The operator introduces the Tapestry Conference call and turns it over to the Global Head of Investor Relations, Christina Colone. She is joined by Tapestry's Chief Executive Officer, Joanne Crevoiserat, and Chief Financial Officer and Chief Operating Officer, Scott Roe, to discuss the company's first quarter results, strategies, and outlook. They caution that forward-looking statements may differ from actual results and provide a link for non-GAAP financial measures. The speakers and topics for the call are outlined, and a question-and-answer session will be held with the addition of Todd Kahn, CEO and Brand President of Coach. Joanne will conclude with closing remarks.

Tapestry CEO Joanne Crevoiserat reports on the company's record first quarter earnings per share and highlights their strategic priorities, including brand building and customer centricity. The company achieved 2% constant currency revenue growth, with a 7% gain internationally and a 9% increase in Greater China. Sales with Chinese consumers globally also rose, supported by improving tourist trends. In Japan, revenue increased by 12%, while sales in other regions were relatively in line with the previous year. In North America, revenue was consistent with expectations and the company is driving a healthy business despite a challenging consumer environment.

In the third paragraph, the company discusses their focus on building customer engagement and attracting younger consumers. They also highlight their success in delivering omnichannel experiences and maintaining strong positioning in digital sales. The company also mentions their success in fashion innovation and product excellence, leading to record first quarter earnings per share. They remain confident in their ability to drive sustainable, profitable growth.

In the fourth quarter, Coach saw 5% constant currency revenue growth and 180 basis points of operating margin expansion, driven by strong gross margin gains. The brand focused on its iconic platforms, including Tabby, Willow, and Rogue, and saw success with the Tabby line, which nearly doubled in sales compared to last year. Coach also launched new silhouettes and saw a mid-single-digit increase in global handbag average unit retail (AUR). The brand sees further potential for pricing improvements and also saw gains in the lifestyle category.

The company saw growth in both ready-to-wear and footwear for men, with a focus on timeless styles and purpose-led storytelling. They launched a campaign featuring new global ambassadors and expanded their customer base through various activations and partnerships. Additionally, they worked on developing stronger connections with consumers through customer insights and a trial on Amazon.

The platform of Coach provides wide consumer reach and plays a crucial role in the customer's journey. They have built momentum in their sub-brand Coachtopia, which focuses on circularity and has gained attention from younger audiences. For the holiday season, they are prioritizing brand health and emotional connections with consumers while remaining disciplined in their approach to discounting. Kate Spade saw improved performance in the quarter, with increases in gross margin and operating profit driven by handbag AUR gains.

In the quarter, we focused on building a strong handbag offering, launching the successful Dakota family with new signature hardware. We also introduced the Madison collection in outlets, which performed well and attracted new and younger customers. Our emphasis on newness and novelty helped drive mid-single-digit handbag AUR growth globally. Additionally, we saw double digit growth in jewelry and footwear, furthering our goal of becoming a more lifestyle brand.

Jewelry and footwear were successful categories for Kate Spade, with a focus on attracting younger consumers. The brand also prioritized its lifestyle offerings and marketing efforts, including collaborations and events, to drive brand consideration and recruit new customers. International markets were also targeted for brand awareness. The brand continues to prioritize its omnichannel strategy.

In October, the company launched a dedicated Kate Spade Outlet website to provide a more cohesive shopping experience for outlet consumers. They will focus on promoting the brand's joy and celebration theme during the upcoming holiday season by introducing new products and marketing campaigns. Additionally, the company plans to launch physical activations of the brand's codes globally and continue driving profitability. However, results for Stuart Weitzman were impacted by reduced off-price wholesale shipments and slower recovery in China, though they still achieved positive trends in point-of-sale and gross margin.

The brand is focused on improving its performance and prioritizing brand health by delivering innovative products. They have seen success in their core collection of boots and booties, as well as expanding into other categories such as loafers and ballet-style flats. They have also launched a new sneaker campaign and utilized influencers to engage with consumers. Their fall campaign, celebrating the brand's 30th anniversary, has been successful and will continue to be used during the holiday season.

