott A. Roe: Quarter, we have made a decision within our brands to spend more on the top of the funnel and less on the bottom of the funnel effect that can hurt sales in the short term.

Scott A. Roe: You get bottom of the funnel sales, but from the quality of sales and the acquisition of new customers, which you saw one point too.

Scott A. Roe: <unk> million dollars in the quarter about half of which are millennial and Gen Z that really speaks to confidence in the future and these are some proof points that help us or give us confidence that we can grow.

Scott A. Roe: Both topline and bottom line in the future.

Operator: Thanks a lot, guys. I appreciate it.

Speaker Change: Thanks, a lot guys I appreciate it.

Speaker Change: Thank you.

Operator: Our next question is from Oliver Chen. T.D. Cowan.

Operator: Our next question is from Oliver Chen of TD Cowen.

Operator: Hi, thanks so much. The coach gross margin continues to really impress. What are your thoughts longer term and should you invest more just to make sure you're being proactive about how well you're doing there? And as you think about pricing, it continues to impress as well. What are you seeing with the elasticity and how are you thinking about like for like relative to mix? The tabby momentum is really impressive.

Oliver Chen: Hi, Thanks, so much the coach gross margin continues to really impressed what.

Operator: What are your thoughts longer term and should you.

Operator: Thus more just to make sure you're being proactive about.

Operator: How well you're doing there and as you think about pricing it continues to impress as well.

Operator: What are you seeing with elasticity and how are you thinking about like for like a relative to mix. The tablet momentum is really impressive.

Operator: Lastly, about the geographies, would love your thoughts on the Chinese customer relative to the U.S. Chinese have been fairly mixed, with some of the macros and housing and traffic being general concerns. Meanwhile, you know, we've seen a linear U.S. customer. Just would love your thoughts on that. Thank you.

Operator: Lastly, about the geographies would love your thoughts on the on the China customer and a relative to the U S. China, it's been fairly mixed with some some of the macros in the housing and traffic thing being general concerns. Meanwhile, we've seen a linear U S customer just would love love thoughts on that thank you.

Operator: <unk>.

Todd Kahn: Todd, do you want to kick us off with Coach Gross Margin and your long-term outlook, and then I'll follow up on the China piece. China. Perfect, thanks.

Operator: Todd do you want to kick us off with the coach gross margin in your long term outlook and then I'll follow up with the on the China piece, China perfect. Thanks.

Todd Kahn: Yeah, we feel good, Oliver, about our gross margin and the sustainability of our gross margin. Now, obviously, this was a standout quarter. I want to make sure no one expects every quarter to be 77%, but we like the neighborhood. We're delivering on an annual basis, and we are investing. Again, when we talk about investing, we're investing in the quality of our product; we're investing in marketing. If you think about it, historically, Coach spent 3% of its revenue on marketing.

Todd Kahn: Yes, we feel good.

Todd Kahn: Oliver about our gross margin and the sustainability of our growth margin now obviously this was a standout quarter I want to make sure no. One would expect every quarter to be 77%.

Speaker Change: Got it.

Todd Kahn: Like the neighborhood, where we're delivering on an annual basis and we are investing.

Todd Kahn: Again.

Todd Kahn: When we talk about investing we're investing in the quality of our product we're investing in marketing.

Todd Kahn: If you think about it historically coats than 3% of the marketing, we're spending or over 8% our marketing today and as Scott indicated in the last question we've shifted even more recently, how we're spending that mark were spending more and more on top of funnel marketing to tell story to create more.

Todd Kahn: We're spending over 8% on marketing today, and as Scott indicated in the last question, we've shifted even more recently how we're spending that marketing. We're spending more and more on top-of-funnel marketing to tell stories and create more connections with our consumers. We do that because we believe in the long-term sustainability and the customer acquisition that that brings to the brand. In terms of pricing, I mean, we touched on this a little bit, but I feel, and Joanne touched on this, but I think in terms of AUR, at Coach Brands specifically, we feel very good about sustaining AUR growth for four reasons. Again, it goes back to innovation and storytelling, something I've talked about over and over again. Emotion always trumps price; consumers have hundreds of choices. Every day, we win because we connect with them emotionally.

Todd Kahn: Connection with our consumers.

Todd Kahn: We're doing that because we believe in the long term sustainability and the customer acquisition that that brings to the brand in terms of pricing I mean, we've touched on this a little bit but.

