Good day and welcome to the Tapestry Conference Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. [Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to, Christina Colone Vice President Investor Relations.

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 Andrea Shaw Resnick, Tapestry’s Interim CFO. 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. This includes 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 Annual 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 other important factors that could impact our future results and performance. Non-GAAP financial measures are included in our comments today and in 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 and the presentation slides posted today. Now, let me outline the speakers and topics for this conference call. Victor will provide an overview summary of our third quarter 2019 results for Tapestry, as well as our three brands. Andrea will continue with details on the 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 Chief Legal Officer, as well as 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, Christina, and welcome, everyone. As noted in our press release this morning, we are pleased with our third quarter performance, highlighted by increases in sales and gross margin on a constant currency basis in each of our three brands. Further, we continued to make key investments across our portfolio and to realize meaningful synergies from the successful integration of Kate Spade as we harness the power of our multi-brand model. Taken together, adjusted EPS was in-line with our expectations for the quarter. Some additional highlights by brand include, another quarter of positive comps at Coach led by international, and e-commerce. The significant sequential comp improvement at Kate Spade with Nicola Glass’s new collection resonating with consumers globally. And at Stuart Weitzman, results were consistent with our expectations with top-line growth driven by our buy now wear now strategy and spring newness. We are also excited to announce the approval of a $1 billion share repurchase authorization demonstrating our confidence in driving long-term sustainable growth and value. Through this program, we will optimize our capital deployment and enhance shareholder return while maintaining our financial and strategic flexibility. Importantly, we remain committed to our longstanding capital allocation priorities supported by our strong balance sheet and free cash flow. First, investing in our brands and business. Second, pursuing strategic acquisitions on an opportunistic basis. And third, returning capital to shareholders through dividends and share repurchases. Now, as is our practice, I’d like to discuss our progress on our strategic pillars. First, continuing to harness the power of our multi-brand model, which is unlike other portfolio holding companies in our space with each of our brands targeting a unique consumer attitude within the attractive and growing accessories, footwear and outerwear markets. We are driving significant synergies on a shared platform…

Thanks, Victor and 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 the balance of fiscal year 2019. 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 to $1.33 billion, while constant currency sales increased 2% driven by growth across brands. Gross margin for the quarter rose 30 basis points to 69.2%. The expansion in our margin was driven by Kate Spade, which increased 90 basis points, fueled by the realization of COGS synergies, as well as a 30 basis point increase in gross margin at Coach, which included 20 basis points of currency benefit. At Stuart Weitzman gross margin declined 150 basis points, which included 210 basis points of pressure from currency. Therefore on a constant currency basis, Stuart Weitzman’s gross margin increased 70 basis points. SG&A expenses totaled $780 million and represented 58.6% of sales, as compared to $727 million and 55.0% respectively in the prior year. The increase in SG&A expenses was primarily driven as projected, by new store distribution and a higher level of marketing expense at Kate Spade, as well as cost associated with regional buybacks and a higher level of depreciation due to our systems implementation. Our operating income totaled $141 million in the quarter as compared to $184 million in the prior year, while operating margin was 10.6% as compared to 13.9%, reflecting the higher level of…

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

Hi, good morning.

Good morning, Bob.

Good morning. Victor, there was a lot of negative sentiment coming into the quarter given the issues that you’ve had with Stuart Weitzman and then followed by the issues with Kate Spade, does the announcement of the share repurchase program suggests you are hitting the pause button here or rethinking this multi-brand strategy?

Got it. So, quite a few parts to that question, Bob. Obviously, in terms – first and foremost, the strategy itself, the execution of the strategy and then now the buyback. First, on the strategy, all of the strategic rationale for a multi-brand strategy remains true as far as we are concerned whether that be the risk of being a single brand, single-category business, which has the risk of overextending. As has been the history for us and even some competitors here in the U.S. and of course, the leverage that we can bring across the platform with different categories, markets and brands. So, I would say that, absolutely not. We are not putting the pause button and are committed to our strategy of acquiring great brands that have solid growth potential. In terms of the execution of the strategy. And I think you touched both on SW Stuart Weitzman and Kate, first, and I will start with Kate, the most recent acquisition. I think it’s important for all of us to remember that that is an acquisition that has been accretive from day one and I could not be prouder of the work that our teams have done in integrating that business onto the Tapestry platform. We’ve migrated supply chains not only realizing significant cost synergies, we have very visibly improved product quality. We have the key talent in place both from a management and a creative perspective. We’ve laid the foundation for solid international growth by buying back all of our businesses in Asia and are already making great progress there. We reinforced brand health with the launch of a fresh creative direction that we are already seeing consumers react to. And lastly, as we announced last quarter, we integrated KS on to what is in essence a…

