Tapestry (TPR) 9 Feb 232023 Q2 Earnings call transcript

Good day and welcome to this Tapestry Conference Call. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, today’s call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone.

Good morning. us. joining for you Thank Financial With me well Crevoiserat, quarter as Tapestry’s our Chief Operating to our strategies discuss Chief Rowe, as Scott Joanne Officer; second and and Chief Executive Officer. results and today Officer outlook Tapestry’s are

begin, Litigation out that fiscal we business includes for Reform involve Act. call this of meaning in point within or our or statements This years. forward-looking the must future the the we conference will Before certain Private quarters current Securities projections

statements list expressed the actual morning we important the our other other and from our Please Forward-looking XX-K, of factors and guarantees may results our that to Form are with and or could not complete the differ results filings materially risks our press issued annual refer and performance. impact and forward-looking those Exchange report this Securities future a on Commission in release implied for statements.

are in in financial Non-GAAP today slides. and presentation our included measures our comments

a and then corresponding For www.tapestry.com/investors presentation earnings and release our the posted GAAP please the visit full financial view website, information, to today. reconciliation

Now, allocation will with our going for let for and and speakers continue Tapestry will brands; forward. priorities capital begin and our Scott our financial highlights call. conference results, me with the this outline Joanne topics outlook

remarks. and closing Following CEO brief of President Brand Joanne a joined session question-and-answer conclude will After with by that, Coach. hold we Todd where we Kahn, will be Q&A, will

CEO. I would now like over Crevoiserat, turn to Joanne it to Tapestry’s

you, Good and Christina morning. welcome everyone. Thank

despite delivered second earnings challenging press the backdrop. we release, As our record noted in quarter

consumers, are operational magic, brand holiday required During compelling season, where expectations. the to with win outperformed and excellence we product key

diversified of which talented the benefits of business innovation engagement to across a teams fuel is our direct reflection portfolio. customer and our model, our This continue and globally

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of highlights quarter. the and on touching financial Now strategic the

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anticipated COVID constant below In positive third experienced performance a we in start currency in driving like Greater expectations following COVID-related and change improvement disruption. in New the Lunar the the declined quarter. than traffic was trends, said, our China, sales XX% to many meaningful as a solid a China, on This That experienced a we greater basis. policy Year others containment

lasting customer to continued Second, build we relationships.

new X.X During quarter, million we the nearly America North customers in alone. acquired

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to China are profit year. penetrated from is pressures Greater significant in the focused brand the remain facing We continuing the on delivering navigate though highly profitable headwinds region, fiscal a

is significant. and is foundation our strong runway closing, our In

our We and same disciplined at current agile forward are agenda. and long-term time, to volatile drive headwinds growth a navigate the staying in environment successfully

consumer. well-positioned our in attractive, direct-to-consumer of durable the enabled we powers which digitally by at our speed amplified brands Importantly, the move are iconic categories, platform, to

and are our sustainable We drive confident competitive all for growth to that advantages will continue and value strategy our stakeholders.

to will Scott? it over With discuss turn fiscal will capital Scott, that, results, outlook. and financial I who priorities 'XX our

and Thanks, morning, everyone. Joanne, good

focused control. Joanne we the in a revenue volatile backdrop mentioned, delivered as we on of the our $X factors while we long-term $X.XX of share pressure. value. same shareholders, ahead XX% against commitment year, achieved realizing operating last enhancing results face As of grew returned to of our At and We per the expectations the billion, earnings demonstrating solid over currency excluding within time, $XXX million margin to

shared the of be of Greater I'll COVID-XX which included which a start in pressure details the to quarter, as currency Turning with revenue, basis, pandemic. a the constant noted. X%, China on otherwise result unless declined will Sales

balance China, X%, the Greater in revenue increased of Excluding international our by led outperformance regions.