Todd Kahn: You know I feel and Joanne touched on this but I think in terms of AUR at coach brand, specifically, we feel very good about sustaining.

Todd Kahn: Our growth for four reasons.

Todd Kahn: Again, it goes back to innovation and storytelling, something I've talked about over and over again emotion always trumps price consumer.

Todd Kahn: <unk> had hundreds of choices.

Todd Kahn: Every day, we win because we connect with them emotionally.

Joanne C. Crevoiserat: Third, traditional European luxury dominates the category, and when we compare our product with that traditional European luxury, the consumer is seeing the value. And that's very important. And lastly, something that Scott always touches on: we're so disciplined in our inventory. We are, our whole structure, if you think about the last four years, Joanne led this, we reduced our SKU count dramatically, and we leaned in on important families. And that takes a lot of the pressure off that constant churn on fashion.

Todd Kahn: Third.

Todd Kahn: Traditional.

Joanne C. Crevoiserat: European luxury dominate the category and when we compare our product with that traditional European luxury consumers sees the value and that's very important and lastly, something that Scott always touches on where so discipline in our inventory.

Joanne C. Crevoiserat: We are our host structure. If you think about the last four years go and.

Joanne C. Crevoiserat: We reduced our SKU count dramatically, we leaned it out important families and that.

Joanne C. Crevoiserat: So a lot of the pressure off that constant churn on fashion, that's what you're seeing with them.

Joanne C. Crevoiserat: That's where you're seeing with Willow Grove, we have families that are sustainable that our emotional that the consumer can next week.

Joanne C. Crevoiserat: Yeah, thank you. And Oliver, as far as the consumer in China is concerned, you know, like many others, we're seeing macro headwinds. There is lots of noise in the numbers. Last year, we were lapping shifts in the New Year holiday during the quarter, but also, importantly, that post-COVID revenge spending. I do think it is important to note that our outlook for the year continues to, you know, expect low single-digit growth for the year in China.

Joanne C. Crevoiserat: Okay.

Speaker Change: Yeah, Yeah, Thank you and Oliver related to the consumer in China like many others, we're seeing macro headwinds.

Joanne C. Crevoiserat: There are there is lots of noise in the numbers last year, we're lapping shifts and in the new year holiday during the quarter, but also importantly that post COVID-19 revenge spending.

Joanne C. Crevoiserat: I do think it is important to note that our outlook for the year continues to.

Joanne C. Crevoiserat: You now expect low single digit growth.

Joanne C. Crevoiserat: For the year in China, So the quarterly flow of that has been quite dynamic.

Joanne C. Crevoiserat: So, the quarterly flow of that has been quite dynamic, but we still expect growth for the year, and our view on the long-term opportunity in China has not changed. And, you know, our team. We have, you know, tremendous teams on the ground. We've been in the market, as you know, for two decades, more than two decades, and our teams are doing an excellent job building our brands and connecting with consumers in this dynamic environment. I was just in the market two weeks ago.

Joanne C. Crevoiserat: I was meeting with teams and our partners in the region. The teams are showing agility and moving with the consumer as their shopping behaviors and preferences shift, and, you know, some of our wholesale outperformance in international was related to how our teams are reading where the consumers are moving and making sure we're showing up, and our brands are connecting with consumers where they are. We are seeing consumer desire for our brands continue to be strong, and purchase intent in our category is still high among consumers. So, we continue to invest in the market and in brand building activities to support that long-term potential that we have.

Joanne C. Crevoiserat: That's been the market and and brand building activities to support that longterm potential that we see.

Operator: Very encouraging. Thanks. Best regards

Speaker Change: Very encouraging think's best regards.

Operator: Alright.

Operator: Our next question is from Mark Altschwager of Baird.

Herold Swogger: Our next question is from her old Swogger of bird.

Operator: Good morning. Thanks for taking the question. Coach continues to demonstrate its ability to drive stable results despite the choppier macro. The tools in Playbook really seem to be working.

Mark R. Altschwager: Good morning, Thanks for taking the question. So coach continues to demonstrate its ability to drive stable results. Despite the shop your macro uhm. So the the tools and playbook really seem to be working so what do you think it's holding back Kate at this stage is there a wholesale story going on.

Joanne C. Crevoiserat: So, what do you think is holding back Kate at this stage? Is there a wholesale story going on there? And do you think that the success at Coach and the success you're having with younger customers is having an impact on Kate at this point? Thank you.

