Good day and welcome to this Tapestry Conference Call. Today’s call is being recorded. [Operator Instructions] Please note this call maybe 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. Thank you for joining us. With me today to discuss our fourth quarter and year end results as well as our strategies and outlook are Joanne Crevoiserat, Tapestry’s Chief Executive Officer; and Scott Roe, Tapestry’s Chief Financial Officer and Chief Operating 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. 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. Given that FY ‘21 included an additional week in the fourth quarter, the years referenced in today’s comments will be on a comparable 13 and 52-week basis unless otherwise noted. For a full reconciliation to corresponding GAAP financial information, please visit our website, www.tapestry.com/investors and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brands. Scott will continue with our financial results, capital allocation priorities and outlook going forward. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, CEO and Brand President of Coach. After Q&A, Joanne will conclude with brief closing remarks. I’d now like to turn it over to Joanne Crevoiserat, Tapestry’s CEO.

Good morning. Thank you, Christina and welcome everyone. We drove standout results this fiscal year, delivering accelerated revenue and profit growth across our portfolio, a direct reflection of the vibrancy of our brands and the agility and ingenuity of our talented teams around the world. Our performance also demonstrates both our competitive advantages as well as the success of our strategic growth agenda, which we developed nearly 3 years ago to radically transform our organization to compete and win in a new world of retail. This meant changing the way we work, adopting a more consumer-centric mindset and utilizing our data-rich platform to acquire new consumers and better connect with our existing customers. At the same time, our ambition required a commitment to leading in digital to complement our world class store operations, recognizing the increasing importance of the omni-channel journey. We also embraced the need to fundamentally pivot, driving efficiencies in many areas of the business to support brand building and high return investments. Overall, we had to be more agile while doubling down on the innovation we bring to consumers at every touch point of our brands. As we crystallized our vision, which we actually named the Acceleration Program, we could have never predicted the way the external environment would change with the onset of the COVID-19 pandemic. Although this profoundly altered the world around us, it reaffirmed our strategic direction. And with consistent execution, we emerged a stronger company. Through an unwavering focus on the consumer, we acquired 15 million new customers in North America alone over the last 24 months, including approximately 7.7 million new customers in fiscal ‘22. Importantly, we have seen these new customers transact at higher AURs and they have returned to the brands with higher frequency. At the same time, we have…

Thanks Joanne and good morning, everyone. Looking back at fiscal year ‘22, we delivered strong results in the face of a volatile backdrop as we focused on the factors within our control. We have fundamentally transformed the company, creating a solid foundation that enables investment in high-return initiatives to fuel a sustainable top and bottom-line growth. This year, we delivered a record $6.7 billion in revenue, grew earnings per share 20% against last year and 35% versus pre-pandemic levels, and we returned $1.9 billion to shareholders, demonstrating our strong cash flow generation, confidence in the future and our commitment to enhancing value for all stakeholders. Turning to the fourth quarter, our results capped a strong year. Revenue rose 9% in constant currency or 7% on a reported basis. By region, North America again drove the results in the quarter, delivering a sales increase of 12%. Revenue in Greater China was pressured as anticipated due to headwinds associated with the pandemic, including lockdowns in major cities. As such, sales declined 32% versus last year due entirely to the pullback in store traffic as digital trends in the region rose 10% compared to the prior year. Importantly, overall trends in Greater China improved modestly throughout the quarter and into fiscal ‘23. In Japan, on a year-over-year basis, sales trends accelerated meaningfully compared to the prior quarter, increasing over 25% on a constant currency basis or approximately 10% on a nominal basis. For Europe, sales rose approximately 65% against last year with strength in both stores and online. While 1-year trends in Japan and Europe have improved significantly due to the anniversary of last year’s pandemic-related headwinds as well as strong traction with domestic consumers, revenue in both regions remained below fiscal ‘19 pre-pandemic levels. Across the balance of Asia, trends again accelerated…

[Operator Instructions] We will take our first question from Bob Drbul of Guggenheim Securities.

Hi, good morning. I guess, Joanne, I was wondering, when you look at the last couple of years, as you guys think about FY ‘23, the environment is clearly challenging. Can you just talk about the confidence that you guys have that you can deliver another strong year for shareholders? Thanks.