Asia These opportunity. the future by with across improved grew Australia, At by sales tourists remained pre-pandemic revenue strength Japan, highlighting led New and the In year versus traction prior well XX%, increased levels, local Other same below Korea. XX%, time, Zealand while were Singapore, again customers. that driven to Malaysia, trends

sales higher year, with Europe tourist and last continued by international customers. above well growth from within were traffic, East notably the XX% local In Middle fueled as Europe, as

Greater was pressure For online. both sales declined our to China, below due with COVID associated stores XX%, forecast incremental and which impacting

year, half improvement year strong in constant still from a of expect the New to Lunar the As during to second in we've for improvement Joanne base. double-digit certain a increase growth the lower fuel meaningful QX lifting maintained as currency. we date, half notably restrictions seen we Therefore, for traffic Year sequential quarter Overall, the second at government strong the a second guidance, of in fiscal approach December, the the mentioned, an albeit in we expectation following holiday.

the X% guidance Sales a and region our North Turning low our for business, line direct both to declined America. by for in total with decline. single-digit

North America and forecast Kate Coach delivered brand underscoring AUR at ahead on our we Importantly, realized both health. growth focus of income and operating Spade, handbag

excluding improvements revenue said, wholesale below mid-single-digit in single grew X%. digital. which traffic fueled declined business in decline a X% low-single-digit direct our and stores was channel, a included by increase prior in year. China, And the By direct revenue That digits, Greater low continued

our XXXbasis negative gross points ahead of Therefore, down offset and ahead expansion business. was P&L, of points China included points prior the year-over-year from high-margin of of year, excluding XX penetration the impacts, year. favorable by we freight FX and impact headwinds driven This gross operational margin ahead projection by Moving of lower these delivered margin outperformance. still prior approximately XXX basis of basis

slightly was initiatives, investments our to mid-single-digit our and prior in by underscored marketing prioritize outlook. we brand and In X% to declined return growth platform SG&A the building favorable quarter, including high spend. activities continued

operating margin outperformance FX EPS to tailwind forecast. year-over-year a of grew year a prior operational X% together, a taken due to impact. and income basis as forecast currency-neutral was to So $X.XX on ahead more well were the as XX% operating favorable and compared or from moderate

$XXX Now turning billion. borrowings flows. revolver. flow for an quarter and sheet no to cloud million cash We and was and implementation were including balance ended million, our investments the quarter related $X.XX under $XXX to cash $X.XX cash There in outstanding borrowings of of of CapEx million. the the inflow Free total billion computing with costs $XXX and

anticipated, year. end above inventory XX% quarter As was prior at

the progression pleased the sequential and quarter with our quality are in of quantity our current We and inventory.

year prior year. fiscal inventory to end 'XX single digits compared to expect to continue We with up the

priorities. now to our Moving allocation capital

over which share, planned as approximately second rate is an including half, on quarter which billion includes million increase This dividend of to $XXX prior for year. XXXX, share million returns based the in represents $XXX continue million dividend of back million. $X repurchases in a approximately $XXX bought first $XXX totaling in per payments including the and XX% shareholder We $X.XX plan in fiscal the annual

unchanged. remain priorities Our

and believe long-term growth; plan. are shareholders to In and business TSR to we is that future, we accretive second, to are platform we drive dividends evaluate would M&A and through investing our is share repurchases. scalable returning the capital in profitable the organic our First,

moving three the our Now incorporating our to versus raised key We've for changes earnings expectation, guidance XXXX. prior outlook. fiscal

reflects quarter's First, operational approximately our the second now outlook outperformance of $X.XX.

headwind are guidance. $X.XX we a benefit previous Second, moderate versus including which currency, from a more our provides

half which the previously our We've Overall, growth to for results, modest QX expectation outlook And we incremental pressure China we've resilience incorporated experienced second year ability noted, more as agility fiscal in second quarter. the our a given prior highlights in impact the of third, of model. based our on the outlook Greater lower the guidance. external and increase earnings the despite roughly our equates versus to $X.XX operating negative of volatile Tapestry's rebased environment,

the of previous which let's through all our guidance. details So run replaces outlook,

FX headwinds. For currency which continues of with the XXX expect compared a of a including guidance be single-digit Touching fiscal North the year, year, on year-to-date sales decline contemplate region X% our constant the On currency. the roughly represents details consistent sales year, in at half second X%. In of basis $X.X America, approximately trends. prior we we growth to basis, to billion, slight anticipate revenue points to reported to by low constant a decline

