Good day and welcome to the Tapestry Conference Call. 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 are Victor Luis, Tapestry's Chief Executive Officer; and Kevin Wills, Tapestry's Chief Financial Officer. Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements. Please refer to our quarterly report on Form 10-K, the press release we issued this morning and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors that could impact our future results and performance. Non-GAAP financial measures are included in our comments today and our presentation slides. You may find the corresponding GAAP financial information as well as the related reconciliations on our website, www.tapestry.com/investors, and then viewing the earnings release posted today in the presentation slide. Now, let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our second fiscal quarter 2019 results for Tapestry as well as our three brands. Kevin Wills will continue with details on financial and operational results of the quarter and our outlook for the balance of FY19. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, Tapestry's President and Chief Administrative Officer; and Josh Schulman, CEO & Brand President of Coach. Following Q&A, we will conclude with some brief summary remarks. I'd now like to turn it over to Victor Luis, Tapestry's CEO.

Good morning. Thank you, Andrea, and welcome, everyone. As noted in our press release this morning, during the second quarter, our sales and gross profit rose, successfully anniversarying the strong holiday results of the prior year. That said, this performance fell short of our expectations in the face of an increasingly volatile macroeconomic and geopolitical backdrop. Importantly and as expected, we generated significant synergies while also making material systems and strategic brand investments across our portfolio. Taken together, adjusted earnings per diluted share were even with the prior year. Across Tapestry, we made significant progress on our strategic pillars during Q2, notably maximizing the opportunity with the Chinese consumer globally. To this end, Coach held its first-ever runway show in Shanghai, which was incredibly well-received by the editorial community and generated more than 1.1 billion impressions. At Kate Spade and Stuart Weitzman where we are focused on driving awareness in the region, we invested in key talents, infrastructure as well as marketing partnerships with Chinese brand ambassadors, while expanding our reach to the opening of new stores. While we understand that there are some continuing concerns around Chinese luxury spending, we view China's heightened emphasis on driving domestic demand as entirely aligned with where we are making our investments across brands. Indeed, we believe further investment in domestic markets with China, the most important, is the best hedge against volatility that may at times occur in tourist spending. Further, we were very pleased by the relative outperformance of all of our brands’ China businesses this quarter. Our teams across Tapestry remained focused on executing our four strategic priorities. First, continuing to harness the power of our multi-brand model. Our synergy capture was evidenced in part in the significant gross margin expansion we achieved in Kate Spade’s second quarter results. To…

Thanks, Victor, for your warm wishes. I have truly enjoyed my time at Tapestry and leading exceptional finance team. Good morning, everyone. Victor has just taken you through our quarterly results and strategies. Let me now take you through some of the important financial details of the quarter as well as our outlook for fiscal year ‘19. Before I begin, please keep in mind that the comments I’m about to make are based on non-GAAP results. Corresponding GAAP results as well as the related reconciliation can be found in the earnings release posted on our website today. Now, turning to the financial results for Tapestry. Total sales for the quarter rose 1% on a reported basis and 2% in constant currency to $1.8 billion. While we delivered growth over our solid prior year results, our performance felt short of our internal expectations due primarily to softness at Kate Spade while comparable store sales were impacted by the lack of newness in the last season under the previous design team. That said, we were pleased to generate growth at Couch, reflecting positive comparable store sales led by international outperformance as well as strong growth in our digital platforms. And at Stuart Weitzman, we achieved our objective of returning the brand to sales growth in the holiday quarter. Turning to gross margin. Our gross margin for the quarter rose 10 basis points to 67% on higher level of sales. The expansion in our margin was driven by Kate Spade, which rose 120 basis points, fueled by the realization of COGS synergies as well as a 10 basis-point increase in gross margin in Coach, which included 45 basis-point of currency benefit. These increases were partially offset by decline in gross margins at Stuart Weitzman of 380 basis points, which included 200 basis points…

[Operator Instructions] And your first question is coming from Bob Drbul of Guggenheim.

Hi. Good morning. I actually have two questions this morning. I think the first one, given these results and the updated outlook for 2019, what gives you the confidence in double-digit operating income and EPS growth in 2020 and your ability to operate this multibranded model? And my second question is, when you think about the Kate Spade positioning right now, what gives you the confidence in Kate’s inflection, what are you seeing quarter-to-date? Can you give us a little bit more detail around that piece? Thanks.