Good morning, Bob. I would say that we’re confident in our ability to connect with the consumer. Over the last 2 years, we’ve gained 15 million new customers in North America alone. And we just – as you pointed out, we just delivered a great year. We posted record revenue levels, double-digit growth at each of our brands. And those results last year and over the past 2 years have been delivered in a very difficult retirement. We saw top and bottom-line growth over that period, and we’re up double digits to pre-pandemic levels. And that really speaks to the success of our Acceleration Program. We’ve built a very strong foundation, and we see significant runway ahead. Given the macro backdrop, as you mentioned, we believe that our outlook is both prudent and realistic. We expect constant currency 6% to 7% growth for the year. And some of the drivers of our confidence, it starts with our team. I believe we have the best team in the business. Our team has proven to have agility, and we’ve been responsive to all of the changes that we’ve seen in the backdrop. Our brands are strong and getting stronger. And over the last 3 years, we’ve really pivoted the company with – to have a real focus on brand building and brand building capabilities, and we’re investing behind that and in the future of our brands. We play in attractive categories. The categories that we serve our customers have proven to be resilient over time and durable. And I think the success of our transformation is really underpinned by our laser focus on the customer. We’re staying closer and closer to our customers and executing behind that. And not only are we calling for growth in this fiscal year, but we see a tremendous amount of runway ahead across each of our brands, and we’re looking forward to sharing more of those details at our Investor Day coming up next month.

Thank you.

[Operator Instructions] We will move next to Ike Boruchow of Wells Fargo.

Hey, good morning, everyone. Scott, you gave some additional color to the fiscal year guide, but I just wanted to follow-up. Is there more you can provide us on the shape of the year? There is a lot of variability first half, back half with freight in China, etcetera. So any other help on the shape would be helpful. And then on GSP, I see that that’s not included in the guide, but if that does go through, can you just remind us the EPS benefit on an annualized benefit that you guys would see? Thanks.

Sure, good morning. And thanks for the question. So on the first part, maybe a little more unpacking on the shape of the year by quarter. So first of all, in North America, Joanne’s comments, we do see some moderation in our growth. We talked about low to mid-single-digit growth. But importantly, that’s off a base of drilling last year, 28%, almost 30%. And on a pre-pandemic stack more than 22%. So our business in North America is strong. It remains strong. And we expect that to be consistent throughout each of the quarters as we go through the four quarters of the year. Next, I’ll address the rest of the world excluding China and again, very strong year-on-year growth. Not quite as – we’re recovering there, not quite as strong on the 2-year stack. But versus last year, where we saw severe COVID impacts, Japan, rest of Asia, we’re seeing very strong double-digit growth, more than 20% in most regions, and we expect that to continue throughout the year. The one that’s a little different is China, as mentioned in the prepared remarks, just some perspective there. Last quarter, we were down about 32%. That’s a little better than we had guided. We guided down 35%. And importantly, as we exited the year and entered this year, we see the trends improving and continue to improve. So we’ve really just taken the trend line that we see and projected that through the balance of the year. So by Q3, we inflected the growth. And for the full year, we see a single-digit growth in China. So that regional difference by year really accounts for a lot of the progression. It’s really a consistency in the trends that we see. It’s not a big change in trend. It’s just the…

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

Thank you. Good morning. Can you give us your thoughts on health of the store fleet? And how you think about the footprint for each brand now that e-commerce is such a bigger part of the business?