In anticipate XX% expect growth, Other to In fiscal the Greater continuation quarter low double-digit the In year. mentioned, the expect continue these to second we as of reflecting gains. approximately while mid-teens Europe, second forecasted in Asia is China, now we slight increase into previously we half. trends the strength and in grow a Japan,

XX points, In of FX contemplates basis addition, a margin of which includes outlook approximately our pressure basis decline points. over XXX operating year-over-year

the to ahead costs prior year, the reflecting gross prior the majority freight We line. FX largely relative margin favorable expect through this headwind gross anticipate of margin We expectations. slightly to of flow

growth, of negative well gross XXX margin input of offset being fiscal materials moderating AUR well partially 'XX, points FX, costs rising impact by is anticipated incorporates benefit to the which as costs as as of the previously basis the as for Compared freight as mentioned.

to long-term fulfillment center marketing we've deleverage SG&A, and reduce value, partially reflecting the to base. growth-driving offset expense new taken investments our digital to for by initiatives, in including proactive On anticipate year, of customer Vegas fuel we continue the actions in expenses planned our XXXXopening Las increased

are earnings. to to our is the approximately last with consistent agreements. significant be of is Moving to geographic prior anticipated net swap guidance, anticipated benefit This expected versus the XX%. reflecting rate fiscal $XX expense interest year, an approximately the Tax cross-currency decline for against to primarily line below mix which represents our the items, million 'XX, million increase year due to of $XX be a

approximately in average diluted expected share count be expected million share in as noted. Weighted in area of the XXX $XXX fiscal is reflects to year million the This shares. repurchases

$X.XX prior currency year-over-year Taken year, high the $X.XX to growth single-digit of together, representing to which we headwind EPS project of approximately includes $X.XX. compared a

the openings Asia, Finally, from to costs store now computing been area 'XX. to be and we is renovations $XXX have fiscal million. of China, This in of decrease mainly deferred prior cloud which of due and expect outlook in some to the CapEx the timing in year

expect our we the the Given and to Las new of approximately shift, dedicated related one-third fulfillment related to to our now investment to in initiatives, balance Vegas. be with renovations including and center IT ongoing openings this spend digital

given outlined, to by comparisons, atypical environment the continue and previously last significant year's expect As we quarter. variability volatile

a the freight we gains expect X% Specifically, down back we growth in earnings includes half return year-over-year in revenue a currency, weighted, in in and which by the on tailwind Drilling to lower revenue basis, X% providing costs to increase planned China constant to Greater to Greater helped margin. quarter, project growth third to be and China.

negative of approximately sales basis On be up a from to basis, a FX. impact reported points anticipate including slightly, XXX we

expect strong increase We $X.XX year-over-year the headwind year. approximately of versus representing $X.XX, currency EPS approach to a a prior despite

delivered closing, expectations earnings, second record are outperforming outlook for in and our a raising volatile quarter year we earnings the despite So backdrop.

shareholders underscoring to sheet our strength of fiscal flow cash significant balance and billion $X the generation. return to track in on remain we addition, In 'XX,

advantages our performance validates Importantly, our and reinforces our strategy. competitive

remain on long-term sustainable we drive our returns. priorities focused delivering forward, and to shareholder look growth against we As

up it open to your like now questions. I'd for

Securities. [Operator Instructions] Our Guggenheim first of question Drbul Bob comes from

more guidance seeing talk this could numbers Scott, are trends environment. Thanks. in Joanne, And some morning developed? and and congratulations and your around just a really trends China? tough maybe on you're exactly recent you things in China, with can have about unpack you quarter what Good how you approaching solid how a if Hi. more

Well, third Lunar our morning, sequential second business more travel, trend from Scott and of driven detail a in solid had to balance minute domestic quarter. recovery with market which will the the a we cover Year China We in improvement including a trending are important last line by in in at Hainan, have our in and and China in And in guidance, with We a in New green thank you, to for through traffic And quarter which roughly are high-level, an the destinations. is Macau and change some start certainly quarter-to-date, seen good Bob. meaningful Greater the the assumes in year, growth trends market. with seeing a light quarter the respect shoots in year. the encouraging

in seeing However, we in very at recovery guidance large opportunities and long-term And short-term. category international for Scott, opportunity for going as you as the growth further still are of we forward. a for confident assumptions. unpacking signs Overall, turn it our to vehicle brands and see forward. encouraging travel down, the move as our that the But we is China

