The paragraph details the opening of a Tapestry Conference Call, with remarks from Christina Colone, the Global Head of Investor Relations. She introduces key participants Joanne Crevoiserat, CEO, and Scott Roe, CFO and COO, who will discuss the company's third quarter results, strategies, and outlook. The call will include forward-looking statements, with a caution about potential discrepancies from actual results. Non-GAAP financial measures will also be discussed, with reconciliation available on the company's investor website. The call's agenda includes highlights from Joanne, financial updates from Scott, a Q&A session joined by Todd Kahn, CEO of Coach, and closing remarks from Joanne.

In the third quarter, Tapestry, led by CEO Joanne Crevoiserat, exceeded expectations with strong global growth, driven by a skilled international team and robust brand-consumer connections. The company saw an 8% revenue increase at constant currency, including a 15% rise at Coach and notable growth in Europe and Greater China. In North America, revenue climbed by 9%, supported by a healthy margin expansion. Tapestry also acquired over 1.2 million new customers, predominantly Gen Z and Millennials, highlighting its success in building enduring consumer relationships and ensuring sustainable growth.

The paragraph highlights several achievements of the company, particularly in relation to Gen Z and Millennial consumers, who are engaging at higher transaction values and showing improved retention rates. The company excelled in omnichannel experiences, with digital sales growing significantly and brick-and-mortar sales increasing profitably. Its direct-to-consumer model is a competitive advantage, enhancing consumer insights and agility. There is continued focus on fashion innovation and product excellence, as shown by growth at Coach and strong gross margins. The company also benefits from a diverse supply chain. It achieved record third-quarter earnings, surpassing expectations with a 27% increase from the previous year, allowing it to raise its fiscal outlook for 2025.

The paragraph highlights the success and growth of the Coach brand, emphasizing its effective strategies, agile operations, and robust team performance. Coach achieved a 15% increase in top line growth in the third quarter, driven by its luxury position and product innovation. The brand focuses on inclusivity and consumer connection, particularly with Gen Z, and has excelled in its core leather goods category. Coach's exceptional margins have improved, and the notable success of their leather goods, especially the Tabby line, has contributed to their strong global performance.

The paragraph highlights Coach's significant growth, driven by its New York family and the archival-inspired Coach Originals collection. This includes the successful launch of products like the Brooklyn Shoulder bag, Soft Empire Carryall, and the large Kiss Lock Bag. The brand's focus on accessories such as Bag Charms and Straps, particularly those favored by Gen Z, contributed to outpacing the industry. Coach achieved mid-teens handbag AUR growth, mainly in North America, and sees potential for future increases. The footwear category saw mid-single-digit growth, attracting younger consumers with successful products like the Soho and Highline sneakers. Consistent pricing across channels supports innovation. Lastly, Coach's marketing efforts are focused on cultural relevance, as showcased by the "On Your Own Time" campaign featuring global ambassadors for the spring 2025 collection.

The campaign inspired by Gen Z interactions focuses on empowering individuals to control their own lives and is showing success globally through increased customer acquisition and brand growth. Coach has engaged consumers, particularly Gen Z, through innovative store concepts like Coach Play, enhancing traffic, dwell time, and retention rates. The brand acquired nearly 900,000 new customers in North America, predominantly Gen Z and Millennials, and improved retention with Gen Z. Overall, Coach is strengthening its brand by fostering emotional connections and delivering value, supported by Tapestry's growth strategies. However, Kate Spade experienced a 12% revenue decline but maintained expected profits through gross margin improvements, as efforts to reposition the brand are ongoing for long-term growth.

The paragraph outlines the strategic actions Tapestry is taking to grow the brand, focusing on brand awareness, product innovation, and consumer engagement, using insights from their success with Coach. Key initiatives include increasing brand heat and relevancy through targeted storytelling and media investments, exemplified by campaigns featuring Gen Z icons like Ice Spice and Charli D'Amelio. Additionally, the company is enhancing its handbag offerings with innovative designs, streamlining its product range by reducing styles, and focusing on popular collections like Deco, Kayla, and Kip to attract younger consumers and drive sales.

The paragraph outlines Kate Spade's strategic focus on creating consumer-informed products that reflect the brand's unique identity while modernizing its expression. The company is committed to reducing promotional activities to enhance customer experience and expand gross margins, aiming for global growth. Additionally, efforts are being made to maintain brand consistency across all channels. Kate Spade plans to honor its creative heritage while focusing on modernization and consumer engagement. The paragraph also briefly mentions the sale of the Stuart Weitzman brand to Caleres, emphasizing it as a strategic move to concentrate on value creation opportunities and ensure long-term success for all brands involved.