Great. Thank you very much.

[Operator Instructions] Our next question comes from the line of Ike Boruchow of Wells Fargo.

Hi, good morning everyone. Congratulations. Very, very nice quarter. I guess, Victor, when you are talking about the Coach business in North America, you referenced a few headwinds you are dealing with and one of those points was the reseller market in North America. I’d love to get your perspective on the luxury resell market, what it means to you and your category accessible luxury et cetera. Just how you kind of think about that as a growing space you now have kind of contend with in North America?

Sure, sure. We know, Ike, that you’ve recently put out an interesting note on the topic which of course we’ve studied and we’ve been studying that whole phenomenon quite closely. In my notes, what we referenced in terms of resell, it was really much more the – those who are reselling as parallel products to China, the Daigou. I think that’s resale in what you are referencing in your note with much more of the U.S. platforms, I’ll touch on in a moment, but let me allow first Josh to talk specifically to the Chinese Daigou resellers and then I will touch much more on the U.S. based platforms, European based platforms that you’ve been talking a bit about. Josh?

So, hi, Ike. As we mentioned last quarter, we have been seeing this volatility in what we call the Daigou business which are the Chinese resellers who have been purchasing from us to resell on the digital platforms in China. So, from what we can tell, the reseller activity continues to be volatile. And it remained a headwind in Q3. We’ve been analyzing the e-commerce platforms in China, as well as news articles about what is happening with this market and it appears that some of the smaller resellers may have exited or closed up shops. What they are reacting to, we believe is the changing regulations and the evolution of the digital platforms globally. For us, for the long-term, the curtailments of this activity we see is a positive, because, keep in mind that our biggest focus and our primary goal is building Coach in the domestic market, with the domestic customer in China and with the domestic customer in North America and we couldn’t be more thrilled with the traction we are having in China, both in terms of the comp performance but also in terms of the brand tracking that Victor referenced in his earlier remarks.

Yes, and so, more generally, on the resell market more broadly, we see it as an opportunity based on a lot of the research that we’ve had the teams digging into this for quite some time now, a market that is about $24 billion globally. But the vast majority of that is still in watches and jewelry. Our own estimates of that about 5% $1.5 billion more or less is in handbags and accessories. We also see it as – and this is more resell of used products now. I am not talking about the parallel opportunity which is resell from lower priced markets into Asia. But we see it as much more concentrated in Europe and the U.S. and we see it less of an opportunity in Asia where consumers are much more focused on new product and much more focused on taking advantage of the international price premiums to access new products at a discount. In Europe and the U.S., we still see brick and mortar playing a very important role. In fact, our own studies show still 70% to 75% of this used product is going via brick and mortar stores and with opportunity of course for more of it to go online. But this is not a new phenomenon. Look, before the current platforms, whether it was eBay and other marketplaces, this has been certainly a trend. We dug deep into the handbag and accessories space and what we can share with you is that we see an average AUR that is really focused on traditional luxury brands. An average AUR that is about a $1000 and it’s really more than anything focused on what we see as seasonal luxury fashion bags as a result. That would not be necessarily the main targets for what we…

Super helpful. Thanks again.

Thank you.

Your next question comes from the line of Erinn Murphy of Piper Jaffray.

Great. Thank you and good morning to you all.

Good morning, Erinn.

My question is around Kate Spade and the operating income pathway. So you are reiterating the $100 million to $115 million of synergies today which is $55 million to $70 million incremental this year. But when I just look at the key operating income this year, it’s only up slightly on a dollar basis. So, I am curious with the pressures you are seeing in Kate this year, how much do you expect to recover next year? And then, on the Kate Spade comp being positive in the fourth quarter, what are you currently seeing that’s giving you that confidence. Thank you.