Yes. Sure, morning, and Bob. good Joanne,

that about impacts million. If prepared In XX%. second it's outlook look our of of QX we China and had year, previously we the about about lining is And based actually recovery in to to impact being worth earnings. easier and as or expect quarter, about the a on we than XX% up in point, down $XX improvement versus about unpacking XX% see the were off to half then curve $X.XX the than balance rebase the for $XX a the throughout it taking it's you mentioned that's that the about or remarks, more we reality, terms ago. on extensive returning we in meaningful the in in growth year more fourth little second look that you that million. million in then COVID-related XX% at $XX had where at projected had an continue year, QX that starting where lower expectation just projections, a the COVID down the little quarter of of that's more And get the our And comps

impacts all I of geographies, diversity revenue we demand and would really our started the to continue are are here also because say, a a And start dynamic slight build and bigger see, that see lose has not the even of are to these what said we that think resiliency what just this and had impact. testament real off progression. as just is well that we to model with we in we gross is managing and our picture strong have we've that we Lunar we've earnings I in raise to impacts inventory margins seen business China. and against Year strong in the great tracking throughout on had. reflected were let's able business for while long-term, encouraged negative these China, And even remains being and position, our Joanne dynamic see you and for with The we New strong, that us, the kind the

So I future the there. feel good about really

you. Thank Great.

take Boruchow from next will Ike Wells of We our question Fargo.

who Hey, good is Joanne, morning. two this not or Scott for, but things sure quickly.

AUR so pricing, is quarter. on First, mid-single-digits up again this

some into any Just saw quick, date. assuming about increase? on know to all seen you it's changes you're you've And just what there? of comment -- competitors. the on stuff then trends quarter your with there's AUR kind your Can of wholesale just seeing heading of smaller anything half, on continues I the you're back at seeing you going you POS Any know resistance big XX% pricing, I holiday, business, a that part channel. are in been some real

knowing again, smaller. curious, it's Just

you what been your curious Just with have Thanks. brands. guys seeing

that I up, will Ike. Yes. pick

brand this did to both icons categories, category magic As building iconic we and America. important And and the behind AUR a it quarter, logic. have globally and AUR, staying close product. North our mid-single-digit I balance handbag gotten of in on to in our -- our think most We've product we testament consumer that's relates delivering the our and to focus drive increases our

delivering marketplace. close creative a compelling to manage we we And see are forward. the into customer stay business move as we and innovation manage the the continue healthy in customer to the And responding. We will way

to Actually, it that see AUR both comment we the touch let opportunity across on pricing, Todd, to you to will our handbag As on brands. can future in minute. continue a Todd subjects, into overall relates … grow I maybe, do

Sure.

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some will was part and overall, business a to pass it but again, you. I So while small was very our manageable there of pressure, it Todd,

Great. Thank you, Joanne.

wholesale do the Just let me first.

business. America X% us our represents wholesale reground Coach, than less for of to North brand, Just our largest obviously,

as relationship and with and an deeper it's our Joanne relationships much long-term of business, more but our really the customers migrated that important profound our direct-to-consumer way value So being love partners, doesn't understanding value And business. and we've we create. business. can drive a it our wholesale in a said, We to

incredibly things product in were Regarding on currency for mid-single-digit we have we saw price. we focus is important And we trumps North happy of constant offered growth And America, handbag with one very the an point. which our emotional consumers. is globally emotion and always the handbags,

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the consumer, create resonates that you consumer. over idea long that I the can, emotional as in example younger gave product we particularly this So the indexes we with with as

are really that. by excited So we

to just We leather and but opportunity will of we just lots AURs not grow see and our goods, in footwear. in lifestyle continue us not men, handbag allow in to and small

Okay.