Yes. Hi, good morning, Lorraine. We feel really good about our store fleet and the health of our store fleet. We had over the last 3 years, had a focus on improving the productivity and profitability of our store fleet and also understanding and making sure that we are delivering the right experience for our consumers in that physical touch point. And we believe stores are still important to the consumer, and it represents, as I have said, an important touch point. But with our focus on the profitability, even as we have come through the pandemic and had traffic pressures, our store fleet is more profitable than it was pre-pandemic level today, even today. So, we feel good about where we are positioned, and we see opportunities to continue to work to improve the experience we are delivering to consumers in that physical touch point as really an important part of the consumer shopping journey. Importantly, to your point, we have driven an incredible growth in our digital business. We have reached $2 billion in that business, more than triple where we were pre-pandemic. And it’s important because we have taken a focus shifting from a specifically channel focus to focusing on the consumer, and we want to be where the consumer is in terms of how to engage the consumer with our brands. And we have, again, lots of traction in digital. It’s a $2 billion business. It comes with accretive margins versus the brick-and-mortar channel. So, for us, seeing that continued growth is a good thing and a good outcome. But at the same time, we are improving profitability of our store fleet. And altogether, we are acquiring new customers across these channels, which is really healthy for our brands, including an increasing number of younger consumers. So, that’s how we are thinking about stores. We will continue to test and learn in the omnichannel capabilities for our store and make sure we are delivering the right experience for our consumers there.

Our next question comes from Michael Binetti of Credit Suisse.

Hey guys. Thanks for all the detail here. I think your – on the AUR comment, Joanne, did I hear you correctly that North America handbag AUR was negative year-over-year in the quarter. And I know you said global, I am assuming a lot of that was from China mix. I am curious on North America. And I think you referenced some ticket increases in August. Maybe the size there and what – whether the 1Q plan based on a return to positive AUR for the Coach brand in North America?

Yes, I will kick it off by saying – and then I will pass it to Todd for some color on Coach. AUR, it continues to be – we continue to see pricing power across our brands. And for the quarter overall, we saw AUR growth. In the Coach brand in the fourth quarter, though we parse it out, Coach has been successful driving AUR growth for 3 years. And a lot of that is due to our focus on the consumer and delivering value and really leveraging data and analytics from our – in our platform, but also delivering the innovation that the customers value. And again, 3 years of a strong track record in the fourth quarter, the Coach brand in North America was down slightly, but still 40% above pre-pandemic levels. So, that gives you, I think an understanding of the pace of change that we have made in the Coach brand. But that – we still see continued opportunity for growth ahead, and I will let Todd touch on that. In our other brands, the Kate and Stuart, we are much earlier on that journey and continue to drive strong AUR growth and see runway ahead in those brands as well. So, bringing the power of our data-rich platform and our consumer centricity forward, it has had traction, and we see that going forward. But Todd, I will let you provide some color on Coach specifically.

Thank you, Joanne. As Joanne indicated, we are coming off some amazing numbers, 40% above pre-pandemic in North America. And what we had said to you before was we had always planned on ticket increases this August and throughout the year. And generally speaking, it’s about 6%, sometimes a little higher, sometimes in that range. And we feel very good about that. We feel good about that because we have not seen any resistance from our consumer, and they really appreciate the codes that Coach offer that are unique, the value and the innovation and we anticipate seeing a return to AUR growth even in North America handbags in the first quarter and throughout the year.

Our next question is from Adrienne Yih of Barclays.

Good morning. Nice end to a fantastic year. Joanne, I wanted to go back to the comment on the 40% to 50% SKU reduction. What categories or did you just kind of tighten up so the AUR, the target AUR? Did you take out certain categories? So, any more color on that piece of it? And then, Todd, how much of the product reduction/design process is based on predictive analytics? And how do you balance sort of your creative force of the team versus the more analytical nature of kind of data analytics? Thanks so much.

Yes. Thanks Adrienne. I will kick it off with our AUR and some of the data and analytics approach to how we thought about SKU reduction. And your point on understanding the assortment, we leveraged data and analytics to really help drive our SKU reduction efforts. We wanted to make sure that we did have the right assortment architecture and we cut a lot of the tail of the unproductive SKUs. But importantly, we leveraged analytics and market research to understand the consumer across the landscape and make sure that we had the right products to deliver against an understanding, a deeper understanding of the customer. So, as we developed our assortment architecture, understanding who the consumer is, who the target consumer is and where we wanted to place our bets, and it’s been an important and a huge win for us as we have come through a pretty volatile environment to have that focused assortment that has – each SKU has a purpose, and we are evaluating which SKUs are attracting new customers, what are the entry points for our brands, where are we seeing customers move up in AUR and delivering that value that they recognize. It’s been a tremendous help to have more focused assortment as we navigate a lot of the supply and demand changes around the world. And it’s been a tremendous help in terms of communicating to the consumer what’s important. So, with all of the changes that have happened over the last 2 years, we are better at identifying the SKUs. We are better at allocating those items, that assortment across the world. We are better at allocating our inventory behind those, and we are better at messaging our consumers behind the reduced SKU count. So, a lot of wins on that store.