In the closing segment of Tapestry's report, the company reflected on a successful quarter featuring accelerated sales and earnings growth, which allowed them to improve their annual outlook. Despite an increasingly complex external environment, Tapestry remains committed to leveraging their global scale and industry advantages for durable growth. Scott Roe noted that the third quarter results surpassed expectations, with record revenue and earnings per share, and more than $1 billion in adjusted free cash flow. Revenue trends showed an 8% increase in sales year-over-year, driven by strong performance in North America and Europe, with double-digit growth at Coach and significant gains in Europe and Greater China, particularly among Gen Z consumers.

The paragraph discusses the company's strong performance in China and other Asian markets. Revenue in Asia rose 14%, with specific growth in Australia, South Korea, and Thailand, although Japan's sales declined by 2%. The direct-to-consumer business increased by 9%, driven by digital and brick-and-mortar sales, while wholesale revenue also grew. The company achieved a gross margin of 76.1%, the highest in over 15 years, leading to a 140 basis point increase in operating margin and a 27% rise in EPS to $1.03. SG&A expenses grew by 7%, with increased brand investments and compensation costs. The company is also executing a $2 billion accelerated share repurchase program.

The paragraph outlines the company's financial strategies and current financial position. It emphasizes the company's focus on two main priorities: investing in its brands and returning capital to shareholders via dividends. They plan to return over $2 billion to shareholders in fiscal 2025, exceeding 100% of adjusted free cash flow. The company also highlights opportunities for share repurchases and strategic portfolio management, guided by a commitment to maintaining a strong investment-grade rating and a gross leverage target below 2.5 times. Financially, the company ended the quarter with $1.1 billion in cash, $2.7 billion in total borrowings, and a net debt of $1.6 billion, with a gross debt to adjusted EBITDA ratio of 1.6 times. They also repaid $303 million in bonds after the quarter ended.

In the third quarter, the company reported an adjusted free cash flow of $135 million and faced $36 million in CapEx and cloud computing implementation costs. Inventory levels increased by 6% compared to the previous year, excluding certain assets held for sale. The company is optimistic about its fiscal 2025 outlook, raising its revenue, earnings, and cash flow projections. It expects a revenue of approximately $6.95 billion, a 4% growth despite a currency headwind. Regional forecasts include a 3-4% revenue growth in North America, a 30% increase in Europe, low single-digit growth in Greater China, high single-digit gains in other Asia, and a mid single-digit decline in Japan. The company anticipates an operating margin expansion by 100 basis points, driven by improvements in AUR and AUC, with negligible impact from freight and FX on gross margins. SG&A expenses are expected to rise faster than revenue growth due to increased marketing spending.

The company is focused on managing expenses while strategically investing in growth priorities. They have adjusted their financial expectations, increasing their EPS guidance to around $5, reflecting significant growth from last year. Net interest expense is projected at $25 million, with a tax rate of approximately 17.5% and a diluted share count of 223 million. Incremental tariffs are predicted to have minimal impact on fiscal 2025 due to fiscal year timing. They forecast adjusted free cash flow of $1.3 billion and anticipate capital expenditures and cloud computing costs to total $160 million, with half related to store operations and half to digital investments. Despite stable revenue trends to date, they are conservatively estimating Q4 revenue growth to be mid-single digits, with operating margins similar to the prior year. They predict Q4 EPS to exceed $0.95.

The paragraph discusses the company's supply chain and production distribution amid global trade shifts and tariffs. Most of their production occurs in Vietnam, Cambodia, and the Philippines, with minimal reliance on China. To mitigate tariff impacts, they advanced inventory receipts and adjusted their manufacturing strategies to minimize exposure. The company credits its strong supply chain team for their expertise and adaptability. Despite external challenges, they maintain a strong position with robust business fundamentals, driven by innovation, customer growth, and improved average unit retail (AUR).