of from of next is question Bank Hutchinson Our America. Lorraine

your morning. Thanks. the insight get I wanted environment. Good to promotional on

out outlook called you for a Kate. promotional more and more is at in beyond? -- some what promotional both seeing your at selling You the Coach What second And half brand? the are brands

the which QX. challenging. our environment quarter we Todd holiday, and continuation supply that year Well, normalized I off was I we a were constrained. a of decline when were this and a And is revenue We we North brand. will saw definitely versus maybe then again, cautious what many this a weigh first slight delivered call more I macro the seeing through trends think as the ago about promotional -- focused and would environment saw in QX, we kick a particularly in more America have consumer really What it is, is say environment will Coach a comment, on

we and and record peak Monday that more those they which Thanksgiving Cyber holiday, their of periods. think selective were consumers This value-driven delivered shows sales in week spending were I outside results,

brands So it, the in a which data the America, handbag patterns more to to business external in the our America would long-term are profit traffic we last and in even and AUR gross that disciplined higher pressures the North drove that dollars product testament we to North demand softer the seeing. despite America. margin business and operating we've model reversion normalized that is allowed I we our and what versus But call are to environment context, applying in and just our driven year talked for in the it was environment us we deliver approach innovation been North in a managing higher about margin,

So And for we and to prudent to approach Todd eye build to continuing our brands will long-term. forecasting on are business an with a continuing take I to the it on running pass Coach. the

expressive journey We liability our particularly leaning on in by environment. What in reducing of holiday markdown and has on is of last is under promotional our Thanks, that focusing It that been. on always know is for leaning values. couple the products years evidenced purpose the in a us, we've quarter, separated drive gross expectations think, leaning I icons, luxury that the and tail in our on and the margin. in been Joanne. And and it

product and direct-to-consumer, that really continue. ourselves own the going that opportunity have ultimately, separate compelling. our we when with, deal have is to good that greater very didn't we had So being a to a that's to this on product, XX% around goes back to And pressure destiny. we create we customer, we our I our control feel Again, it can focus idea focus on the storytelling that

question is Matthew next Boss JPMorgan. of Our from

congrats quarter. on Great. Thanks and another nice

question. maybe So a two-part

upside about So, post basis is could directionally points even a the think then line quarter be quantify really you're Joanne, at North break for if to key in second would best the you margin takes that to or down as gross I the notably to helpful. maybe could the and of then, America about help in walk top And we as Coach Scott, the of holiday? the half gross gross second XX progressed. driver speak way trends margin maybe in of the the seeing puts you think think second How margin, through cadence brand just there And outlook, quarter? maybe some

North globally, the talking of specifically, take and would The about I will the I could cadence we're talk specifically, Well, we and of Yes. part about cadence the first of North but normalized. if quarter say, question, the interesting an was question. it's more the quarter, America America

saw forward normalized as were peak in we we saw And demand mentioned, we as periods. this all a just year, the many, supply pull think holiday, ago, and shopping more constrained. customers where a cadence during were I a this I year

and so more well-positioned are a many And of Importantly, team with advantage welcoming were which we we was take to great fabulous. trends. customers our those into back obviously, changes stores,

we global policy on more market. business cadence reopening in a the differently of the China were COVID and COVID conditions infections containment they the December in than changes that the impacted and when and much impacted expected the played Obviously, out scale with in softness

in we delivering and for consumers our exceeded higher margin the didn't. face of to really handbag moved for well. the Scott? But really of customers and the were So continue profitability AUR we our business expectations agility see category, our changes, anticipated, saw way. manage with and we teams category different a healthy the higher lot deliver we with delivered in resilience some we as to Even the a durability in shifts, some our our of that gross

Yes.

taking would second it we Matt, from quarter there, really Just related. being the was call operationally what

So increases a was price versus it the combination discount. of

and more year to the to we we -- So said, elevated when This going and discounts revenue is, even constraints with last supply issues. were top dollar discipline, and drive as last little said, and operating we would the under line. Todd we are strange year just may be unit we a are Joanne chase versus we not normalized, said as

the see are business, long-term reflected in We on that motion really focus said, just and quarter. health the versus you focused second on of a Todd And price. the

impacts. gotten and the year, better of full the freight the I well to turn it remarks, we as as bit prepared outlined has some a us, but for FX operational And in we think

see remember, slightly quarter, now So we was that guidance full And gross for you margin And that's for the that, took half. in it's the first And freight benefit second about year. as in freight. the basis our points up negative. XXX remember,

in negative the half. of the are the seeing in benefits first reflects we some the XXX the half second So and

as should be benefit and move continues tailwind as we the second that we into to a go half what next through So grow year.