Sure. I’ll start Erinn, on the question around operating income. And obviously, we have seen the COGS flow through and the significant growth we had today on including last year’s fourth quarter as well as the first three quarters of this year. Where we have seen pressure if you will, has been, as our choosing and that we are seeing significantly higher SG&A expenses associated with our buyback, associated with our significant ramp in new store openings, et cetera. So, we do expect that operating margin for Kate will grow as we move forward, but and we lap these investments, but this year we’ve really seen that in the increase and SG&A investments. I think I’ll turn it over to Victor on the positive comp question.

Sure. Erinn, of course, you know, we don’t discuss intra-quarter comps, but what I would share is that, we are definitely tracking to our plan to drive positive comps, some of what you’ve heard us talk about of course in terms of increased penetration of Nicola’s products is a key part of that by the end of the third quarter approximately three-fourth of the product in full priced was newness. By the end of the fourth quarter, all of the in essence will be new products in the full price channel and then in the outlet channel, we will be about one-third newness and we are really excited by the consumer reaction.

Thank you very much.

Thank you.

Thanks, Erinn.

Your next question comes from the line of Oliver Chen of Cowen and Company.

Hi. Thank you. As we look at the Coach brands, what are your thoughts on long-term growth opportunity? And how that will pace relative to the handbag market, thoughts on pricing and categories and what you prioritize renovation there? And then, a quick follow-up, the open source vendor forum as well as design-led thinking, that sounded new to me, as well as very interesting for driving some competitive advantages. I mean, how would you articulate that moving forward in terms of what makes it different versus how you innovated in the past and how that may drive our models on a long-term basis? Thank you.

Sure, sure. Let me let Josh talk a little bit about Coach and what we are thinking long-term or let me just start, I’ll start and Josh will then jump in on Coach. But on opensource and design-led thinking which we are really leveraging across the Tapestry platform. As you know, we’ve been talking about innovation for quite some time. I think it’s not just us, it’s obviously invention and newness and the pace that is today required is vital for all businesses in an increasingly transparent world. We are looking for ways in which we can obviously engage differently with outside partners to increase and drive the level of that innovation. And one of the ideas that we started working on a year ago that we just executed that really brought tremendous excitement to 10 Hudson Yards was actually reaching out to all of our current vendor base globally as well as new vendors and asking them to come for three days to our headquarters present to all of our design teams, present to all of our merchants as well as product development and even marketeers in pods. So, we have the small leather goods team for Coach combined with the PD people, combined with their marketeer parts, with their marketing partners and merchant partners across each of the categories, across all three brands go around for three days and meet with all of these vendors who came and we asked them to bring us newness. We asked them to bring us new ideas and materials, executions, printings, hardware, leathers, that we would then as a company take some bets behind and it was exciting. I mean the teams come up with incredible opportunity now. Over the next quarters, we will be able to see some of that actually…

Yes, hi, Oliver. So, as we think about long-term growth for Coach, from a product lens, it really comes from innovation as Victor was mentioning. And the way we think about that by category is within handbag, it’s developing new powerful core lines, like we have now with Charlie, with Parker, with Dreamer that have a certain consistency about them. But then, can get updated in new platforms season-after-season. And then, increasingly it’s also about getting that balance between consistency and disruption. And so, in this quarter, we talked about our collaboration with Disney and Dumbo and things like that that surprise and delight the customer. Certainly, a lot of these pop-ups that we’ve been doing are important to drive disruptive messages around the brand as well. Then from a emerging category perspective, we have three focus areas which is footwear, where we are really starting to see a nice traction in that business both within our own stores and within wholesale that’s growing driven by sneakers for both genders and booties for women and fashion sandals, as well, this season. Our men's business is also a focus. In men’s we have a clear path to $1 billion and that is getting an inflection from our association with Michael B. Jordan and as we think about the way men are dressing today, in a more modern active sensibility, the importance of signature and logo in that business has been really powerful. And while still small, and intended to remain a small percentage for us, our ready to wear business is growing as well, driven by outerwear. In terms of distribution growth, we see no net distribution growth, but geographically, a big focus on China of course, and Europe where we are starting to see some nice traction. In addition, of course, it’s everything we are doing digitally. So, I hope that gives you some perspectives on the categories and the geographies that we are thinking about.