What I can add is our designers are not going to be replaced by AI any time soon. So what we have said often in the past is we are at our best when we blend magic and logic. And today, what that means is all the things that Joanne mentioned. But in addition, it’s informing the creative process. It’s informing design. We are having much better feedback loops earlier. And Again, I want to make sure we continue to be innovative and creative, and that is not going to be something that we are outsourcing to computers. Stuart Vevers and his team really come up with incredible ideas and focus. And their goal, their muse is this younger consumer, this global consumer that cares about values that we infuse in the brand. So, again, it’s an informed creative process. We are at our best when we do this. We are using the Tapestry platform and the data to help us do this in a really authentic way, and you are seeing it in the product.

Our next question is from Mark Altschwager of Baird.

Good morning. Thanks for taking my question. It’s been great to see the continued progress at Kate. Can you give us some updated perspective on the path to $2 billion? How are you thinking about growth by geography? And at what point does China become a bigger part of the story again?

Well, we see, Mark, the opportunity to achieve $2 billion. We are increasingly confident that as the team has really delivered and the brand is really performing, both on top and bottom line. And we see that traction with our existing customers. That has been our focus, right, to get the brand steady and growing in our core markets of North America and Japan. And we see tremendous runway and opportunity ahead to get to that $2 billion with growth in our core markets. We also go to your point, see opportunity to expand internationally. We have driven strong growth. Our business is small in both China and Europe. Europe has been performing quite well. We see opportunities to expand there. And over time, also impact the China market. So, that is an opportunity. The $2 billion is not contingent upon a big step into China. We see runway in our core markets in addition to China, which is right now, it represents a lot of white space for the brand to continue to grow beyond $2 billion.

Our next question is from Oliver Chen of Cowen.

Hi Joanne, it’s Scott. Our survey data at Cowen is showing some pressure on the higher and customer as well. Just would love your thoughts on the strategy for the average unit retail increases at the Coach brand in the fourth year of doing this, just the nature of what’s achievable yet still offering clear value and innovation. And Joanne, you mentioned younger customer in your prepared remarks as well as opportunity for continued brand building. Could you be more specific about what you mean there and where you see the evolution of the innovation going? Thank you.

Yes. Why don’t I toss it to Todd to talk about the Coach brand, and then I will follow it up with our young consumer.

Thank you. Good morning. We feel really good about where we are in AUR and particularly the place you focused on, which is the higher end. Two quick data points. First of all, in retail we saw AUR handbag growth even in the fourth quarter. And what that shows is the dramatic white space that exists today between Coach and the traditional European luxury brands. And I think what you see with Rogue and some of our more elevated products, the consumer is recognizing the value there and there is a lot of opportunities to continue to grow there. And so I see us further increase our AURs throughout the year, both in North America and globally. And we are going to see that in Japan, in China, coupled with innovation, I feel very good, particularly about us capturing more of that white space.

And let me just follow up with – to answer the second part of your question, Oliver, on brand building. We have spent the last 3 years really pivoting the company to get focused on how we continue to invest in our brands. And as we have done that, we have focused on acquiring new customers, reactivating the customers, lapsed customers and continuing to drive higher customer lifetime value. And that focus on the customer is part of our brand building story. We are trying to acquire more customers and succeeding, 15 million new customers in the last 2 years alone, and we are seeing an increasing number of younger consumers. And we are doing that with capabilities that we have developed in marketing and also with data and how we are positioning our assortment, so understanding that consumer, getting closer to that consumer and delivering product and experiences that they value. And again, we are seeing traction. We are showing up in the places where they are, particularly on digital channels. And we are showing up not only for the transaction, but engaging consumers as they are on their journey, the customer journey and discovery. So, part of our investments, and we talked about how we have significantly changed our investments to be behind that brand building and in digital, moving our marketing spend from 4% of sales to 8% of sales is meaningful, and we have the capabilities to continue to measure the effectiveness of the investments we are making and ensuring that we are getting the outcomes that we want. And you can see those results again in the customer acquisition over the last 2 years, and we expect that to continue.

