The Tapestry Conference Call is being held to discuss the company's fourth quarter and year-end results, strategies, and outlook. The call will include forward-looking statements and non-GAAP financial measures, and listeners are directed to the company's website for more information. The speakers and topics for the call are outlined, including highlights for Tapestry and its brands, financial results and outlook, and a question-and-answer session with the CEO and Brand President of Coach. The call will conclude with closing remarks from the CEO.

Joanne Crevoiserat, CEO of Tapestry, begins by thanking the global teams for their exceptional execution and creativity which led to the company's successful fourth quarter. She highlights the company's 1% revenue growth on a constant currency basis, driven by international growth of 6%. In Greater China, sales rose 3%, while in North America, revenue declined 1% but profit rose. The company also focused on building relationships with consumers, acquiring over 6.5 million new customers, with over half being Gen Z and Millennials.

The company has seen success in attracting new customers with higher average transaction values and reactivating lapsed customers. They have also focused on providing a strong omnichannel experience, resulting in increased brick and mortar sales and a strong digital business. The company's focus on fashion innovation and product excellence has led to record revenue and gross margin. They have also outperformed earnings expectations and are looking to accelerate growth in their brands.

Tapestry has made two key changes to its executive leadership team, with Sandeep Seth taking on the role of Chief Growth Officer and Eva Erdmann being appointed as CEO and Brand President of Kate Spade. The company is confident in its pending acquisition of Capri and believes it is well positioned to bring innovation and growth to their brands. Coach has achieved record annual revenue of over $5 billion, driven by the success of its expressive luxury positioning and strong appeal to younger consumers.

The success of Coach's handbag offerings, particularly the Tabby family, has contributed to the brand's growth and recognition as one of the hottest brands globally. The brand has also successfully tested a distribution strategy for Tabby, and plans to continue scaling innovative products and marketing campaigns across channels. Other popular handbag families include Willow and Rogue, and the brand has seen strong sales with the launch of new products such as the Juliet shoulder bag and the viral sensation, The Coach Original Swing Zip. Coach's growth in handbags and accessories has outpaced the industry, with further potential for growth in the future.

In the sixth paragraph, the company discusses their global handbag AUR, which remained steady despite currency impacts and positive growth in North America. They also highlight their efforts to expand their lifestyle assortment and drive customer recruitment and loyalty. The success of their footwear, ready to wear, and men's lines is also mentioned. The company's marketing strategy, focused on storytelling and their purpose of "Courage to be Real," has led to gains in awareness, consideration, and purchase intent among Gen Z consumers. They also discuss their immersive retail experiences and collaborations in the gaming world as part of their goal to innovate and connect with younger consumers.

The holistic brand building activities implemented by Coach have resulted in an increase in new customer acquisition and strong brand momentum. The company's priorities for the upcoming fiscal year include deepening connections with consumers, growing leather goods and lifestyle categories, and expanding retail experiences. Despite challenges in top-line results, Kate Spade saw significant profit growth due to gross margin expansion and disciplined expense management. The company is focused on realizing the full potential of the brand and is looking forward to the leadership of Eva, who has a strong understanding of the evolving consumer landscape and experience in building passionate communities for luxury brands.

In the eighth paragraph, the speaker expresses confidence in Eva's ability to enhance the company's execution and drive sustainable profitable growth. They also discuss their focus on strengthening the brand's core handbag offering and expanding their lifestyle offerings, such as jewelry. They have also launched a new outlet digital channel and acquired nearly 2.3 million new customers in North America, with plans to accelerate this progress for future success.

The company will continue to invest in top- and mid-funnel marketing to support brand building and growth, especially with younger audiences. They also maintained a commitment to operational excellence, which has contributed to their gross margin and profit expansion. In the upcoming year, their focus will be on driving brand heat, strengthening their core handbag foundation, and maximizing the omni channel opportunity for growth. Despite challenges in the Stuart Weitzman brand's key markets, they are still focused on brand-building initiatives and have seen growth in new categories. The company's mission of bringing joy to consumers and delivering sustainable profitable growth remains their top priority.

The company has seen an increase in brand awareness and engagement, leading to potential future growth. The Stuart Weitzman brand is focusing on storytelling and expanding into new categories to drive relevancy and growth. The company has delivered record earnings and has a bold vision for the future, with a focus on innovation and emotion. They also see potential for value creation through the acquisition of Capri. The company emphasizes the importance of execution in achieving their goals.