The paragraph highlights a successful quarter for the company, marked by significant growth in both revenue and profit margins, leading to an optimistic outlook for fiscal 2025. The company plans to achieve an EPS of around $5 while returning over $3 billion to shareholders, aligning with their investor targets set in 2022. Despite the challenging environment, the company is confident in its brands, personnel, and strategic approach, emphasizing a business model that is adaptive, resilient, and cash-generative. Joanne Crevoiserat responds to Ike Boruchow from Wells Fargo, attributing the strong performance, especially for the Coach brand, to the company's structural strengths and effective navigation of market conditions. The company remains focused on disciplined operations to ensure continued growth and shareholder value.

The paragraph discusses the key structural advantages that have contributed to the company's success, including building strong emotional connections with consumers in the durable handbag category, maintaining high margins and strong cash flow with a direct-to-consumer model, and having a diversified and agile supply chain. These factors help insulate the company from tariff exposure and enable it to quickly respond to demand signals. The company is delivering innovative products at compelling value, driving strong quarterly results and on track to achieve $5 in earnings per share, matching targets set in 2022. The company feels confident in its ability to navigate volatility and succeed in diverse environments. Following the speaker, Ike Boruchow congratulates them, and the operator then introduces a new question from Lorraine Hutchinson, who mentions the encouraging 2025 outlook on tariffs.

In the paragraph, Scott Roe discusses the company's strategies to mitigate the impact of potential tariffs on its operations. While the company won't provide specific guidance for 2026 until the next fiscal year, Roe highlights several actions already taken, such as bringing inventory in early and optimizing their supply chain. They are collaborating with suppliers to reduce costs without compromising on innovation or quality. Roe notes that $900 million of their cost of goods sold is linked to U.S. imports, and a 10% tariff could add $90 million in costs, though they are actively working on mitigation strategies to reduce potential exposure.

The paragraph discusses Coach's strategy for maintaining and improving gross margins by focusing on Average Unit Retail (AUR) gains, brand building, and consumer engagement. Todd Kahn highlights the company's successful history of raising AURs in 18 of the last 20 quarters, driven by strong brand desirability and innovation. He cites recent successful product launches, such as the Powder Pink collection in outlets and the Crystal Sync collection in retail, which attracted significant consumer interest. These successes, along with a promising innovation pipeline, bolster confidence in Coach's future performance and its ability to offer compelling value to clients, particularly as compared to traditional European luxury brands.

The paragraph discusses the company's focus on new customer acquisition, particularly targeting younger consumers such as Gen Z and Millennials, recognizing their growing market significance by 2030. Joanne Crevoiserat emphasizes the importance of gaining new customers for brand growth and mentions that they have been intentional in their efforts to attract this demographic. The strategy includes making the consumer central to their brand initiatives and consistently highlighting new customer acquisition metrics. Matthew Boss from JPMorgan acknowledges these efforts and also inquires about customer retention and market share strategies, which Joanne and Todd are addressing.

The paragraph discusses the company's focus on engaging consumers, particularly young ones, by creating emotional connections with its brands. By acquiring young consumers, the company aims to ensure long-term growth and relevance across different demographics. Young consumers, who are digitally connected, influence other age groups and drive brand popularity. The company notes increased retention rates among young customers at Coach, especially Gen Z, signaling a promising future for the brand. Additionally, the company has acquired 900,000 new customers, 70% of whom are Gen Z and Millennials, which is seen as an important step in expanding their consumer base.

The paragraph discusses Coach's strategy to increase customer lifetime value by focusing on point of entry and market share growth. Todd Kahn highlights the brand's success in the North American market, despite global challenges, citing a rise in the list index of hottest global brands as evidence of its strength. Coach has moved up significantly in rankings, demonstrating strong consumer interest and relevance. The brand's focus on consistent innovation in popular product lines, such as Tabby and the New York family, underpins their merchandising strategy, which has proven to be compelling and effective in resonating with customers worldwide.

The paragraph features a dialogue during a company earnings call. An operator introduces a question from Michael Binetti of Evercore ISI, addressing the recent financial performance of Coach and its brand strategy. Michael congratulates the company on a successful quarter and seeks clarification on gross margin contributions, specifically noting that Kate Spade exceeded guidance while Coach fell slightly short. He questions if this was expected and inquires about future gross margin outlooks, specifically for Coach, and any operational improvements. Michael also asks about Average Unit Retail (AUR) growth and its financial drivers, as the company has seen mid-teens AUR growth for consecutive quarters. Scott Roe responds, indicating there were several parts to Michael's question and acknowledges the complexity of the inquiry but does not provide a detailed answer.

