Good day, and welcome to the Tapestry’s Conference Call. All lines have been placed in a listen-only mode until the question-and answer-portion of the program. [Operator Instructions] Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Andrea Resnick, Global Head of Investor Relations and Corporate Communications.

Good morning and thank you for joining us. With me today to discuss our quarterly results and annual forecast are Victor Luis, Tapestry, Inc.’s Chief Executive Officer; and Kevin Wills, Tapestry CFO. Before we begin, we must point out that this conference call will involve certain forward-looking statements, including projections for our business in the current or future quarters or fiscal years. These statements are based upon a number of continuing assumptions. Future results may differ materially from our current expectations based upon a number of important factors, including risks and uncertainties such as our ability to achieve intended benefits, cost savings and synergies from acquisitions; expected economic trends or our ability to anticipate consumer preferences, control costs, successfully execute our operational efficiency initiatives and growth strategies. Please refer to our latest annual report on Form 10-K and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors. Please note that historical trends may not be indicative of future performance. Also, certain financial information and metrics that will be discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain items related to our operational efficiency plan and integration and acquisition related charges, as well as the impact of foreign currency fluctuations where noted. You may identify these non-GAAP measures by the terms non-GAAP or constant currency. The Company believes that presenting these non-GAAP measures is a useful way for investors and others to evaluate the Company’s ongoing operations and financial results against historical performance, and in a manner that is consistent with management’s evaluation of the business. You may find the corresponding GAAP financial information or metric as well as a related reconciliation on our website, www.tapestry.com /investors, and then viewing the earnings release posted today. Now, let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our first fiscal quarter 2018 results for our three brands. Kevin Wills will continue with details on financial and operational results, and our outlook for the balance of FY18. Following that we will hold a question-and-answer session where we will be joined by Todd Kahn, President, Chief Administrative Officer and Secretary; and Josh Schulman, Chief Executive Officer and Brand President of Coach. This Q&A session will end shortly before 9:30 a.m. We will then conclude with some brief summary remarks. I’d now like to introduce Victor Luis, Tapestry’s CEO.

Good morning. Thank you, Andrea, and welcome, everyone to our first call as Tapestry. In changing our name, we’re establishing a strong and distinct corporate identity which enables our brands to express their individual personalities and unique language to consumers, therefore eliminating confusion between Coach, Inc. and the Coach brand. We searched for a name to reflect the shared values of optimism, innovation and inclusion that all three of our brands share, while also expressing the diversity of our people and our brands. Our new corporate identity embodies our creative, brand-led, and consumer-focused business, while also representing the heritage of our group. Now, turning to our results. As noted in our press release this morning, our first quarter performance was in line with our overall expectations, which as Kevin mentioned on our last call, would be impacted by calendar shifts and currency. Our results clearly reflected the benefits of our diversified multi-brand model, notably the contribution of Kate Spade to our consolidated results, and double-digit growth at Stuart Weitzman. While we were not satisfied with Coach’s global comp store sales performance, which was impacted by both, the expected calendar shifts and inventory mix challenges as well as the effects of the unanticipated natural disasters, we have returned to global and North America comp growth in the second quarter and our well-positioned for holiday. Importantly, we remain on track to achieve the annual guidance we set out for Tapestry in August. We have been especially pleased with the progress of the integration of Kate Spade, on to our operating platform. During the quarter, we took significant actions to position the brand for long-term success. We began to implement our strategic initiatives including the pull back on wholesale, disposition and flash sales, while taking substantial steps to unlock cost synergies. After only…

Thanks, Victor, and good morning, everyone. Victor has just taken you through the highlights and strategies. Let me now take you through some of the important financial details of our first quarter results, as well as our outlook for fiscal year 2018. Before I begin, please note, the comments I’m about to make are based on non-GAAP results. Corresponding GAAP results, as well as a related reconciliation can be found in the earnings release posted on our website today. In addition and as previously announced, beginning in fiscal 2018, we establish reportable segments per brand. Information under these new reportable segments including restated prior year results can be found in our earnings release as well as in the 8-K filed with the SEC today. Finally, fiscal 2018 first quarter performance includes the contribution of Kate Spade for the post-acquisition period of July 11, 2017 through the end of the fiscal quarter on September 30, 2017. Now, turning to the financial results for Tapestry. Net sales totaled $1.29 billion as compared to the $1.04 billion in the prior year, an increase of 24%, driven by the acquisition of Kate Spade and double-digit growth at Stuart Weitzman, partially offset by decline in Coach brand sales. On a constant currency basis, total sales increased to 25%. Coach net sales totaled $924 million as compared to 924950 million in the prior year, a decrease of 3%. On a constant currency basis, sales declined 2%. As Victor previously noted, sales during Q1 were negatively impacted by inventory challenges, calendar shifts and the impacts of the stronger U.S. dollars as well as the impact of natural disasters. Kate Spade net sales totaled $269 million for the post-acquisition period, reflecting in part the strategic pullback in wholesale disposition and online flash. Stuart Weitzman net sales totaled $96…

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

Can you hear me?