First, I think, to your first question in terms of guidance for FY20. There are two important themes as we target mid-single-digit topline growth with the double-digit operating income and EPS growth. The first theme is lapping key investments that we've made and the second theme is traction from the brand investment that we’ve made, specifically around Stuart Weitzman, and of course Kate. So, more specifically, as we enter Q4 of this fiscal year, we will have lapped all of the strategic brand investments, especially in Asia where we bought back, as all of you are aware, distribution for Kate Spade and Stuart Weitzman. And by the end of Q3, that will mostly be behind us. And I can share with you all that I’ve spent some time with those teams on the ground in December. And we have really talented and very-focused teams there and we’re getting [Technical Difficulty]

Ladies and gentlemen, we apologize. But, there will be a slight delay in today’s conference. Please hold and the conference will resume momentarily.

Hello. Operator, can you hear us?

Yes. We can hear you now.

Okay, great. Thank you. Sorry about that everyone. We lost one of our mics there for some reason. I’m just going to start at the beginning, Bob, with your question because I’m not sure when we lost the line and that first mic. But, as I was suggesting, two very important themes, one is lapping the key investments that we’ve made and two is the traction that we are getting from key brand investments that we are making, specifically around Stuart and Kate. And more specifically around those two themes, as we enter the fourth quarter, we will have comped all of the investments and the distribution, buy backs in Asia, especially in the key China market for both Stuart Weitzman and Kate Spade. And as I was sharing, I’m not sure if you guys heard during the call, but I visited those teams in December and can share my excitement, not only by the strength of the talent that we have on the ground and the investment that we’ve made in structure but the performance that they are already driving for us, which of course we start comping from the fourth quarter. Also, as you heard in our speakers’ notes, we are really pleased with the successful implementation of the SAP S4 HANA platform. We were the first and are the first company globally to be on this new version of SAP. It started with the implementation and finance for Tapestry, Coach and Stuart Weitzman early last quarter and just this week in fact where on day two, we have implemented the entire foundation of this platform in Kate Spade including supply chain, logistics and the systems and cost savings that we expect from that and system efficiencies, have given us the confidence, along with the continued experience that…

[Operator Instructions] Your next question comes from Irwin Boruchow of Wells Fargo.

So, I guess, I have my question on the gross margin line. Kate Spade, you guys talked about, carryover inventory, given the sales performance at holiday into the third quarter. What kind of a gross margin impact should we be thinking about for Kate Spade in the third quarter, could Kate gross margins be down? And then, also, you would talk about the Coach gross margin being a little less optimistic on that for the fiscal year. Just kind of can you talk about that, the promotional environment, what exactly the puts and takes are there.

On the Kate Spade carryover, we did come out with in the speakers’ note and we expect that to put some incremental pressure on the third quarter results. We’re not giving specific margin guidance by quarter. And on Coach, again, due to the promotional nature of the North American business, we have expected some pressure there as well. So, taken together, that was one of the reasons that we were looking to reduce the guidance in the back half.

Yes. And I would just add something. Obviously, with the lack of performance of the product that was in stores, we could have easily been much more promotional, gotten rid of that inventory. We made a very clear decision not to be more aggressive in the full price channel, not only to create of course an overhang with consumers as we launch new product, but more specifically because we have tremendous confidence in the new products coming in, and we have a lot of confidence that that product can and will work effectively well in the outlook channel as we exit this quarter and beyond. And relative to the total business, we think that impact will be minimal.

Thank you. Our next question is from David Schick of Consumer Edge Research.

You called out Parker and some of the other platforms that were working. Is anything changing with cycle time in the industry, and how long one of these platforms matters and iterates? And sorry to follow on to these Kate questions. Does the repositioning, as you do that and you have more data, do you think about the real estate portfolio any differently there?

I’ll ask Josh to first talk a little bit about the Coach specifically and life cycles. And then, I'll touch on Kate.

Good morning. So, I think it’s an interesting question about cycle times and how the customer is responding to fashion. On the one hand, the customer is wanting more and more newness. I think that you can see that in how we’re dropping products more frequently in different ways, surprising and delighting the customers. At the same time, when you have an important platform like Signature, that is part of something that is not a seasonal trend, that is something that you can really build over the course of many years. And I would say, that’s one of the things that we’re most proud of in our product performance right now. It has been very deliberate way that we launched Signature over the past year, which is now in the high teens globally, in our retail channel. And we’re continuing to sustain higher AURs in signature, and the customer is really responding. So, the answer to your question is both. She wants fashion, she wants newness. But, for the brands where she has a very close affinity and a deep love, she wants to wear that icon proudly. And so, we’re seeing both impacts on our business.

And David, relative to Kate and the evolution of that brand and its impact on the real estate, I think we’re all aware of the key investments of course that we talked about over the past year, first and foremost, reducing both the flash model as well as the urban disposition channel to the of $100 million, which is a key investment that we should think about in terms of long-term brand health; secondly, in terms of physical and other channels go forward. Kate footprint is much higher, I think relatively clean. We’re incredibly pleased with the new store format that we launched and the performance that we’re seeing. So, we’re being very thoughtful about how we leverage that go forward and the tremendous amount of attention right now in terms of wardrobe [ph] is on of course Asia with a specific focus on China where we’re seeing very solid performance. Again, couldn’t be happy with that team and the work that they are doing. And we start comping that business of course in the months ahead.

