The Global Head of Investor Relations, Christina Colone, opened the Tapestry conference call and introduced the other speakers, Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Christina warned that the call will involve certain forward-looking statements and non-GAAP financial measures. Joanne will discuss highlights for Tapestry and their brands, followed by Scott who will cover their financial results, capital allocation priorities, and their outlook.

Tapestry's CEO Joanne Crevoiserat reported record EPS for the fiscal year, driven by successful brand building, consumer-centric strategies, and disciplined execution. Revenue grew 3% globally, with international businesses growing 13% excluding FX, and China rebounding in the second half with 50% growth in the fourth quarter. North America saw a low-single digit decline due to a challenging consumer backdrop.

The fourth quarter saw a decrease in business compared to the prior year, but gross margins and AUR growth remained consistent. In North America, revenue is trending in line with prior year, and the company acquired 6.5 million new customers, many of whom were Millennials and Gen Z. Direct-to-consumer sales grew 3%, brick-and-mortar sales grew mid-single digit, and digital sales were down slightly but still represented nearly 30% of sales. Handbag AUR growth was seen globally and in North America, and small leather goods and lifestyle offerings drove top line growth.

The company had a successful fiscal year with double-digit earnings per share growth despite a volatile demand and currency headwinds. Coach, the company's brand, had nearly $5 billion in revenue and a higher operating margin due to an increase in gross margin. The fourth quarter saw strong success with the Tabby, Willow, Field, and Rogue families, particularly with Tabby shoulder bags, Willow volume driving styles, Rogue animations, and Field tote and washed signature denim.

Coach saw success in the fourth quarter due to their innovative product, marketing investments, and product offering resonating with younger consumers. They had over 900,000 new customers in North America and a 50% top line gain in Greater China. Ready-to-wear saw mid-single digit growth due to their branded denim and T-shirt assortment, while leather goods had outsized growth with the successful launch of a cross grain leather program.

Coach is continuing to roll out multi-sensory experiences and activations and is focused on deepening its connection with consumers, growing its leather goods, fueling gains across lifestyle, leading with purpose-led storytelling, and building momentum in its sub-brand Coachtopia. The brand is confident in its ability to deliver continued healthy growth in the coming years.

The company had a successful year, despite external headwinds, and achieved revenue of $1.4 billion. Gross margin was expanded, and the brand has seen two years of AUR gains. The company has made foundational investments in the brand to position them for the future. In the fourth quarter, the Knott and Hudson families of handbags were top sellers, while the Shell collection drove engagement with younger consumers and had strong full price sell-throughs and high margins.

Kate Spade was successful in their product initiatives and use of data to understand consumer preferences, resulting in low-single digit handbag AUR growth. Despite North America's challenging backdrop, they accelerated new product launches, becoming more lifestyle-oriented with jewelry and footwear, increasing average spend per customer. They invested in marketing activations, such as Kate Spade Green and iconic dots and stripes, and partnered with the Boris Lawrence Henson Foundation for women's empowerment. This marketing helped to recruit approximately 500,000 new customers in North America for the quarter.

Kate Spade has seen double-digit international growth, particularly in China, and has launched marketing activations such as pop-ups in Japan and Thailand and a permanent location in Grand Gateway in Shanghai. The company has also rolled out its new store concept across 20 doors globally. For fiscal '24, Kate Spade will focus on strengthening its core handbag foundation, introducing a new Dakota handbag collection, growing its jewelry offering, investing in marketing to acquire and retain customers, and driving in-store productivity.

Kate Spade is focused on enhancing their online experiences and investing in China to open 10 locations, as well as investing in marketing to build awareness. Meanwhile, Stuart Weitzman has been significantly impacted by the external backdrop in China and North America, but is focusing on long-term potential and maintaining brand health. During the fourth quarter, they curated a relevant offering of emotional product, such as low first pumps and booties, as well as handbags, and used new marketing tactics to increase awareness.

Tapestry is focusing on increasing marketing relevancy and emotionally engaging with target consumers, expanding their core and iconic categories, accelerating growth in China, and leveraging their platform to improve the online shopping experience. They are committed to driving top and bottom line growth in fiscal '24 and beyond, and recently announced the acquisition of Capri Holdings to expand their portfolio reach.

Joanne discussed the company's plans to bring together six iconic brands and leverage their consumer engagement platform to create superior value for their stakeholders. Scott then discussed the company's financial results, which included a 3% increase in sales, a 120 basis points increase in gross margin, and a 12% increase in earnings per share. In the fourth quarter, sales increased 1%, driven by international growth and offset by pressure in North America. Chinese travel spend has been encouraging, but it remains below pre-pandemic levels.

In Q4, sales in Japan rose 12%, Other Asia grew 7%, Europe declined 13%, and North America declined 8%. Despite the difficult backdrop, gross margin increased by 350 basis points due to operational outperformance, net pricing improvements, and higher penetration of the higher margin China business. SG&A rose 5%, including the timing shift of expenses from the third quarter into Q4, and the company is continuing to reinvest in the business by prioritizing platform investments and brand building activities.

Michael Kors reported a 22% increase in fourth quarter EPS of $0.95, and ended the year with $742 million in cash and investments and total borrowings of $1.66 billion. Free cash flow for the year was an inflow of $791 million, and inventory levels were 8% below prior year. The company returned $1 billion to shareholders in the fiscal year, consisting of $700 million in share repurchases and dividend payments totaling $283 million. The company also announced the planned acquisition of Capri Holdings, which is expected to close in 2024. The company's guidance for fiscal '24 is provided on a non-GAAP basis and does not include any potential impact from the acquisition.