The company is focused on agility and adaptability in the coming year, taking control of what they can and managing their business responsibly for long-term growth. Despite external factors, their unique brands, talented teams, and strong cash flow give them the flexibility to deliver value in the future. In the past fiscal year, they showed disciplined growth, with increased revenue, expanded gross margin, and record earnings per share. In the fourth quarter, revenue was in line with the previous year, with strong growth in Europe and Other Asia, a decline in Greater China, and a slight decline in North America. Despite challenging consumer conditions, the company saw growth in digital channels and supported brand health.

In the fourth quarter, the company saw a 2% decrease in direct-to-consumer revenue, but wholesale revenue increased by 14%. Gross margin also exceeded expectations, driven by operational outperformance and lower freight expenses. SG&A costs rose by 3%, but the company continues to control costs while making strategic investments. The company ended the year with $7.2 billion in cash and investments, and free cash flow was over $1.1 billion. Inventory levels were 10% lower than the previous year, and the company is navigating supply chain disruptions with minimal impact.

The company expects inventories to be high in the first quarter but to end the year slightly above last year's levels. They have increased their dividend payout by 17% and are forecasting revenue growth for the year, with operating margin expansion and slight leverage in SG&A expenses. The company is also controlling costs while investing in growth initiatives. The pending acquisition of Capri is not factored into their outlook.

The company projects a net interest income of $20 million for the year, with an expected EPS of $4.45 to $4.50, representing mid-single-digit growth compared to last year. The guidance takes into account the negative impact of the suspension of share repurchase activity and an estimated currency headwind. The company also expects free cash flow of approximately $1.1 billion and plans to spend around $190 million on CapEx and cloud computing costs. They anticipate flat constant-currency sales in the first half of the year, with modest growth in the second half. In the first quarter, constant-currency sales are expected to be down 2%, primarily due to lower wholesale shipments in North America and a decline in Greater China. Gross margin is expected to expand for the year, with the most significant improvement in the first quarter.

In the first and second halves of the year, SG&A dollars are expected to remain flat with a planned increase in the back half due to anticipated revenue growth. Net interest income is expected to be balanced in the first half and have no impact in the second half. The company's capital allocation priorities remain the same, with a focus on investing in brands and businesses, paying off debt, and returning capital to shareholders. The acquisition of Capri, although facing challenges, is still seen as a valuable opportunity for long-term growth and synergies. The integration planning and strategies have been adapted to further support this belief.

Tapestry's standalone business has performed well, despite facing more near-term challenges than expected. The company remains committed to the deal and expects EPS accretion, enhanced cash flow, and strong returns. They are focused on driving sustainable growth and shareholder returns. When asked about Capri's recent underperformance, the company expressed disappointment and surprise, but sees it as an opportunity for better execution.

The company is displaying agility and cost-cutting abilities, and despite declines in top-line and profitability, the Michael Kors brand still has a high operating income. The combination with Michael Kors is a strong strategic fit and is financially accretive, with the company committed to hitting deleverage targets and maintaining investment-grade. The company has increased conviction on the synergies of the combination and has had time for integration planning. The company's results demonstrate their focus on brand-building, consumer centricity, and excellent execution, with the highest gross margin in 15 years, double-digit EPS growth, strong free cash flow, and momentum at the Coach brand.

The speaker discusses the success of companies that are innovating and executing, and how this puts them in a position of strength. They also address the recent acquisition and the potential for long-term value creation. The company plans to reinvigorate the business and focus on the consumer, leveraging their proven ability to execute. The speaker also mentions their understanding of the financials and confidence in their ability to drive value creation. The questioner asks about potential synergies and a backup plan if the deal does not go through.

Joanne Crevoiserat, CEO of Tapestry, and Scott Roe, CFO, discuss the company's strategic and financial strength and flexibility. They believe the acquisition they are currently pursuing (Plan A) is a compelling and significant value creation opportunity, but they also have other options for creating value. If Plan A falls through, they have a strong free cash flow and can consider buybacks as a potential option. They are not yet prepared to give a specific number for potential synergies from the acquisition, but they have high confidence that there will be more than $200 million in synergies. They will provide more information on this after the deal closes.