Your next question is from Erinn Murphy of Piper Jaffray.

My question is around -- to see overall category and Couch’s position in it. I think, you said that category grew high single digits and Couch was up 1.5%. I’m curious to see where from a global prospective you’re seeing some of the share loss relative to where the growth is in the category? And what are the levers that you think are most actionable to kind of reaccelerate the Coach brand relatively to where the market is growing today. Thank you.

Overall, we have not seen a change in theme, Erinn, from the last few quarters. I would say that globally this past quarter, most of the growth is coming -- or outsized growth coming especially from Asia, China domestically being and continuing to lead. And I would say that a lot of the growth is coming from a couple of the traditional European brands that are driving outsized dollar performance with the U.S. this past quarter having grown closer to a low single to mid single digit rate relative to the high single digit rate that we saw globally with a slight deceleration from the September quarter. In terms of what drives this at the end of the day, Erinn, it is the same things we’ve discussed; it has a lot to do obviously with brand’s connection and the motion, innovation and consumers and driving desirability with consumers. So, everything that we’ve been doing for the past several years, obviously we’re in a very different situation, very different distribution than the traditional European luxury brands, has been focused just on that. We have worked still ahead of us but continue to be incredibly satisfied with the progress made and of course never fully satisfied with the realization that it never ends and there is lot ahead of us. And I’m really excited by what Josh and the team have planned for the next 12 months in terms of both products and marketing, and of course couldn’t be happier with the work that Nicola and Anna are doing on Kate. Again, I highly encourage you guys to go and experience that over this quarter and next as everything rolls out. And of course, Eraldo and the team at Stuart Weitzman, when we think about the progress in just 12 months getting back first to deliveries and then kicking off this quarter with a really innovative marketing campaign, encourage you guys to stay tune for that one because there is more coming. And the Yang Mi collaboration for China, very exciting where that’s getting again tremendous buzz. So, very excited by the brand work being done and us getting a return on those investments.

Thank you. Next question is coming from Oliver Chen of Cowen and Company.

Thank you. Regarding the Coach brand and the go forward for merchandise margin, what are your thoughts on merchandise margin with respect to what you're seeing with tourism spending and balancing, making sure you’re offering a great value to the customers? And at the Kate Spade brand, with distinctive newness and the rebalancing that's happening with new product, could just give us some color on what happened with the product mix and the average unit retail and number of transactions, or thoughts around what the new product is versus what wasn't enough newness within those activities? Thank you.

Sure. Let me start first with Kate. There is not a tremendous shift, Oliver. So, this was not about a price repositioning by any means. There were two very important themes here. Newness in terms of really innovative and I would say emotional products for the consumer, creation of brand recognizable platforms that allow us to then bring those across different categories and create sustainable long-term growth platforms within branding is absolutely vital to that and we’re on our way, and nothing but two weeks of course. But, I think you all go online and you see the reaction and you see how consumers are responding to the Spade logo and how we are beginning to play with that in print and hardware and in other branding applications, could not be happier by that. And very pleased that the consumers is seeing the Kate Spade’s emotional attributes and I talked about that on our speakers note as remaining consistent. And of course, we will test those every six months go forward but very excited by the initial results there. So, really, no mix I would say. The key drivers for us have been of course the synergies that we’ve been able to drive. So, the theme and the strategy has been very consistent, new product, more emotional products, greater perception of value at greater perceived quality at similar price points and mix to where we had been in the past. I’ll let Josh touch a little bit on Couch merchandise or gross margin in terms of any impact going forward. Josh?

Yes. So, for the full-year, we continue to anticipate gross margin expansion for Coach. And in the second half, it should be fairly flat as we’re anniversarying some of the key cost benefits we got from GSP last year. Speaking more specifically about the product strategy that drives the gross margin, as we talked about on several of these calls, we really have the line architecture around good, better, best, both for retail and for outlet. And I think in our retail channel, you’ve seen the work that we’ve done this past year in the 300 to 400 price segment, particularly around Parker and Charlie and some of those lines that have become quite significant. And now, we’re starting to see the impact of Dreamer and some of the latest introductions. We’re very excited about Harmony coming online at somewhat higher price points as well. And it’s really the same for us in outlet too. And so, you can see the price architecture there. We have focused on marketing, the added marketing, our pinnacle line. And we’re really learning a lot about what the outlet customer will pay from that exercise, and how we can influence future collections, updates on that. When we think about that on a global basis, often it is our international customers, our Chinese tourist customers and our Chinese customer at home that is most willing to pay for the top of the pyramid product with the highest AURs, whether that’s in handbags or in ready-to-wear and so forth. So, we’re feeling good about the work we’re doing. And we always want to keep the balance. So, there is always some things to be done. There are always product holes to fill in when you’re dealing with such a broad consumer.