The company expects revenue to increase by 3-4% in the fiscal year, with North America experiencing slight growth and Greater China, Japan, Other Asia and Europe experiencing high single-digit, high-single digit and high-teens growth respectively. Operating margin is expected to improve modestly, with gross margin expansion and SG&A expenses being slightly deleveraged. Net interest expense is expected to be $20 million, the tax rate is expected to be 20% and the weighted average diluted share count is forecasted to be 235 million shares. EPS is projected to be $4.10 to $4.15, representing 6-7% growth, although this is lower than expected due to the suspension of share repurchase activity.

The company expects to have free cash flow of $1.1 billion and CapEx and cloud computing costs of $220 million, with most of the spending going towards store openings, renovations, and relocations. They expect top line growth to be consistent between the first and second half of the year, with gross margin expansion in Q1 due to lower freight expenses. Operating income growth is expected to be balanced between the halves, but EPS growth is expected to be front-half weighted. The company will use its strong free cash flow for debt repayment and maintain a solid investment-grade rating, with a long-term leverage target of under 2.5 times. They also plan to return capital to shareholders through dividends, with an annual rate of $1.40 per share.

Joanne Crevoiserat discusses the success of Coach and how they can apply these learnings to the rest of their brands. She states that their success is due to their strong brand and business model, and that they have learned three or four things from Coach's success. These include clarifying their brand positioning, investing in product innovation, focusing on digital capabilities, and leveraging their global scale.

The company has taken steps to better understand their target customers, invest in brand building activities, and apply data and analytics to their decision making. This includes doubling their marketing spend, tripling their digital business, and creating productive and profitable store fleets. As a result, they have seen increases in AUR and gross margin, allowing them to consistently deliver strong results in a volatile environment.

Coach is experiencing strong sales and earnings growth, and the company is optimistic about the opportunities for further growth. In North America, the aspirational consumer is being more selective and careful with their purchases, which has caused a slowdown in sales. To improve the trend in North America, the company is focusing on brand building, product excellence, and strong inventory management. This has led to an improvement in the trend in the first quarter.

Joanne Crevoiserat discussed the improvement in North America and the overall health of the handbag and accessories category globally. She also provided guidance for North America to be up slightly through the year, and Scott Roe discussed the pause in share buyback associated with the transaction and the $5 earnings in FY '25. He also spoke about the free cash flow profile post integration and the opportunity it provides.

The handbag category has proven to be resilient and durable even through choppy demand environments. The business has momentum and is well positioned to capitalize on the trends in the category, and the company is confident in hitting the $5 goal. The pause in share repurchase will impact EPS but not operating earnings.

Joanne Crevoiserat and Todd discussed the positive handbag AUR that Coach saw in the quarter and their outlook for additional ticket and AUR increases in FY '25. They discussed how Coach is planning for AUR growth, particularly pricing growth in North America, in the face of a slightly more promotional competitive industry backdrop.

Joanne and Todd have discussed how Tapestry's platform has allowed them to better understand their customers, which has enabled them to create a balance of magic and logic in their products. They have also used purpose-led storytelling to create desire for their products, such as the Tabby pop-ups and the Lil Nas campaign. This has resulted in two years of AUR growth for Coach and Kate Spade.

Kate Spade has seen AUR increases in North America due to strategies to protect brand health, and there is still a lot of potential for top line growth and margin growth. They have been able to increase AUR for two years now, and are confident in their ability to continue to do so.

Kate Spade is focused on driving innovation and faster delivery of newness and innovation, particularly in the outlet channel with the Madison delivery. They have launched the Dakota bag and other changes that are having an impact. Kate Spade is expecting a significant sequential improvement in the first quarter and their outlook for the year is for international to be relatively stronger in the first half and North America in the back half.

The company has seen a 50% growth in China at constant currency in the last quarter, and is continuing to build their brands and connect with consumers in the market. They have been in the market for two decades and have been agile in pivoting with the consumer to deliver what they need.

Coach is expecting high-single digit growth in China, Japan, and Europe. They are engaging the local consumer base and seeing some tourism benefit in Asia and Europe, but not in the West. In Europe, they are growing their wholesale business in a productive way and expect more benefit from China inbound in the rest of Asia and Europe. In North America, Coach is almost entirely direct-to-consumer.

The speaker discusses the company's positioning and opportunities in the wholesale channel, as well as their focus on quality and brand health in Kate Spade. They also discuss the inventory and gifting plans for the upcoming holiday season, as well as the approval process and major hurdles that may be encountered. Finally, the speaker talks about the differences and opportunities between the Michael Kors brand and the company's consumer research.

Joanne and Todd are both excited for the upcoming holiday season. Inventory is down 8% compared to last year, putting them in a great position to ensure they have the right product for consumers. They are launching the Shine campaign and will be expanding their product offerings through Coachtopia. The campaign is aimed at younger consumers and will be available in more stores during the holiday gift-giving period.

The speaker is confident in the ability to complete the acquisition of Capri Holdings, which is highly complementary and expands their portfolio reach and diversification. The research conducted prior to the transaction showed that Capri's portfolio, including the Michael Kors brand, is strong and well-positioned in attractive markets and market segments. By putting these iconic brands on their consumer engagement platform, they hope to drive more innovation, connectivity, and relevance for the consumer, which will benefit all stakeholders. The speaker concluded by expressing excitement about the opportunities ahead.

The speaker expresses enthusiasm for delivering value to all stakeholders and invites further conversation. The call is then concluded, with thanks given for everyone's participation.

This summary was generated with AI and may contain some inaccuracies.