Tapestry, Inc.

Please stand by. Your program is about to begin. If you need assistance on today's conference, please press star zero. Good day and welcome to this Tapestry conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colon.

Good morning. Thank you for joining us. With me today to discuss our third quarter results as well as our strategies and outlook are Joanne Corvoisierat, Tapestry's Chief Executive Officer, and Scott Rowe, 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 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. 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. 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 brands. Scott will continue with 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 Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne for VoiceRot, Tapestry's CEO.

Good morning. Thank you, Christina, and welcome, everyone. As noted in our press release, our record third quarter results outperformed expectations, reinforcing our position of strength. Our talented global teams drove accelerated top and bottom line growth against an increasingly complex backdrop, clearly demonstrating the power of consistent brand building and our connections with consumers around the world. Touching on the highlights of the quarter. First, we powered global growth with total revenue gains of 8% at Constant Currency, outpacing guidance, fueled by 15% growth at Coach, By geography, international revenue rose 8%, led by an increase of 35% in Europe, where our business has strong momentum and the opportunity for continued growth is significant. In addition, we delivered a sales increase of 4% in the total APAC region. In Greater China specifically, revenue growth accelerated, rising 5% as we continue to confidently invest behind our long-term growth agenda in the region and with this important consumer cohort. And in North America, revenue increased 9% compared to last year, and growth and operating margin continued to expand, reinforcing our commitment to driving a healthy business. Second, we built new and lasting relationships with consumers around the world. In North America specifically, we acquired over 1.2 million new customers in the quarter, representing strong growth versus last year. And of these new customers, two-thirds were Gen Z and millennials. We are capturing consumers who are entering the category for the first time, which is instrumental to fueling enduring relationships, customer lifetime value, and sustainable growth. New Gen Z and millennial consumers continue to transact at higher AUR than the balance of our customer base. And we achieved a meaningful increase in year one retention rates among Gen Z consumers at Coach, a key indicator that these relationships are sticky. Third, we delivered compelling omnichannel experiences, delighting consumers across all touch points with our brands. To this end, we maintained strength in digital, which grew at a mid-teens rate versus prior year and represented approximately 30% of revenue at accretive margins. Our global brick-and-mortar sales rose at a mid-single-digit rate in the quarter at strong and increasing profitability. Overall, our direct-to-consumer operating model is a clear differentiator and competitive advantage, driving real-time consumer understanding and agility. Fourth, we fueled fashion innovation and product excellence as we continue to deliver creativity, quality, and compelling value to consumers around the world. This is on display at Coach, where we delivered strong and broad-based growth, highlighting the vibrancy of the brand and product offering. Our commitment to disciplined brand building is also reflected in our strong gross margin, which continued to expand in the quarter. Importantly, our globally scaled and diverse supply chain is a key competitive advantage, enabling us to deliver craftsmanship to consumers while navigating the shifting backdrop, which Scott will discuss in more detail shortly. Overall, we generated record third quarter earnings per share, which exceeded our expectations and increased 27% compared to the prior year. This outperformance positioned us to increase our outlook for the fiscal year. We're on track to deliver fiscal year 25 earnings in the area of $5 per share, consistent with the outlook we provided nearly three years ago at our investor day, despite the rapidly changing global landscape. This is a testament to the power of our strategies, the agility of our operating model, and the resilience and focus of our teams. These advantages are driving our success today, and I'm confident they will continue to underpin our growth long term. Now moving to our results and strategies by brand. Coach delivered another standout performance with accelerated growth in the third quarter, driving 15% top-line gains as the brand's expressive luxury position continues to resonate with consumers. We believe that the momentum we have unlocked is enduring and that Coach's success is compounding. We continue to build on our strong brand and cultural relevance, driven by product innovation and the creativity of our talented global teams who are operating with excellence, focus, and intention. The Coach vision is clear, to be the world's most inclusive, genuine, and loved fashion brand. And it is this vision that guides our strategies and fosters a brand purpose that cuts through with consumers. And our success is evident in our results. We are driving meaningful new Gen Z customer acquisition through our outstanding product offerings, authentic brand values, and deep understanding of our target consumer. We are winning in our core leather goods category, where we're outpacing the industry. And we're doing this on a global scale, with strong top line momentum and exceptional margins, which increase nearly 100 basis points versus prior year. Now touching on the highlights of the third quarter in more detail. First, we drove double digit gains in leather goods, where we have multiple platforms for growth, The iconic Tabby family once again led, over-indexing with new and younger consumers, building strength on strength. The Tabby shoulder bag 26 continued to anchor the offering, while the new chain Tabby was a global success. Additionally, our New York family significantly outpaced expectations, cementing itself as a new growth driver for the brand, with styles ranging from the viral Brooklyn shoulder bag 28 at $295, to the Soft Empire Carry-All 40 at $695. Further, we grew our archival-inspired Coach Originals collection with the introduction of the large Kitslock bag at $695, which sold out within minutes of launching online and within a day at stores. And finally, our bag charms and straps added to our success, providing consumers with further opportunities for self-expression, with the Cherry Bag Charm remaining a Gen Z favorite. Overall, Coach's growth in handbags and accessories continued to outpace the industry, a testament to the brand's heat, innovation pipeline, and the compelling value and craftsmanship we offer in the luxury market. With these advantages, we drove mid-teens handbag AUR growth, led by North America. Looking ahead, we are confident in the potential for further sustainable AUR increases. Next. We remain focused on fueling footwear, which drives lifetime value with our target Gen Z consumer. In the