Instructions]. [Operator

of move will Binetti next to We Suisse. Michael Credit

you your what I'm you having. great focus positive On discussion to on quarter. Hey, America get are growth want to AUR, most you smaller guys. to Congrats -- the for just to sure mentioned you think think teams when that's the about a North I handbags. back ask here? on -- do important you're things

we margin about You've positive you more if on the that that trend pressure lowered revenues little heard you bit EBIT quarter continues, importantly, bit nicely. a become report that. and AURs continuing last wonder held to a But nice the I a had.

you're raising, parts. a there's but moving Now of lot

see things. opportunities look you two flow-through. half to you you EBIT upside? removed costs second think As bring to have us? able numbers, to And do Where Or help do earlier you the those maybe of those may Scott, just back that think if about for at I for stabilize you need some you're plan, us guess, tap

Yes.

particularly globally. Let in thinking us but me off growth with also North driving we're kick America, how about future, the into

we one I an making customer, things with we're drive that both focused leverage as the file, platform, as the on acquisition quarter, a of model continuation really you our per which and think second that our as we saw spend sure well of in our trend. growth direct-to-consumer that is customer average

more. our So leveraging that close we to have customer that direct relationship staying driving and customer with that and

So that have show they up are. where means that we to

We to taking have be advantage. investing marketing, in

that's first, our relationships So our customers. deepening with

happening at that And Todd doing innovation Coach, that talk great the can product that's day. of focused every some and Second experiences. we're And and compelling is and compelling innovation. about maybe on omni-channel delivering delivering

advantage across saw shopping channels to omni-channel, have that where having our we channels. very customers into profitable our the meet both are. a back we So quarter And customers come stores. is And of this increasingly customer was they two where

to omni-channel real keys -- I spending with is are They're highest that customer should us. the customers. lifetime our So those say more and value

toss to Todd to about our product second our into that we think our innovation, came them are the drive those bear will to agenda But maybe strategic relationships, an including product you growth. and lifestyle quarter. of omni-channel we it talk in continue forward, And leaning Coach. categories to they our as can our meeting And see growth all further going customer basis. where in and So things for

to A Joanne. of couple things Thanks, reinforce.

add higher million new First, last X.X in we North customers America AURs. at that did average Coach this quarter

brand the expectation years in different of the -- enter are is the we So and where than AUR past. they

Second, said comes I as before, price. emotion always

have the AUR. about between have So correlation if yes, think you a higher bag large we bag, you size, a -- very typically when

are an and materials, texture our if you tabu that and beautiful these But and to icon some a family, of whether AUR of families bags we grow highest or if outlet. our as add take take the indicated, bag you Tabby, Shearling other take heart bags, take with [ph] higher it But it's Pillow different or these Bandit, I we you some in if that AURs, on command iconic AUR. expand create opportunities

values, the So again, large creating about in or in bags, sure we profitable will that and create I'm small a whether that I they represents a we am us not and as future. sustainable, bags making Coach bringing for the growth and that their connectivity concerned concerned believe by brand them sell a customer, have

Yes. assumptions taking a now lot trends of slower? you could. the be in be through approached From catalyst that the and And, of remind through low-single-digits, -- come you it's So question right? what from are is China now be Michael, we I to China. may point forward, get them the or are points could Could way be down longest guess, standpoint, for adding on faster, half. halfway are back it a And second just upside I'd you guidance Could and top time we asked I morning, you -- me what inflection what to our It projecting open all it back in the line see, up have spend better. our whether obviously, the we North we've initial how it's America think, could. could that on year,

very think with been same Our North we've estimates, consistent. I reasonable business has right? America, got

or We down. a haven't predicted big up

dynamic brands And we know strong. are so continues to evolve, as our that

long-term, and we We whatever are are see. for the we environment running to adapt to going demand

trying force it those and it, we maintaining strong not are margins. We push gross to or are