Despite external challenges, Stuart Weitzman is focused on executing strategic priorities and building a stronger foundation for long-term growth. The planned acquisition of Capri Holdings will accelerate these strategies and create a powerful global house of luxury and fashion brands. The company is confident in its ability to achieve organic growth and is making progress towards closing the transaction. The financial results reflect the benefits of the business model and the company's financial discipline and agility.

The company experienced growth in revenue, operating income, and earnings in the first quarter despite a volatile market. International sales increased by 7%, with Greater China seeing a 9% growth and a rise in travel spend from Chinese tourists. Japan saw a 12% increase in sales, while Europe and North America remained relatively flat. The company also saw growth in their direct-to-consumer business and wholesale revenue, with a strong gross margin that exceeded projections and last year's numbers.

The company had a successful first quarter, with growth in operating margin, operating income, and EPS. They also had a strong balance sheet with cash and investments, low inventory levels, and a dividend program for shareholders. The company has suspended share repurchase activity due to the acquisition of Capri Holdings. They also provided guidance for fiscal year 2024, which does not include any potential impact from the planned acquisition.

Despite a more moderate rate of sales growth, the company is maintaining its earnings and operating cash flow outlook for the fiscal year. This is due to a stronger than anticipated margin performance and the benefits of their agile platform and disciplined execution. The company expects revenue of $6.7 billion, with a slight increase on a reported basis and 2-3% constant currency growth. Revenue in North America is expected to be in line with or slightly above last year, while Greater China, Japan, and Europe are expected to see growth. The company also anticipates operating margin expansion and gross margin gains, with a slight deleverage in SG&A expenses due to continued investments in growth-driving initiatives.

The company is closely monitoring their expenses and expects a net interest expense of $20 million, a tax rate of 20%, and a weighted average diluted share count of 235 million shares. They anticipate EPS growth of 6-7% and free cash flow of $1.1 billion. The majority of their spending will go towards store openings and digital/IT investments. The first half of the year is expected to see more growth due to gross margin gains, while the second half will see a slower pace of investments. In the second quarter, they expect a 2% revenue growth and EPS of $1.45. The company's capital allocation priorities remain the same, with a focus on investing in their brands and businesses and rapid debt repayment.

The company is committed to maintaining a solid investment grade rating and has set a long-term leverage target of less than 2.5x. They plan to achieve this within two years and will return capital to shareholders through dividends and potential share repurchases. The acquisition of Capri is expected to drive significant value creation and will result in immediate accretion to adjusted earnings, enhanced cash flow, and strong financial returns. The company is making progress towards closing the transaction, with shareholder approval and regulatory approvals already obtained. They anticipate the transaction to close in 2024.

The company plans to fund the purchase through a combination of financing, and expects to achieve cost synergies within three years. They remain excited about the opportunity to expand their brands and confident in their ability to execute. The quarter saw revenue growth, strong margin expansion, and high EPS increase, demonstrating the strength of their brands and business model. They remain focused on delivering sustainable growth, cash flow, and shareholder returns. The first question from a Guggenheim Securities analyst asked about the company's confidence in the continued momentum at Tapestry, particularly at the Coach brand.

The speaker acknowledges the company's growth in revenue, margin, and earnings, with record earnings per share in the first quarter. They emphasize the importance of maintaining brand health and driving strong free cash flow. The Coach brand is performing well and has a strong team focused on long-term success. The speaker expresses confidence in the upcoming holiday season and beyond. They also mention the ongoing acquisition of iconic brands and the potential for unlocking value through the company's platform.

The company is making progress towards its calendar year '24 close, and integration planning efforts are in full swing. They remain focused on their existing brands and business, and are confident in the strategic and financial rationale for the transaction. The Q2 guide for North America is expected to be stable, with Coach specifically performing well. The outlook for the year was balanced and reflects the current consumer trends.

The company remains confident in their business, inventory, and innovation pipeline despite the uncertain market. The gross margin performance in the first quarter was strong and they are operating for quality sales rather than chasing the last sale. The regional growth rates for the year are in constant currency. There is positive reception for newness in the Kate Spade brand and the company is optimistic about turning sales positive this year. There is also progress in building out the brand's presence in China.

The speaker acknowledges that there is still work to be done in the business, but they are making progress and are focused on moving faster. The company has seen positive results from new innovations and is managing the business in a healthy way. They are also focused on strengthening the core handbag foundation and have launched new products in order to drive growth. The company is also investing in building their business in China and sees potential for growth in both their current markets and in China.