Our next question is from Brooke Roach of Goldman Sachs.

Good morning. Thank you for taking our question. Joanne, I would love to hear your outlook for growth for the accessories and handbag category into fiscal ‘23 for both units and AUR. Where do you see the largest opportunity for Coach brand to take share in the North American handbag and accessories market this year? Thank you.

We are fortunate to play in a category that has historically had very – proven very resilient and had durable growth over years. We have seen pre-pandemic, the category grow in the mid to high-single digit range very consistently. And even through the pandemic, we saw consumers engaging with the category and coming out strong as we have recovered from the pandemic. But going forward, we expect the category to continue to grow in that mid to high-single digit level. And from the Coach brand, I give Todd and the team at Coach tremendous credit. They have really infused life and energy into that brand. We are acquiring new customers. We are driving innovation and really managing the business quite well. And you can see that in the customer acquisition that we are seeing at the Coach brand, we still have tremendous runway ahead for Coach. The category we see growing and we think Coach is very well positioned to continue to grow with the category at very strong margins.

Yes. I think the only thing I can point you to is it was very interesting recently, the business of fashion did a very deep dive in the handbag category. And with unaided awareness, they were asked consumers who were engaged in the category and anticipated buying a brand, what brand would they buy. And we were very pleased to see that Coach was the number one brand in the U.S. on an unaided awareness by consumers who have the intention to buy. Even what was also very interesting was on high net worth individuals, individuals who have over 1.5 million investable assets, Coach was number five in the U.S. So, that bodes very well and shows that we are cutting through in our messaging on values. And I think you are going to see us, and you are going to hear us talk quite a bit about it at the upcoming Investor Day, how we are going to chart our future and take us into the next meaningful growth period for Coach.

Our next question is from Dana Telsey of Telsey Advisory Group.

Hi. Good morning everyone. Can you talk a little bit for each of the brands where you are on the journey of price increases? And does it at all differ in terms of how you are pricing for some of your exclusive or limited edition products? Thank you.

Good morning Dana. First, I will start by saying we occupy an incredible position in the market, and we represent tremendous value for the quality and the innovation that we are delivering to consumers, and consumers are recognizing that. We have been seeing AUR growth consistently at Coach for 3 years. And consumers are recognizing the value that we are delivering in the marketplace. Where we are in the journey, we still see runway ahead across all three brands to drive AUR. We see pricing power across our brands, again, with customers recognizing that value. While Coach is further along on this journey, again, and as Todd just mentioned, we see runway ahead to drive more price increases more than offsetting inflationary input cost pressures as we move forward and as we deliver – continue to deliver great value in the market. And in the context of the market, we have seen the Pinnacle Luxury players move price up pretty substantially over the last 3 years. And that creates that white space for all of our brands to position our – and continue to position AUR higher. Again, at Kate Spade and at Stuart Weitzman, continuing to see strong AUR growth in the last quarter over the last year, earlier on the journey, so much more runway ahead in those brands as well.

Thank you. That concludes our question-and-answer session this morning. I will now turn the call over to Joanne for some concluding remarks.

Thanks operator. I want to close by thanking our teams around the world for their passion and commitment. They drove these standout results that we delivered. We delivered record annual revenue this year with double-digit growth at each brand and our digital business reaching $2 billion, along with earnings 20% above last year, so a standout performance. Really clearly demonstrating the strength of our brands and the power of our transformation which positions us well for the future. We have significant long-term runway. And through a continued focus on the customer and commitment to brand building, I am confident in our ability to drive sustainable growth going forward. I am looking forward to sharing more details on our long-term roadmap at our Investor Day next month, and I hope to see you all there. Thank you.

This does conclude the Tapestry earnings call. We thank you for your participation. You may now disconnect your lines. Everyone, have a great day.