quarter, footwear grew mid-single digits, bringing new and younger consumers to the brand. Growth in the category was led by the successful launch of the Soho sneaker and the continued momentum of the Highline sneaker. Building on our one coach learning agenda, both sneakers are offered at consistent price points between retail and outlet channels. enabling us to amplify our innovation and big ideas with consumers. Turning to marketing, we continue to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering. During the quarter, Coach launched On Your Own Time, a campaign introducing Coach's Spring 2025 collection and starring global ambassadors Elle Fanning, Naja, Koki, and Youngji Lee. This campaign was inspired by our ongoing discussions with Gen Z consumers across the world and shares a powerful message about having the courage to set the pace of your own life. This campaign is continuing to deliver strong uplifts and consideration and purchase intent across markets. And as we deepen our learnings with each campaign, we are strengthening both our bold storytelling and our media execution. This strategy is driving the acceleration of sustainable customer acquisition and brand growth, and it's working globally at scale. In addition, we also cultivated enthusiasm for the brand through unique and immersive retail experiences. Our CoachPlay concept stores continue to outperform with higher Gen Z traffic, longer dwell times, and higher return frequency. We're taking these learnings to bring the highest impact elements of this concept to our store fleet more broadly. Overall, our holistic brand building activities help to drive increases in new customer acquisition, as we welcome nearly 900,000 new customers to coach in North America, of which nearly 70% were Gen Z and millennials. And at the same time, our retention rate with the Gen Z cohort also meaningfully increased, reinforcing that we're building lasting relationships with our consumers in support of durable growth. In closing, Coach is strong in delivering differentiated results by fostering emotional connections and delivering exceptional value to consumers. Powered by Tapestry's growth engine, we will continue to invest in brand building and innovation to drive long-term sustainable growth, bringing this iconic brand to new generations of consumers. Now moving to Kate Spade. In the third quarter, revenue was pressured, declining 12% at constant currency, while profit met our expectations, driven by continued gross margin expansion. As we've shared, our work to reset the brand is underway, and we're making decisions today to drive sustainable growth long term. We know this work will take time, particularly in the context of a more uncertain backdrop. However, the actions we need to take are clear, and we are executing with focus and urgency. Our strategies are informed by Tapestry's growth model, with a focus on building brand heat, relevant product innovation, and compelling experiences. As we build a healthier brand, we will be closely tracking leading indicators of progress along the way, informed by our learnings and success at Coach. These include, first, increasing unaided brand awareness and search interest, followed by an improvement in traffic and customer acquisition, which will ultimately compound to drive top line growth. Now turning to the strategic details. First, we're committed to fueling brand heat and relevancy through cohesive storytelling and incremental investments in brand media. In April, we launched our spring campaign, which features Ice Spice and Charli D'Amelio, two very influential and relevant Gen Z celebrities. This is a further step toward a more effective spike in sustained marketing strategy that will enable us to reestablish Kate Spade as a top-of-mind brand for our target audience. Next, we continue to prioritize strengthening and elevating our handbag offering, bringing more innovation, focus, and relevancy to our assortment. We are advancing our work to build blockbuster handbag families. During the quarter, we continued to amplify the Deco Collection and Retail and the Kayla and Kip and Outlet, which over-indexed with new, younger consumers at strong AUR and margins, and we see further opportunity for these families going forward. And as we bring more innovation to the assortment, we're also working to streamline our offering by reducing handbag styles by over 15% by fall and continue to clear de-selection barriers through improved styling, ensuring our big ideas cut through with consumers. Overall, we're focused on creating distinctive product that is consumer-informed, grounded in Kate Spade's unique brand DNA, and modern and relevant today. Next, we're working to maximize omnichannel cohesiveness with a compelling, consistent brand message across all consumer touchpoints. As part of our efforts to improve the customer experience and fuel brand health, we are committed to reducing promotional activity and delivering continued gross margin expansion. As previously shared, reducing the level of promotional activity is a key building block to scale in a healthy way globally over the long term. as we build for the future and connect with consumers on our brand values beyond simply price. In closing, we are advancing our efforts to reinvigorate Kate Spade. The brand has a legacy of creativity, joy, wit, and warmth, and we will build on this unique heritage while modernizing its expression, guided by a sharpened focus on our consumer. The steps to do this will take time, but we are confident in the potential and path forward. Importantly, the strength of our platform provides us with the experience, discipline, and brand-building capabilities to execute these strategies while delivering enhanced results overall. Our focus is clear, and we are committed to unlocking the untapped growth and value creation opportunities for this iconic brand. Now turning briefly to Stuart Weitzman. As previously announced, we entered into a definitive agreement to sell the brand to Calaris, and we continue to expect the transaction to close this summer, subject to customary closing conditions. As diligent stewards of our portfolio and disciplined allocators of capital, this ensures that all our brands are positioned for long-term success and that we maintain a sharp focus on our largest value creation opportunities. At the same time, we are pleased that we found Stuart Weitzman a home in Calaris, an ideal owner to guide its next chapter of growth. In closing, Tapestry delivered another standout quarter with accelerated sales and earnings growth that positioned us to increase our outlook for the year. I want to thank our extraordinary teams for driving these strong and differentiated results. Moving forward, the external backdrop has become increasingly complex. That said, in the face of uncertainty, our purpose is unwavering, to stretch what's possible for our brands and business. To do this, we will harness our proven competitive and structural advantages that have allowed us to adapt and win in any environment, namely our global scale and an attractive industry, the compelling value we offer to consumers, and the strong fundamentals of our business. I'm confident in our future and the meaningful opportunity to deliver durable growth and shareholder value. I'll now turn it over to Scott.