Mark R. Altschwager: There and do you think that the success of coach and the successor, having with younger customers is having an impact on K at this point. Thank you.

Joanne C. Crevoiserat: Now, our opportunities with Kate, and I appreciate the question, Mark. At Kate, we are focused on building a stronger brand and, you know, a bigger brand. We see tremendous potential in the future for Kate, and we're building both the profitability of the brand as well as establishing a stronger brand with our consumers. So, in the quarter, you saw us expand gross margin, operating margin, and profit versus last year. It exceeded our expectations, so the disciplined management of the business remains intact.

Speaker Change: Now our opportunities with Kate and I. Appreciate the question Mark you know like Kate we are focused on.

Joanne C. Crevoiserat: Building, a stronger brand and you know a bigger brand, we see tremendous potential in the future for Kate and we're we're doing both building the profitability of the brand as well as establishing a stronger brand with our consumers. So in the quarter you soft expand grow.

Joanne C. Crevoiserat: <unk> margin operating margin and profit versus last year it exceeded our.

Joanne C. Crevoiserat: Patients so that the the discipline manage it the best management of the business remains intact.

Joanne C. Crevoiserat: We're executing with discipline, and that will be embedded in our ways of working going forward. So we're focused on increasing the profitability of the brand, and from that base, also an opportunity to grow the top line. And in that, we see an opportunity to increase or improve the execution in three areas, and we've talked about this. One is strengthening the core handbag foundation. Coach has 80 years of archives that we're pulling from and really driving.

Joanne C. Crevoiserat: We're executing with discipline and that is embedded in our ways of working going forward. So we're focused on increasing the profitability of the brand and from that day also an opportunity to grow the top line and and in that we see an opportunity to increase the accident or improve the execution in three areas.

Joanne C. Crevoiserat: We've talked about this one is strengthening the core handbag foundation coach AV 80 years of archives that we're pulling from and really driving Kate is building those those core handbag ideas and the delivery of innovation you've heard that as a theme at tapestry, we're we're really winning and where we see the customer.

Joanne C. Crevoiserat: Kate is building those core handbag ideas and delivering innovation. You've heard that as a theme at Tapestry, where we're really winning and where we see the customer responding is when we're delivering newness and innovation in our assortments. And that's what we're focused on delivering, and we're increasing that newness and innovation at Kate. Where we're delivering it, it's working. And that newness and innovation will grow, as we've mentioned, into fiscal 25.

Joanne C. Crevoiserat: Respond as one word delivering newness and innovation in our Assortments and and that's what we're focused on delivering and and we're increasing that newness and innovation that Kate where we're delivering that it's working and that newness and innovation will grow as as we've mentioned into physical 25. We're also focused on the omnichannel.

Joanne C. Crevoiserat: We're also focused on the omni-channel experience. We've launched outlet.com. We have more omni-channel customers, but that seamless experience and driving more emotional marketing. We're talking about shifting our investments into the top of the funnel. So all the things that Todd just talked about at Coach are things we're applying to Kate. Kate's in the earlier innings, and, you know, we continue to have confidence in the runway that we see ahead for the brand. We're being disciplined about our execution and building profitability while we continue to execute on the things that will drive and help us achieve that long-term brand ambition.

Joanne C. Crevoiserat: <unk>, we launched out with Dot com, we have more omnichannel customers, but that seamless experience and.

Joanne C. Crevoiserat: And driving more emotional marketing, we're talking about shifting our investments in the top a funnel to all the things that Todd just talked about a coach or things were applying to Kate <unk> earlier earnings and you know we continue to have confidence in the runway that we see ahead for the brand were being disciplined about our our.

Joanne C. Crevoiserat: <unk> and building the profitability, while we continue to execute on the things that will drive and and help us achieve that longterm brand ambition.

Scott A. Roe: And maybe one more quick one for Scott on fiscal 25. The agility in the model came up a couple of times today. Is sales growth needed to hit the earnings goals, trying to better understand the range of scenarios you're contemplating there? Thanks again.

Joanne C. Crevoiserat: Thank you and maybe one more quick one for Scott physical twenty-five uhm, the agility and the model came up a couple of times today is.

Scott A. Roe: Sales growth needed to hit the earnings goals.

Scott A. Roe: To better understand the range of scenarios, you're contemplating there. Thanks again.

Scott A. Roe: Yeah, so, you know, again, I'm not going to get into that level of specificity, but let me be clear. We expect to grow, right? We've got the building blocks in place. We're acquiring consumers that we believe have a strong lifetime value. We're making the investments in marketing and behind the business, and we've got an innovation pipeline. So we'll come back and give you more soon, but, you know, we do expect it to grow.