The paragraph discusses the financial performance driven by strong gross margins, particularly highlighting the roles of Average Unit Retail (AUR) and Average Unit Cost (AUC). The company is finding efficiencies and opportunities without compromising on quality or innovation. AUR strength stems from merchandising, value, and innovation, supported by brand popularity, especially for the Coach brand, with no consumer resistance to pricing. The company relies on data and analytics to maintain a balanced price-value relationship, giving them confidence in future performance.

The paragraph discusses the performance and strategy of the Coach brand. Despite challenges in demand and the top line, the focus remains on quality and managing inventory effectively, while growing the gross margin. Todd Kahn highlights that Coach achieved a 79% gross margin last quarter, the highest in its history for the third quarter. Brooke Roach from Goldman Sachs inquires about unit volumes and the balance between average unit retail (AUR) and unit growth. Todd Kahn responds by emphasizing the strategy of attracting new clients and growing units over time, noting that the AUR has significantly increased since 2019, particularly in North America.

The paragraph discusses the company's strategy of reducing product promotions to achieve sustainable brand growth and strengthen brand positioning. This approach is expected to lead to increased average unit retail (AUR) and unit growth. Todd Kahn highlights the "One Coach" strategy, where traditionally full-priced products are also available in outlet stores at full price, aligning with consumer preferences rather than being channel-centric. This strategy is successfully extending into other categories, such as footwear, with a specific focus on sneakers. The overall emphasis is on providing a consistent consumer experience across all channels.

In the paragraph, the company highlights its successful launch of the Soho sneaker at a unified price point of $145, noting strong resonance with younger consumers. They emphasize a strategy of blurring channel lines to enhance value for consumers and maintaining customer-centricity in their "One Coach" approach. Dana Telsey from Telsey Group inquires about marketing strategies and future plans for store remodels and openings, considering Coach's brand positioning. Joanne Crevoiserat and Todd respond by stressing the competitive advantage of their direct business, which facilitates consumer engagement both digitally and in-store, leading to growth in both channels with increased profitability.

The paragraph discusses a company's strategic focus on enhancing customer experiences across various channels, emphasizing the importance of marketing and brand-building investments. The company has significantly increased its marketing budget from 3-4% of sales to nearly 10% to drive high returns and continuously improve media strategies. This increased investment is yielding positive results, particularly for the Coach brand, due to the cumulative effect of these strategies. The paragraph also highlights the importance of integrating creativity, product offerings, and both in-store and digital experiences to enhance the overall customer experience. Todd Kahn is mentioned as someone who can provide further insights into the store experience developments.

The paragraph discusses Coach's refined strategy over recent years, focusing on sustaining consistent messaging with two annual campaigns instead of changing messages monthly. It highlights that Gen Z, affected by COVID-19, enjoys in-store and experiential retail, prompting Coach to introduce new concepts like Coach Play and coffee shops. The brand is evolving store designs to connect with younger consumers while maintaining its "Expressive Luxury" ethos by creating rather than following trends. The paragraph ends with an inquiry from Mark Altschwager about regional product alignment and addressing risks of Chinese consumers turning against U.S. brands.

In the paragraph, Joanne Crevoiserat discusses the positive performance of their business in Greater China during the third quarter, achieving mid-single-digit growth despite the broader market being down in their category. This growth is attributed to acquiring new, younger consumers and delivering value and innovation. The company sees China as an important long-term market and is staying attuned to consumer needs, noting no significant pressure from anti-American sentiment. They're confident about continued growth, expecting low single-digit growth for the year with further acceleration in the fourth quarter. Todd Kahn adds that success is partly due to a revamped regionalization strategy, highlighting the universal appeal of their products.

The paragraph discusses the successful strategy of targeting Gen Z consumers using a consistent global marketing approach, exemplified by the use of celebrities like Bella Hadid. This approach allows the company to focus its marketing efforts and resources more efficiently without regionalizing stories. The strategy involves cutting back on less popular products to enhance profitability and concentrate on successful global products, thus driving growth and capturing new customers. Additionally, Joanne Crevoiserat commends the global teams for their strong quarterly performance and consistent results over the past five years, noting the company's growth and resilience despite an uncertain environment.

The paragraph highlights Tapestry's strong performance driven by momentum, strong margins, cash flow, a flexible direct-to-consumer model, and an agile supply chain. These elements are said to provide significant value at a global scale, contributing to the company's current success and expected future growth. The speaker expresses gratitude to participants of the earnings conference call before it concludes.

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