Good morning. Yes, we can.

Okay, sorry. I was wondering if you could talk a little bit more about the comp trends at Coach and Kate Spade in the first quarter. Specifically, what drove the negative comp at Coach? And for Kate, what drove the sequential improvement in store comp trends? Thank you.

Sure. I’ll take the Kate side of it and then hand off to Josh for some texture on Coach. During the period that we owned Kate, as we expressed in our notes, we saw a decline of 9%, which was also including a 600 bps negative impact from global ecommerce, and that was driven, of course in part by our strategic decisions to pull back on the online promotional sales as we have discussed. The store comp, also as we expressed, went from a negative 8 the previous quarter to a negative 3, and that improvement was really driven by outlet, and we were really pleased with what we saw there as a sequential improvement at both reduced promotional levels and at higher gross margins, and really, thanks to just the right mix and better inventory all around. Handbag’s performing well, SLG’s performing, as well as jewelry. And I’ll pass on to Josh for Coach texture.

Good morning, Bob. If you remember, on our Q4 call, we had mentioned that Q1 would be pressured by a continued inventory mix issues, specifically at North America outlet where we have a lack of a high margin logo product to satisfy demand. In addition to that, we also expected the calendar shift of the Mid-Autumn Festival which moved from September last year to October this year. So, both of those were anticipated impacts to the quarter. However, what we did not anticipate were the additional impacts of the hurricanes in North America and the typhoons in Asia. And it’s important to note that in addition to the direct impact to sales, to stores in the hurricanes path, we also experienced disruption to our Jacksonville, Florida distribution center which services all of our North America business. And so that distribution center had trouble, both receiving merchandise from the port and then getting it out to the network of Coach stores across the country. We believe that if you -- with those factors weren’t in play, we estimate that our global comp would have been positive in the quarter. And as we turned the corner into Q2, we’re actually very pleased that we’ve had a rebound in our comps in Q2 and so that gives us continued confidence in our ability to deliver a strong holiday season.

Our next question comes from Ike Boruchow with Wells Fargo.

Just a quick one on Coach and a quick follow-up on Kate, if I may. So, the Coach brand inventory issue that you guys called out for Q1, is that now totally behind us as we move into holiday? And then, just to finish that question up, how should we would be thinking about the Coach brand gross margin in Q2? And then, as a follow-up in terms of the Kate Spade trajectory, is there a reason we should assume that the Kate Spade top line, run rate should sequentially slow down before stabilizing later or is this kind of the run rate we should be thinking about?

Sure. I will let Josh touch on the Coach inventory, Kevin on gross margin, and then I will take the Kate question.

Yes. As we look at what happened in Q1, we really had inefficient product mix in outlet in the quarter with the lack of this high margin logo product to satisfy customer demand. And at the same time, some of the best we took in outlet fashion, particularly nylon underperformed our expectation. And taken together, that resulted in an unfavorable promotional stance versus expectations. It’s important to note that as we turned the corner into Q2, our inventory is more balanced and we saw a rebound in our handbag sales.

Hey, good morning, Ike. It’s Kevin. As it relates to the gross margin rate, we do expect that Q1 will be our most challenging year-over-year comparison due to the inventory issues that we’ve just discussed. As we move into Q2, as Josh outlined, we feel we’re in a much better inventory position, and we should expect to see improved year-over-year sequential performance.

And As it relates to Kate, Ike, we wouldn’t change the guidance that we’ve given there. I think you’re going to see a some variability, specifically as we continue the strategic pullback in the first quarter. Of course, we have the pullback much more present in the online channel than we did in the wholesale channel, given some of the commitments that we had there. So, as we go through quarters, 2, 3 and 4, you will continue to see us increase the pullback from those promotional channels and of course the resulting impact that we have. What is exciting is the underlying trends that we’re seeing in our brick and mortar channel. And again, as I mentioned that’s both driven by the good inventory mix that we had -- and I have to say, the one thing that for us as a team is really exciting as well is the ready-to-wear trends that we’re seeing in Kate Spade across both channels. And of course nothing more exciting than the synergies that we’re beginning to see and the increased amount that we’ve just communicated in the 100 to $115 million range.