Speaker Change: Yeah. So.

Speaker Change: I'm not gonna get into that level of specificity, but let me be clear we expect to grow right. We've got the building blocks in place where aquarium consumers that we believe I have a strong lifetime value, we're putting the investments in marketing and behind the business and we got an innovation pipeline. So we'll come back and give you more.

Scott A. Roe: Soon but you know we we do expect to grow that Chad we've demonstrated this year that even.

Scott A. Roe: That said, we've demonstrated this year that even on no growth, essentially, a flat business, we can and have the levers to deliver profitability. So a combination of both those things gives me a lot of confidence. Think about what this model does as it's been remade and the efficiency that we've been talking about as we achieve the growth that we expect in the future. And this becomes a profit and a cash machine on an even higher level than the commitments that we've made public. In the interest of time, please limit yourselves to one question. We'll move next to Rick Patel.

Rakesh Babarbhai Patel: No gross essentially flat business, we can and have the levers to deliver profitability. So it's a combination of both of those things that give me a lot of confidence thinking about what this model does is it's been <unk> remade in the efficiency that that we've been talking about as we achieved the grocery expected.

Rakesh Babarbhai Patel: In the future and this becomes a profit in a cash machine on an even higher level than the commitments that we've made publicly.

Operator: In the interest of time, please limit yourselves to one question. Thank you. We'll move next to Rick Patel of Raymond James. Thank you. Good morning. Really good.

Rakesh Babarbhai Patel: In the interest of time, please limit yourselves to one question. Thank you.

Operator: We'll move next to Rick Patel of Raymond James.

Rakesh Babarbhai Patel: Thank you good morning, really good control of SG&A can you talk about which levers you pulled in the quarter to pare back the growth there in touch on how we should think about opex going forward in terms of areas, where you see opportunity for better control versus areas and you need to make more investments.

Operator: Yeah, maybe I'll start. You know, listen, we continue. The model really hasn't changed. We continue to invest in our people's capability and in marketing. And those are the areas that you see that we invested in during the quarter. And we're finding leverage really throughout the rest of the P&L. I'd remind you that about two-thirds of our rents now have a variable component. And again, we're spending about 9% in terms of marketing. So, you know, that really isn't a change, and we've been pretty consistent in the way we're looking at that from a cost-forward perspective.

Rakesh Babarbhai Patel: Yeah, maybe I'll start you know <unk>, where we continue the mile really hasn't changed so we continue to invest in our in our people and our.

Operator: People capability and in marketing and those are the areas that you see that we invested in the corner and refining levers really throughout the rest of the the P&L I'd remind you about two thirds of our of our ranch now have a variable component and again, we're spending about 9% in terms of Mark.

Operator: <unk>. So you know that's that's that really isn't gonna change and and and we've been pretty consistent and the way you were looking at that got <unk> foreign standpoint.

Speaker Change: Thank you very much.

Speaker Change: Oh, thank you.

Scott A. Roe: This does conclude our question and answer session. I'd be happy to return the call to Joanne for closing remarks.

Operator: This does conclude our question and answer session I'd be happy to return the call to Joanne for concluding remarks.

Joanne C. Crevoiserat: Well, thank you, and thank you for joining us and for your interest in our story, and thank you to our incredible teams around the world who continue to drive our results against this dynamic backdrop. Our disciplined approach to brand building and our commitment to operational excellence were once again on display in the third quarter. We're delivering innovation for consumers and driving profit and earnings growth. I'm confident in our future and the significant opportunity to drive sustainable growth and shareholder returns. Thanks again, and have a great day. This concludes Tapestry's Earnings Conference Call. We thank you for your participation.

Joanne: Well, thank you and thank you for joining us and for your interest in our story and and Thanks, you too are incredible teams around the world who continue to drive our results against the dynamic backdrop are disciplined approach to brand building and our commitment to operational excellence were once again on display in the third quarter or delivering innovation.

Joanne C. Crevoiserat: For consumers and driving profit and earnings growth I'm confident in our future and the significant opportunity to drive sustainable growth and shareholder returns. Thanks, again and have a great day.

Operator: This concludes Tapestry's earnings conference call. We thank you for your participation.

Joanne C. Crevoiserat: This concludes tapestries earnings conference call. We thank you for your participation.

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