Joanne and Todd discuss the current health of the Coach brand in North America and the changes in consumer behavior in the first quarter. They express confidence in the brand's positioning and highlight the importance of brand execution and innovation in winning over customers. They also mention the brand's growth and high gross margins in the fourth quarter.

The company's success can be attributed to four main factors: its focus on timeless Gen Z, product innovation, compelling storytelling in marketing, and a team of successful operators. The gross margin has been driven by structural advantages and will continue to be a focus in the future. The company plans to amplify its efforts in Kate Spade through holistic marketing campaigns and expects to build on its previous success to accelerate growth in the top-line.

The speaker discusses the company's focus on brand building and innovation to drive growth, while also investing in the brand. They mention the upcoming addition of someone named Eva and the impact of macro headwinds on the Chinese market. Despite this, the company remains optimistic about the long-term potential of the Chinese market and is closely monitoring consumer behavior.

The speaker discusses the company's positive outlook on the Chinese market and the growth opportunities for their brand. They also address questions about AUR and gross margin, stating that AUR was flat due to geography mix and that they expect it to increase in the future. They also mention that gross margin increased in the fourth quarter, with 90 basis points attributed to freight and the rest to operational tailwinds. They anticipate further expansion in the first quarter.

During a recent earnings call, Coach executives discussed the record levels of the brand's multi-year growth and the opportunities that lie ahead. They attribute this success to their investments in innovation and brand building, which have led to higher average unit retail (AUR) and strong margins. These investments are seen as structural to the business and have helped the brand acquire new and younger customers. Coach's commitment to brand health and careful, measured growth is expected to continue driving success in the future. The question was also addressed about the impact of foreign exchange (FX) on the fourth quarter.

The company saw a 60 basis point increase in operational growth in the quarter, leading to outperformance. They expect to see a stronger first half of the year, with a slight decline in the second half due to freight and foreign exchange. The company is focused on the operational benefits that have led to growth in gross margin, particularly in full price and outlet channels. They are blurring the lines between these channels and meeting consumers where they are, resulting in successful sales of products such as the Tabby bag at full price in outlet stores.

Tapestry plans to extend its brand investment strategy to other brands, starting with the Brooklyn bag next month. This strategy has been successful in China and is expected to be a major opportunity for the company. When it comes to capital allocation, Tapestry evaluates investments rigorously and prioritizes brand-building, marketing, and technology investments globally. The company also has access to data tools through its data and analytics capabilities.

The company plans to invest in its store fleet, with two-thirds of the capital being allocated to brick-and-mortar expansion, relocation, and remodeling. They see opportunity for growth in Asia, particularly in China, Japan, and Korea, as well as in Europe and North America. The expectations for year one accretion in the recent deal have moderated, and the company is guiding for 50 bps of EBIT margin expansion in fiscal '25, with potential leverage in corporate expenses. The company sees potential for growth in both Coach and Kate, with Coach being the largest business.

In response to a question about margin compression at Coach and expansion at Kate, Scott Roe explains that the compression was due to timing of expenses and is not indicative of a trend. He also acknowledges disappointment with the flow-through at Capri, but remains confident in the value-creation opportunity and the potential for accretion. He also reminds investors not to overlook the strong performance of the underlying Tapestry business and the increasing conviction around synergies.

The speaker discusses the confidence in the success of the Michael Kors brand under Tapestry's ownership, citing their experience with Coach and their understanding of the target consumer. They plan to reinvigorate the brand through brand-building efforts and leveraging their platform, including consumer research and innovation in product and marketing.

The company is utilizing the benefits of the Tapestry platform, such as consumer insights and supply chain capabilities, and is confident in the synergy estimates. They see potential to leverage these capabilities to unlock value. As for Coach, they have been successful in raising their floor and have a strong positioning in the $200 to $500 price range. They plan to focus on innovation and AUR growth in China. The company is excited about their future and their ability to compete.

Joanne Crevoiserat thanks the listeners for joining the Tapestry earnings conference call and reiterates the company's successful year and strong position. She mentions their focus on innovation, emotion, and execution to win with consumers. The fiscal '25 guidance is seen as achievable with room for additional growth and value for stakeholders. The call concludes with thanks to all participants.

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