Our next question comes from Erinn Murphy with Piper Jaffray.

I wanted to focus a little bit about the logo trends you guys are building into. Can you just talk about how you’re planning to look at both, full price versus the outlet interpretation of that trend, any gross margin implications of this mix? And then, just as clarification on the North America quarter-to-date comp for the Coach brand being positive. Can you just talk about how the promotional calendar compared year-over-year? Thanks.

Sure. Erinn, good morning. I’ll let Josh chime in on that.

Okay. Good morning. In terms of the logo trend, it’s really interesting because this is a trend that’s happening throughout the industry right now, in the most elevated brands. And it took us somewhat by surprise over the summer that the demand for the logo product exceeded our expectations in our outlet channel. Historically, as you know, this has been a very important part of the Coach brand identity and the Coach business over time. At one point, logo reached a 70% penetration of our retail sales globally and about 60% in our North America outlet stores. Over the past few years, our transformation plans were very focused on reducing some of the ubiquity around logo with the strategic decision not to feature logo in advertising campaigns. And therefore, we have this pull back, which has created pent-up demand as this logo trend comes back into fashion. So, what’s really interesting for us is we’re seeing demand in our outlet channel, but we’re also having requests for more logo product coming from our most elevated wholesale partners around the world, like the Bon Marché in Paris, Saks Fifth Avenue in New York. And so, when Stuart Vevers put it on the runway, it was a great moment for the brand because editors and customers around the world were very excited, which is fresh take and new approach to this iconic part of our brand. So, we are feeling pretty excited about the reintroduction of signature into our most elevated channels this brings.

And Erinn, just on the gross margin. It is our highest item new product. So, obviously, we look to opportunity there. I think that’s a -- what I would also just add to Josh’s comments, of course is just how exciting it is for us, given the fact that this is our most brand and mostly highly differentiated platform. It’s exciting because it obviously reflects the importance that consumers are placing on brand.

And then, just the North American comp quarter-to-date, just promotional calendar year-over-year?

Yes. Our commercial calendar is largely similar year-over-year, quarter-to-date.

Our next question comes from Anna Andreeva with Oppenheimer.

A couple of questions from us. Following up on the North America negative 2 comp, I guess was comp negative in both full price and outlets. And then secondly, gross margins for the Coach brand, are you guys still expecting flattish levels for the year, and if so, what would drive that improvement and should we expect gross margins up in each quarter for the remainder of the year? Thanks so much.

Sure. I’ll let Kevin jump in on the gross margin question and then I believe your first question was -- if you could just repeat it one more time, Anna?

I guess, was North America comp a negative in both full price and in outlet?

Comp by channel, got it. And I’ll let Josh chime in on that.

Good morning, Anna. On the Coach gross margin, we are still expecting to be flat to up modestly for the year. As it relates to the quarterly flows, we would expect relatively similar to up maybe a little in Q2 and Q3 with the bigger improvement occurring in Q4 due to the last year’s comp.

And in terms of the comp by channel, we don’t disaggregate the comp by channel.

Okay, thanks. Best of luck, guys.

Thank you, Anna.

[Operator instructions] Our next question comes from Oliver Chen with Cowen & Company.

Hi, thank you. Victor, in the context of Tapestry at large, what are your thoughts regarding the 15 to 25-year old and how to cater to that customer and balance different needs? And also, as you think about data science and analytics and customer relationship management, what do you see as the opportunities to balance both art and science, and also achieve digital personalization and creativity kind of in the new world of retail?