line. upside we bottom see, through on the any come So do will

be investments while in it's side, a those are standpoint, maintaining invest we but environment, within higher of our going we've a in the that a other to paying think And seen trying little a very at analytics, dynamic you've is And at to us that both Those our largely think marketing control. light hope time, testament a quarter than digital, cetera. X% even prudent on from continuing in are great et fact the On I to this disciplined that obviously whether control, more what the same in are around are second data quarter. long-term, in our been we drive than the little the to capabilities off. investments

said, So expenses is Joanne the continue carefully be gives we biggest of sacrificing not for gross to things being quarter, future the that we prudent, discounting. Todd that our the those the And the to while in and as as for on margins gross one and We and full as can we me as the coming the we margin long-term. that continue confidence managing diligent we see manage price that will see year. and increases see in

lot. it. a Thanks Got it. Appreciate

Yes.

Our next question is from Brooke Roach of Goldman Sachs.

remainder A As you rebalancing, and trend Can about the today for much expect inventory to lot of taking do ground question thank you. you for in question. our think morning calendar but Scott. of geography given cadencing for Good so the brand and year? the of recovery rate by you on that my covered, inventory is comment China? slower your position Thank the of where you

and right? about Brooke, into talked well-positioned Yes, answer say felt and coming peak good news, question. And of new still season, big quantity I inventory the no love holiday that is, the would picture answer would is we quality I here about We've our we being the do. it. to the

end We of the We year, the be are by digits. up XX%. single we'd said about up

quarter you third, China reopen the inventory at funny, improvement have China, expect And can inventory we where is fourth on have too talking expect move and you through a in quarter. sequential about for now we If as end enough China. do ago, the in were we and told it's to do you much we I

say points well-positioned of diversity inventory in in reopen, the quality that our China. degree, growth in as inventory. really to second ware We've flexibility We've to bonded of that We would within feel good to, houses. starts about we we to half the the some of think return as inventory. model. are China. I there And -- got Again, got able reposition this our We're and

Thank you.

from Cowen. Our of next Chen question is Oliver

positive are development How that in that platform of AURs? matrix. And underpinning with as the that you less versus customer of the intersect for the Hi, And do data you're then is on With Tabby been with Bandit platform SKUs to some that? product factors Great has it's higher and and the What's thinking future thank Rogue. the the Thanks. and platform, and more continue are CDP, less customer more very the quarter. Willow, rationalize head you. been coming decomplicate about seeing pricing? does new also pretty What impressive. than

are real that driver. Oliver. consumer a The data -- have and meaningful been we Thanks, the have consumer

where In number in different our for their our terms leveraging our understanding ways. that and consumer and data they we're of of brands, a expectations are of

for about from the as do mapping are understand brand We as our including and our from we as consumer product, market leveraging market and younger and creation full with think leveraging it value how well consumer are chain through the understand looking products our which consumers we bases. what we we are resonate from it product as which and

how coming frequency engage product price. we what are and likely just brands, customers fully We they're does have, in day-to-day. allows it the opportunities show us happening making and infrastructure this drive that's decision how to brand one us lifetime data purchase at those, into terms in understand embed it value. to that to higher next a importantly, driving of We more technology our into And harness in see we one really them and not as our

the second huge I That And our think again, seen of direct-to-consumer platform. is, that through quarter. you've a advantage

customer platform, on are modern that new us technology in to on as And business. day. It's SKU take quickly I I very results throughout us build allows that acquisition, our also to even apply move learnings increased don't want Coach. the we you infrastructure it. the you SKU We to we better. but teams to customer into every show to know utilize allow see it a -- And are continuing And technology, applying leverage new and from our lean the technology spend if per having the it and to new data question Todd, think

platform we are how and have best do animate we to rich see understanding really what to amazing the so we able it's the Tapestry individual the and icon. is. again, how data with Overall, with And are Yes.

