Tapestry, Inc.

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. To register to ask a question at any time, please press star 1 on your telephone keypad. 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 second quarter results, as well as our strategies and outlook, are Joanne Prevoicerat, Tapestry's Chief Executive Officer, and Scott Rowe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out 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 brand. 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 Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Krivoycerot, Tapestry CEO.

Good morning. Thank you, Christina, and welcome, everyone. Our second quarter outperformance demonstrates the compounding impact of our Amplify strategies. During the key holiday period, we delivered pro forma revenue growth of 18%, expanded adjusted operating margin by 390 basis points, and grew earnings per share by 34% versus prior year, each exceeding our expectations. These standout results combined with the momentum in our business enabled us to confidently increase our outlook for the year, reinforcing that our advantages are structural and sustainable, in underscoring our commitment to driving durable growth and value creation. I want to recognize our exceptional global teams. Their passion, creativity, and disciplined execution made these results possible. Now turning to the strategic actions from the quarter, actions that are delivering results today while advancing our long-term growth ambition. First, we built emotional connections with consumers, acquiring over 3.7 million new customers globally in the quarter. driven by a strategic focus on Gen Z. This continues to be central to our healthy top-line growth, as engaging consumers earlier in their purchase journey enhances repeat purchasing and lifetime value over time. We also drove growth with our existing customer base, demonstrating broad-based strength. These dynamics reinforce a durable competitive advantage. our ability to consistently attract and retain new generations of consumers to our brand. Next, we delivered fashion innovation and product excellence led by Coach, where desire and demand for the brand are strong. And we're winning in our core with our leather goods offering leading our growth, driven by higher AUR and unit volume. The combination of craftsmanship, creativity, and value we offer to consumers at scale continues to be a clear competitive and structural advantage of our business and brand. And we power global growth through compelling experiences, delivering double-digit gains in North America, greater China, and Europe, significantly outpacing the industry and growing market share in each of these regions. Our direct-to-consumer model keeps us close to our customers, allowing a deeper understanding of their needs and enabling more relevant brand building, which together with the agility of our teams sharpens execution and fuels growth. This was evident again this quarter as we achieved double-digit growth in stores and online at strong and increasing profitability. Overall, we delivered record quarterly results, with a business that is strong, differentiated, and well-positioned for the future. Now moving to our results by brand. Turning to Coach, the brand delivered another exceptional quarter, with revenue increasing 25% and margins expanding. Growth accelerated from the first quarter on a one- and two-year basis, with several key indicators reinforcing the strength of the brand and the durability of its growth. Customer acquisition once again drove top-line gains, welcoming 2.9 million new customers to the brand this quarter, rising meaningfully over the prior year, led by continued growth with our target Gen Z consumer. Our relevance with Gen Z is influencing all other generations, and we're driving healthy gains from existing customers, reflecting broad and increasing brand desire and reach. Growth was led by our core leather goods assortment, where we have deep expertise and clear differentiation, with broad-based strength and no single family accounting for more than 10% of sales. Within leather goods, growth was well diversified, with both average unit retail and unit volumes increasing at mid-teens rates, demonstrating multiple drivers of sustainable growth in the core. And momentum remains strong across key geographies, including North America up 27 percent, greater China rising 37 percent, and Europe increasing 26 percent, highlighting the global resonance of the brand and the effectiveness of our regional strategies. With a large total addressable market of nearly 2 billion consumers, including 275 million at the point of market entry, we have under 1% share and meaningful opportunity ahead. Coach continues to benefit from its expressive luxury positioning, combining 85 years of heritage, craftsmanship, creativity, and value to build enduring customer relationships and support sustained growth. Now, to discuss our second quarter results in more detail. Our creative teams are delivering compelling innovation to consumers through a blend of magic and logic that are the hallmarks of our brand. Our icons continue to lead, consistent with our strategy. In particular, the Tabby franchise, the New York family, including the Brooklyn and Empire, and Terry, Juliet, and Laurel outperformed, driven by accelerated Gen Z customer recruitment. By animating our proven hero silhouettes through new colorways, materials such as crystals, and sizes, we built on our leadership in our core category and delighted our consumers during the key holiday season. Importantly, Coach's accelerated growth in leather goods highlights the enduring values of the brand and the value we offer in the luxury market. Looking forward, we have a strong product pipeline that we believe supports gains in both AUR and units, reinforcing the diversified drivers in place to support healthy and sustained growth, while never compromising the value proposition we offer to consumers, a key structural advantage. Next, turning to footwear. We delivered high single-digit growth in the quarter, fueled by sneakers, with the continued success of the Soho family. Building on our footwear assortment that is designed with the timeless Gen Z consumer in mind, we also successfully launched the Margo family, featuring sandals and slingbacks. Footwear remains a long-term growth opportunity for Coach, given our brand's strength, low share of the