Sure. Great questions and I’ll also ask Josh to chime in because obviously we’re leading on some of those areas with the Coach brand. What I can share with you Oliver is that our strategy and data analytics team is chomping at the bit right now as we take the data from all three brands and bring it together. We have approximately $80 million U.S. households now in our database, over 120 million globally in our database and we’re beginning obviously to look at opportunities on how to take that information and leverage it effectively. Of course, look, in terms of the first side, first one of your questions as it relates to the 15 to 25-year old specifically, the younger consumer, and we’ve talked I think quite extensively about the opportunity that we have especially with the Kate Spade is, as we see through all of our analytics with their customers still approximately 60% millennial offering us a huge opportunity from learnings. What we see there of course is how well Kate Spade does in the few very specific categories with smaller bags, gifts and specialty tech playing a very significant role, both in the direct channels and I would also add even through some of the wholesale channels. We are gearing up as far as the third part of your question, Oliver, we’re spending a lot of time internally discussing about how we gear ourselves up from both the technical platform as well as from an innovation perspective through partnerships with other in collaborations with third parties to be much more active, not just here in the U.S. but globally. I think that we’re incredibly pleased with the performance that our China team has been, especially led us with, in the Coach brand. We have a leadership position both in senior level as well as in WeChat. I think the opportunity for us here is really still here in the U.S. and in Europe for us to truly turn our flagship, dotcom platform into a real force for the brand as well as through what we do through social media. But, I’ll let Josh chime in because he has been really focused with the team on what that next phase for the Coach brand will be which will lead for the entire group.

Yes.. There are two elements of your question that I will touch on. First, our team in China, as Victor mentioned, has really been a pioneer on WeChat, developing a We clientele platform which really allows one and one dialog between the store associates, the brand and the customer. And we’re just seeing terrific consumer engagement out of that. And well, WeChat isn’t the platform of choice outside of China, we’re seeing great learnings from that that can be exported to our other business units in North America and Europe. So that’s something on all of our minds. In terms of the millennial customer you talk about, with our engagements with Selena, one of the things that we have seen is the breadth of the age range of the customers that she is attracting. She is definitely bringing some of her core fans into our store that tend to a bit younger than our target customers. But, on the other hand, we’re also finding our core customers simply think about she looks beautiful and terrific in the Coach ads and they aspire to be a part of her world. So, we’re seeing traction across age groups.

Our next question comes from Lindsay Drucker Mann with Goldman Sachs.

Kevin, I was hoping to start with you, if you could, it’s great to hear the upgraded synergy targets. Could you give us a little more detail on the buckets of where you expect those synergies to come from and in what sort of inning you feel like you are in identifying synergies? So, do you feel like this is what we’re going to get or is there opportunity for more? And then just a quick maybe housekeeping question. As you talked about some of the factors that impacted the Coach comp in the quarter, excluding the lack of inventory, could you quantify how much the disruption, the natural disaster disruption and the holiday shifts hurt the comps, so we can maybe get to an underlying number?

Good morning, Lindsay. On the synergy detail, obviously, we have spent a significant amount of time over the last quarter, building our detailed synergy plans, and we’re pleased that we were able to up our fiscal year 2019 and run rate synergies to 4100 million to $115 million. I would tell you that the synergy work is ongoing. But, as you think about the 100, $115 million that’s probably going to be split fairly evenly between cost of goods sold and SG&A with the vast majority of that residing in the Kate brand. And as it relates what inning we’re in, it’s hard to tell. We’re continuing to do work on that; something is going to be an ongoing process to for as we move throughout the year. But, we’re pleased with the efforts and hopefully there will be more to come. But at this point in time, based on where we’re at, we’re not in a position to take the numbers above the 100 to 115.

Kevin, any more sort of detail beyond just cogs and SG&A on where the costs are coming from?

On the cogs side, obviously it’s the product, raw material costs, sourcing and manufacturing. So, it’s really a cost of board; there is also some shifting in production between countries. So, we’ve really tried to take a holistic look at the entire supply chain and drive synergies throughout the process. And on the SG&A side, again, really kind of cost of board there from this elimination of duplicative corporate costs to negotiating better things relative to insurance rates or things of that nature. So, again, trying to take a holistic look to leverage our corporate infrastructure.

Yes. I would just add Lindsay, I think that there is a lot of negations going on across the Company with a lot of our vendors and suppliers. On the cogs side, obviously, three things. You’ve got labor, you’ve got materials and then you’ve got the country shifts that are taking place as we leverage the Coach platform where we have well-established partnerships in lower cost areas.

Great. And then, just quantifying the comp impact?

And then on the comp impact in terms of the inventory and national disaster shifts. We’ve communicated taking it together. We haven’t really broken it down.

Taken together, we’d be modestly positive.

Our next question comes from Simeon Siegel with Nomura.

Victory, any color you could share on the distribution opportunities for Kate that you mentioned? And then, just nice adjusted gross margins for Kate. Any way to -- given that the outlets have been a source of pressure for them, can you talk to the opportunity you might see there? Thanks.