So we ideas are testing earlier.

to Our our very timeless of customer we're merchants, Z some creative influence that early. bringing teams, Gen in our

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occasion recognize this time idea placed We that matters. also and of

So and in be we in opportunities incredible. was on the which to wear-testing love focus fall, actually time backpack. how place I that I'm the will each you'll it. identified been it. one outlet we of have the occasion, compelling being again, icon a see launched And

these know going the timeless is So, I I I'm internally, opportunities. Joanne customer, Gen see to Z say am. but not we

informs we just really and look is But it it informing on the doesn't data the at upfront. that, hind-sighting, inform and

we as It as we pricing. we So better, it, our It informs placement. informs everything it informs really promotions. informs our get understand our It do.

to opportunity would animate the by constantly very historic I'm without excited excited been the norm. to by continue icons new icons So create very every platform. trying existing I'm which have the year, to

Todd. Thanks,

and timeless You’re congrats [indiscernible]. on

Thank you.

question from next is Our Baird. of Mark Altschwager

in. Good morning. me squeezing for Thanks

-- is were quick you're price be today is expectations, potentially along as of your average? versus North on price in sensitivity and a growth just macro this there the that durability showing appeared you're that, with And there So for a Kate, Coach consumer insights to the as Are at your data I year line and Kate customer unfolds? might the can guess discussing Kate? curious do Why impact backdrop more new higher gap AUR. same time? you Should line tracking what more Just close not of then at over Coach any you did in so Kate versus how Coach? leveraging analytics of capabilities a more just it real in one moderate that Is inventory that younger a there, that Kate, plans. customer Scott, sensitive. America, you with showing bit think Coach function the is you customers, mention driving line

the there? you. levels would that And achieve With inventory time the business Thank bigger you about and saw the can at how turns line picture, opportunity we think pre-COVID?

were at We about I We Thanks, Mark. great terms Kate more X new acquired customer the are customers constrained. made over last drove handbag growth a year. you Kate who was, promotions year, business and the AUR feel supply that quarter. that I would some standpoint. of progress than points is. making. the from in And while environment was Kate of say, quarter. normalized the extremely promotional in think million We The the the the we Last higher And

would I that an would So year. anomalous be say

and were really And are than more deep we a great we've promotional encouraging in differences called lower of developing We Knott Those platform the ago The are same Spade. a X Kate. Gramercy is as Kate. that's Coach start. platform, off between out building our Kate there. to heritage. platform levels continue the leather handbag across foundation core success, about the core signs. core at solid mode at And Kate, still with we talk But been but tools out perform. to the building program, years still at key the applying a been we We new and has introduced Coaches Again, we've one strategy history icon our and Katy

at into the durability novelty, of an leverage model cetera, resilience such Kate Kate signature We to about in platform we've is we that build flower. Monogram and really the part to important into history, addition really Kate the et Kate continue And into that to that's in talked a Additionally, had. model and platform, can platform we had the its has, continue leaning another been never again, the spade to that at DNA.

teams making building the at the foundation. progress So are on and Spade Kate

expanding customer are very And We base. base have Spade. Kate that at a passionate we customer

is We value forward. mid-teens as per long-term complement we of Kate, lifestyle driver are an saw leveraging categories we the of customer. higher go at important categories. growth We full in spend which customer lifestyle seeing We're think

we future feel So are the investing in at ahead. and progress because we we confident Kate good the about runway are in future the

in levels, hit that's we get to line you all every about on through short that's and been We seen in dynamics lead expect early certainly would our intent. the we've certainly the when very about year Yes, work we together elongated but know I that address we a this The now don't talking churn. stuff, over time question at next Mark, play we we've by tell Todd unusual are with things to our the disruptions into return that churn yes, myself. And targeting, pre-COVID year. from think are of just internally, I number as from those times we demand levels Joanne last that sight, quarters, as we of is, exactly focusing just move the on we from an can your and supply answer

to. So that's our what expectation, driving and that's we're

you. Thank

does it Joanne you. session. This question-and-answer -- conclude be our Thank over the happy I'd to call to return concluding for some remarks.

record for talented raise we to the joining interest for to for world thank expectations drive earnings, huge positioning and thank Today, our story. holiday to who results. and Thank outperforming the you, outlook A continue our around year. you us our our us you team our in and delivered fiscal your

Importantly, consumer strong well and highlights competitive Tapestry's globally direct-to-consumer the iconic engagement performance platform power advantages, as our model. of as our brands our diversified business

a have great drive We the and to have portfolio, again, Thanks strategy confident across our ahead. we're clear long-term significant and in a day. growth sustainable runway

for call. thank your conference participation. earnings Tapestry's you concludes This We