Yes, that’s really helpful. The last one on sustainability, that was a really nice point of difference, Victor, how you moved in that direction. Maybe just if you could share with us of the consumer insights around sustainability and why this matters to you and how it may play in to separating you from competitors?

Sure. Look, at the end of the day, Oliver, and simple – to put it simply, it’s just good business. Our teams care about it. Our consumers care about it. And I think that’s as fiduciaries and good corporate citizens and good citizens within the communities that we live and work in, we think it’s just the right thing to do whether it be on how we treat our teams, how we treat and support the communities that we work in. And as well, of course, from the environment we work with our vendor partners very closely and I think that’s putting out very, very clear targets for 2025 and coming out every single year and holding ourselves accountable to those targets by communicating them very clearly to all of you, to our teams, and to the consumers who will hold us accountable, we felt it was the absolute right thing to do and we are really proud of the moves we are making there.

Thank you. Best regards.

Thank you.

We have time for one more question. Your final question will come from the line of Simeon Siegel of Nomura Instinet.

Thanks. Hey guys. Good morning and nice progress in the quarter.

Good morning Simeon.

Good morning.

Victor, did you or can you speak to a trend that you are seeing at full price versus outlets? And then, just Andrea, maybe within just given the moving pieces and the Kate non-comp component, I guess the buy-ins also best positions. What do we need to keep in mind into Q4 and next year for the sales to comps rate? Thanks.

Yes, I think full price to outlet, as you know, of course, we deliver and only provide global comps. But in general, I would say that, from a global perspective, Simeon, the reality is all of our businesses internationally have been very robust. I could not be prouder of the traction that we are seeing across Asia on all of our brands and now from a much smaller base of course. As you are all aware, in Europe, really good and I would say across all channels really. Asia, of course has now wholesales, but full price and outlet performing really well and I would say that in Europe, the same is true with wholesale becoming an increasingly important part of our business across all three of our brands. In the U.S. I would say that our full price business is robust. I encourage you guys, especially for those of you who haven’t, please come to Hudson Yards, and you will see the most recent execution of the store formats for Coach, Kate Spade and Stuart Weitzman that we are tweaking and rolling out globally. Those stores are all doing incredibly, incredibly well. Really pleased with the performance of this new location for us really significantly above our expectations for all three actually. And what I would say is that, the opportunity in the outlet channel for increasing AURs that we’ve been talking about, that Josh has been talking about and the teams have been talking about, remains the real opportunity and we are very, very focused on innovating there, on obviously engaging with the consumer there and separating ourselves from the competition.

And I think, Simeon, as you look into the fourth quarter and you look beyond the fourth quarter, you are going to see both the Kate Spade organic comp growth augmented by significant non-comp growth. We will still be accelerating store openings next year and in this last quarter, just as an aside, we already saw the China business outperformed and contribute to our overall comps in terms of the fact that we brought them in Jan 1 of last year. So they did participate in the global comp number that we shared. So they were a driver of the improvement.

Yes, I think, I’ll just add Simeon on that, you got 242 Coach doors in Greater China where it’s 54 for Kate, 39 for SW. We are only scratching the surface here. So, a lot, a lot of opportunity. We are very excited about that.

Great. That’s exciting.

Thank you. That concludes our Q&A. I’ll now turn it back over to Victor for some closing remarks.

Thanks to all of you as usual for joining us and as is our custom, I just want to again thank our 21,000 strong team across the globe for all of their hard work and dedication and to recognize my excitement for the great work being done, not only across our brands, but as well across our very nascent and increasingly strong Tapestry platform. We have three amazing brands. Each of them has a unique narrative and an exciting creative direction that we are committed to investing behind across our multichannel and our global platforms. And I am continually inspired by the resilience and the desire of our teams to drive great experience for our customers globally. Thank you.

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