The operator introduces a question from Matthew Boss of JPMorgan, who asks about the pricing power and gross margin of the Coach brand. Joanne Crevoiserat defers to Todd Kahn, who expresses confidence in the brand's ability to continue increasing AURs through innovation, storytelling, and a focus on the emotional aspect of their products. He also mentions the potential for growth in the European luxury market.

The speaker states that they prefer to maintain their gross margin and continue delivering strong results rather than taking on new opportunities. They had a strong first quarter with a 250 basis point gross margin expansion, with 150 basis points coming from operational improvements. They expect freight tailwinds to moderate in the second half, but their gross margin for the full year remains strong due to operational discipline and reinvestment in the brand. They also mention expense control and expect to see expense leverage in the second half. Overall, they are confident in their profitability forecast for the full year.

In response to a question about EPS, the company clarifies that they are expecting a 150 basis point increase in total gross margin for the year. They also discuss their plans for Coach China sales and the opportunities they see in the handbag market with the addition of the Capri brand. The market is large and fragmented, and the company has extensive experience in the industry.

In a world where consumers have access to anything at any time, brands have become increasingly important. The company has focused on building its capabilities and investing in its brands to reach consumers in a different way. Coach is a prime example of this strategy, with a clear brand positioning and targeted approach to reaching consumers through various channels. The company is confident that this platform can be leveraged for other brands, including those from the recently acquired Capri transaction. Additionally, the company's China business, particularly Coach, is a strong driver of growth.

In the first quarter, the company saw 9% growth and expects mid-single digit growth for the full year. This would result in flat performance in the second half, but the company still expects to be above 2021 levels. The operator then asked a question about the recent transaction and its impact on revenue and EBITDA. The speaker could not provide much information due to the ongoing process, but reiterated previous expectations for modest growth and strong accretion. They also mentioned that interest rates may have some impact, but the company has hedged against potential changes. The operator then asked another question, but the speaker could not provide any further updates on the deal's financing.

Joanne Crevoiserat explains that the company is managing their business with strong gross margin while also investing in brand building. This strategy helps to create a flywheel effect and drive top line growth. They are also protecting brand health and operating with discipline in a dynamic and highly promotional environment. This includes using data and analytics to support their pricing and inventory management.

The company has a strong process and system in place to maintain gross margin and invest in their brand. They use data and analytics to make informed decisions and have seen evidence of this in their P&L, as well as in their inventory levels. They also discuss consumer engagement in North America and any changes in the consumer environment they have observed.

The company's first quarter results in North America were flat compared to last year, but showed improvement from the previous quarter. The aspirational consumer, who is lower income, is being more selective in their purchases. The company is focused on controllables such as brand building and delivering innovation and newness, which has been successful in driving consumer response. The company's direct business globally and in North America has been strong, driven by emotional connections with consumers. The company is also expanding their full price distribution, even in value channels, to appeal to a wider range of consumers.

The speaker discusses the success of Coach's Tabby bag and how it has created a desire for the brand across all value channels. They also mention the current state of the industry in North America and the company's focus on their direct relationship with consumers. They see potential for growth in the direct business with the Capri brands and appreciate their wholesale partners.

The speaker discusses the potential benefits of having multiple brands and leveraging them for the enhancement of the hotel. They also address a question about premium luxury brands not being on Amazon and explain their philosophy behind it. The decline in digital sales and the catalysts for the second request are also mentioned. The speaker talks about the due diligence they did on Amazon and their partnership with the company, which has been beneficial and has not led to cannibalization.

The speaker discusses the company's focus on creating desirability and accessibility for consumers, and their satisfaction with the performance so far. They also mention their digital strategy, stating that they are meeting consumers where they are and maintaining their digital capabilities. The company is agnostic about where consumers shop and is working on improving their digital experience. They also mention their efforts to receive regulatory approvals for a deal, with an expected closing date in Fiscal '24.

The speaker discusses their company's position in a large, fragmented market with low barriers to entry and pro-consumer transactions. They express confidence in completing a transaction and closing in 2024. The operator thanks the participants and the speaker concludes with confidence in their company's strategy and potential for growth through an acquisition.

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