Sure. First, on the distribution side. I think look, overwhelmingly, the number one opportunity is international. We see that in markets across Asia, obviously a very strong focus on Mainland China. We have a partner there. We’ve been in discussions with them now for a few months on what the future may look like there. And while we don’t have anything to announce today, we hope in the not too distant future to be able to share more. But very, very excited about Kate Spade in that market, both due to what we’re seeing in our tracker in that market in terms of how it’s resonating with the urban millennial consumer as well of course just given what we know about it and the tremendous opportunity that exists from a distribution perspective in the market where stores and malls, whether it would be department stores or shopping malls are already in waiting for a differentiated preposition like Kate. In terms of other opportunities from a distribution perspective, of course, there is Europe. And there we are pleased with initial signs in the UK and that’s our focus. Here in the U.S. as it relates to distribution, I think the opportunity is out there. As we know, Kate’s in less than approximately 70 doors today in the North American outlook channel. What we are seeing there of course is that as a brick and mortar channel, it’s holding up better from the traffic perspective than the full price channels. And as we’ve shown this first quarter with the right inventory mix and we give the team there a lot of credit because they’ve been working on that for a few months prior to the acquisition of the brand, getting themselves aligned with the right inventory mix to take care of that opportunity. And what we are exciting about is providing them with the more support in the core handbag development as we look to capture that. And of course, look, we are pulling back on the surprise as well as the disposition sales. And as we remove the more urban, I think much more transparent promotional part of the business, we know that we will continue to see opportunity in our brick and mortar channel.

[Operator Instructions] Our final question this morning will come from the line of Omar Saad with Evercore ISI.

I wanted to ask a follow-up on the logo discussion you guys were having earlier. I really want to dive in there. How are you thinking about this logo trend? And as you work into it, are you approaching it differently than the last time around? Victor, I think in the past you had mentioned that sometimes logo becomes a big percentage of the business, it’s hard to differentiate the product between channels and obviously there might be a little bit of the ubiquity effect. But, I noticed you were also saying fashion forward designs are really working well. So, maybe explain how you combine those two dynamics in product line? Thank you.

Sure. I’m going to just add a couple of things and then let Josh trump in because he is really working very closely with Stuart and the design team at Coach on that which lead and of course eventually we do see even some opportunity for the Kate Spade brand to benefit from that. They do have a couple of logo platforms in their archives, and we’re now exploring opportunities for that brand as well. I would just reiterate a little bit before handing over to Josh what he stated earlier, which is that at peak, this was its highest, 70% of our business. Logo is on the one hand the most differentiated platform that we have. It’s difficult to copy the signature platform, any other brand is there. So, it’s uniquely ours. The key is as you suggested, Omar, how we manage it carefully, how we differentiate across channels, how we obviously leverage fashion execution with the design team on the logo platform to make it relevant today and not just to bring it back like it was in the past. And I’m going to let Josh to jump in because he has been working very closely with Stuart on all of those areas.

This trend is an industry trend and it’s a very cyclical part of the business. So, every few years, there is a big cycle around logo. And for us, this is very powerful because we have the opportunity to harness this as such an important part of our heritage. And Stuart debuted on the runaway this season and he took a very fresh take on it. He re-colored the logo, did it in a new version of coated canvas, trimmed with the burnish leather. And that really sets the term for our most elevated assortment that is going to be embellished with different icons of the brand in the most elevated ways. And so, we’re really looking in the merchandising mix of how to build a pyramid of products, a good, better, best, and really at the top of the pyramid having a limited edition product that would be highly desirable. And what we have seen already is that some of the most influential fashion editors in the world including for instance the legendary Karen Raphael have already being going into the Coach archives to find logo product and so, it’s alongside the world class brands. So, we are very encouraged by the start, but we know this has to be carefully managed in the seasons ahead.

I appreciate the information. Thanks, guys. Good luck.

Thank you, Omar.

Thank you everybody. That will conclude our Q&A and we’ll now turn it over to Victor Luis for some concluding remarks.

Thank you, Andrea. As is our custom, I just want to close by thanking all of you for joining us and just as importantly thanking our 20,000-strong-team across the world in 25 markets for all of their hard work and dedication. Obviously, we couldn’t be more excited about the evolution of Coach, Inc. to Tapestry as we become a true house of brands, and support the vision of all of our leaders and creative teams across the brands as they bring those narratives to consumers. A lot of exciting activity, a tremendous innovation taking place, and we look forward to sharing that with all of you in the quarters ahead. So, please stay tuned. Thank you.

Thank you.

Ladies and gentleman, that will conclude the Tapestry first quarter 2018 conference call. You may now disconnect your lines.