Thank you. Your next question is from Mark Altschwager of Baird.

Just a follow-up on Coach for Josh or Victor. So, you mentioned pressure from reduced sales to resellers at Coach outlet; furthermore, Coach marketing and distribution strategy is really aimed at capturing sales in Mainland China. So, I'm wondering to the extent of the changes in tourist shopping patterns have a structural component, what if anything needs to be done to right size the North American outlet footprint.

I would say, first and foremost, on the resellers and the Daigou mark. We all know of course that this is something that exists across all brands relative to the price difference with their home markets. I’ve been experiencing this since I entered the luxury goods business in 1994 in Japan, so absolutely nothing new; it’s driven by economics, driven by arbitrage and very, very difficult to control. Most brands, subs included have limits in place. We try to manage these things. But, quite often, there are organized groups who come in and by very small quantities, one at a time and leveraging of course the arbitrage and pricing. The key for us is that, given the change -- and for us, the entire industry has the change and we don’t know how well it’s going to be enforced. But, given the changes in laws in China, specifically the Chinese government is trying of course to drive domestic consumption. They’ve made a few changes, the most important change of which is requiring all of these Daigous to register as businesses domestically as well as in the country where they are purchasing products. That is leading to a lot of changes from what we are learning; there is still very much in learning stages to some extent. But, overall, what we’ve seen is that the law will now make the digital platforms liable for this, which is driving some change in the flows, whether it’s movements from some digital platforms in China to the more social platforms where they sell or in some cases, some individuals getting out of the business completely. And for us, the key there is first and foremost long-term we think it’s absolutely amazing, obviously it will help our brand as the Chinese government mostly protects our IP and they’ve been great partners overall over the years to us when we’ve looked to protect IP, specifically as it relates to of course, online and safe products. And secondly, of course, for us, the key has been to leverage the investments that we’re making in Mainland China. We’ve talked about that I think throughout the whole morning and of course for the past year, whether it would be the investments we made in Coach and continue to make including the significant fashion show as well as buying back our businesses at Kate and Stuart Weitzman. We’re very committed to it. We think that that’s the long-term path. We don’t see a change as a result of any of that to our North American outlet footprint, where these folks are active happen to be the most important markets where we’re in. And so, we don’t see any impact at all to the real estate footprint.

Today’s final question is coming from Simeon Siegel of Nomura Instinet.

Any color on where you expect inventory over the rest the year? And then, just there were some comments on watches. I believe it is relatively small part of your business; any way to quantify how big that business is for Coach and Kate? Thanks.

Yes. In terms of the watch business, as you suggest, it’s very small. We are I think really pleased with the work that both Movado and Fossil are doing and trying to bring new technology into it. It has never been significant for us in our own stores and remains a pretty small business. On the license front, what we’re now really excited by from a bigger presence perspective and category of course are sunwear both in stores and globally with Luxottica as well as of course our fragrance businesses. And of course we have Sofio of course for Kate in sun wear but really pleased with the fragrance business and the work that Interparfums is doing there for the Coach brand. In terms of new licenses, we did touch on the fact that we’ve signed with Incipio, really pleased with the work they’ve done for Kate. And we know that they are going to be a great partner for the Coach brand overall.

As it relates to the inventory, as noted in our prepared remarks, we ended the quarter with inventory up about 10% year-over-year. However, if you remove the inventory associated with the regional buyback activity, the inventories were up approximately 3% for the year. So, we feel good about inventory as we head into the second half.

Thank you. That will conclude Q&A. I will now turn it over to Victor Luis for some concluding remarks. Victor?

Thank you, Andrea. Thank you, everyone. Let me first thank Kevin again for all of his wonderful work over the past almost two year with us as we laid down the foundation for Tapestry. And I want to thank and congratulate Andrew as she steps in for this interim role and we have a tremendous amount of confidence in her and of course the team supporting us. Thank you all for joining us. And as is our custom, I want to thank the 20,000 strong Tapestry team members across of the world for the wonderful job that they are doing and all of the hard work that they are putting in. While it continues to be early days in our multi-brand journey, could not be prouder of the solid foundation that they continue to lay and the hard work they are putting in. Thank you.

Thank you. This does conclude the Tapestry earnings conference call. We thank you for your participation. You may now disconnect.