market, and the categories relevant to our target consumer. Touching on marketing, the compounding benefits of our strategic brand investments were evident during the quarter, with a clear focus on long-term demand creation. We increased marketing spend by approximately 40% versus the prior year, with a continued shift toward top of funnel brand building to support sustained customer acquisition. This sustained investment in fueling brand desire supported accelerating customer acquisition during the quarter, even as we meaningfully reduced promotional messaging during the most discount-driven period of the year, demonstrating both our commitment to the strategy and its effectiveness. Importantly, we continue to prioritize building emotional connections with Gen Z consumers globally through the Gift for New Adventures campaign, a new holiday campaign positioning the brand as the ultimate destination for gifts that spark confidence and self-expression in the year ahead. The campaign featured a diverse global cast, including Oscar-nominated actor Elle Fanning, actors Charles Melton and Cokie, and K-pop rapper Soyeon. building cultural relevance and reach across key markets. In addition, to support growth acceleration in China, we launched a collaboration with Klott, a leading Chinese streetwear and lifestyle brand. The partnership bridges heritage and street sensibility, fusing Coach's expressive spirit with Klott's disruptive approach to daily wear, reinterpreting iconic Coach silhouettes through a China-specific streetwear lens. Collectively, these actions reflect a disciplined, long-term approach to brand building at scale, deepening cultural relevance, accelerating consumer acquisition at point-of-market entry, and reinforcing a growing brand moat around consumer understanding and sustainable demand creation. And finally, we are strengthening brand desire through distinctive, immersive retail experiences that elevate how consumers engage with Coach. We continue to bring expressive luxury to life through unique store formats, including our newly remodeled stores in Ginza, Yorkdale, Macau, and the Mall of Dubai. These locations reinforce brand desirability while providing valuable insights that will inform our future store investments and expansion. Our coach coffee concepts at Jersey Gardens and Woodbury Commons also continue to perform ahead of expectations, resonating especially well with younger consumers. In closing, Coach continues to deliver standout results, guided by a clear brand vision and a deep focus on the consumer. Our teams are operating with purpose and discipline, translating insights into meaningful action and impact. Importantly, this performance reinforces our conviction that Coach will be a $10 billion brand over time, with best-in-class margins and an unwavering commitment to what makes the brand iconic valued, and loved by consumers around the world. Now moving to Kate Spade. Our results for the quarter matched expectations from strategy to financial outcomes. In the second quarter, revenue declined 14%, reflecting in part deliberate actions to reset the brand through a pullback in promotional activity. At the same time, we made incremental investments to advance the turnaround underway, remaining focused on strengthening the brand's foundation for long-term growth. Once again, where we placed our focus in investments, we drove progress as tracked against the leading KPIs we've previously outlined. We saw a lift in brand consideration with our holiday marketing campaign and delivered an improvement in Gen Z acquisition trends driven by handbags. While still early in the turnaround, the improvement in these KPIs are signs that we are executing our strategies and they're beginning to take hold. To touch on our results of the quarter in more detail, Our first strategic priority is to fuel brand heat through our uplifting luxury positioning to become top of mind and relevant with the Gen Z connector, our target customer. In the quarter, we stood behind our Spark Something Beautiful campaign featuring influential Gen Z celebrities. We updated the campaign with a holiday twist to make it festive while reinforcing a cohesive message over time. This campaign drove an improvement in purchase intent among Gen Z consumers reinforcing our investment in brand building. Next, we advanced our strategy to build handbag blockbusters with a consumer-informed assortment that is more relevant and focused. During the quarter, we made important progress. Our handbag blockbusters, the Duo, Kayla, Margo, and 454, outperformed the balance of the offering with higher AUR and strong Gen Z acquisition. This is another example of how our strategic focus is translating into early positive signs in the business. And as we've discussed, we've also brought more focus to the assortment, reducing handbag styles by 40% this holiday, allowing us to stand behind our big ideas with clarity and intention while supporting a reduction in promotional activity, an increase in full-price selling, and handbag AUR growth. These actions are consistent with our commitment to building a healthier brand. Finally, touching on our third strategic pillar to maximize compelling omnichannel consumer experiences. A critical part of this work involves removing deselection barriers with cohesive messaging that elevates the brand and builds desire. As part of this work, we tested updates to the visual experience and merchandising in 10 locations. These stores experienced a lift in conversion and ADT and outperformed the balance of the chain. We plan to bring this format to additional locations in North America by fiscal year end. Overall, we are strengthening the fundamentals at Kate Spade to drive sustainable, profitable growth. This is a unique brand with heritage, distinctive positioning, and meaningful long-term opportunities. With disciplined execution, the benefit of continued learnings from Coach's success and Tapestry's brand-building capabilities, We're acting with focus to realize the brand's full and significant potential. In closing, Tapestry achieved another record quarter, and we raised our outlook for the year, showcasing the power of our amplified growth agenda and that our structural advantages are enduring. As we move forward, we do so with momentum and confidence. We have the strategy, capabilities, and team in place to drive growth and value creation for years to come. I'll now turn it over to Scott.