Good day and welcome to this Tapestry Conference Call. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone.

Good morning. Thank you for joining us. With me today to discuss our second quarter results as well as our strategies and outlook are Joanne Crevoiserat, Tapestry’s Chief Executive Officer; and Scott Rowe, 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. 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 our 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 would now like to turn it over to Joanne Crevoiserat, Tapestry’s CEO.

Good morning. Thank you, Christina and welcome everyone. As noted in our press release, we delivered record second quarter earnings despite the challenging backdrop. During the key holiday season, where brand magic, compelling product and operational excellence are required to win with consumers, we outperformed expectations. This is a direct reflection of our talented teams and the benefits of our globally diversified business model, which continue to fuel innovation and customer engagement across our portfolio. Importantly, we remained disciplined stewards of our brands, which is underscored by gross margin expansion, as well as the ongoing investments we are making to support our long-term growth agenda. Now touching on the strategic and financial highlights of the quarter. First, we powered global growth, delivering low single-digit constant currency revenue gains excluding greater China, which experienced incremental pressure associated with COVID. These results were led by double-digit sales increases in Europe, Japan and other Asia, which together outpaced our expectations. In North America, as expected, we realized the slight decline in revenue, amid a difficult consumer backdrop. We did this while driving higher gross margin, operating margin and profit dollars compared to both prior year and pre-pandemic levels, underscoring our commitment to brand building and operating discipline. In Greater China, sales declined 20% on a constant currency basis. This was below our expectations as we like many others experienced greater than anticipated COVID-related disruption. That said, following the change in the COVID containment policy in China, we experienced a meaningful improvement in traffic trends, driving a positive Lunar New Year performance and a solid start to the third quarter. Second, we continued to build lasting customer relationships. During the quarter, we acquired nearly 2.6 million new customers in North America alone. Importantly, these customers transacted at higher AUR than the balance of our…

Thanks, Joanne, and good morning, everyone. As Joanne mentioned, we delivered solid results in the face of a volatile backdrop as we focused on the factors within our control. We achieved revenue of over $2 billion, while realizing the operating margin ahead of expectations and grew earnings per share 10% against last year, excluding $0.11 of currency pressure. At the same time, we returned $272 million to shareholders, demonstrating our commitment to enhancing long-term value. Turning to the details of the quarter, I'll start with revenue, which will be shared on a constant currency basis, unless otherwise noted. Sales declined 2%, which included pressure in Greater China as a result of the COVID-19 pandemic. Excluding Greater China, revenue increased 1%, led by outperformance in the balance of our international regions. In Japan, revenue increased 10%, while Other Asia grew 29%, driven by strength across Singapore, Malaysia, Australia, New Zealand and Korea. These trends were again led by traction with local customers. At the same time, sales to tourists improved versus the prior year that remained well below pre-pandemic levels, highlighting future opportunity. In Europe, sales were 20% above last year, fueled by higher international tourist traffic, notably from the Middle East and within Europe as well as continued growth with local customers. For Greater China, sales declined 20%, which was below our forecast due to incremental pressure associated with COVID impacting both stores and online. As Joanne mentioned, following the lifting of certain government restrictions in December, we've seen a meaningful improvement in traffic Q3 to date, notably during the Lunar New Year holiday. Therefore, as we approach guidance, we maintained the expectation for a strong sequential improvement in the second half of the year, albeit from a lower second quarter base. Overall, we still expect strong double-digit growth in…

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

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

Well, thank you, and good morning, Bob. We certainly have seen a meaningful trend change in Greater China from the second quarter to the third quarter. We had an encouraging start with a solid Lunar New Year driven by sequential improvement in traffic trends in the market. And quarter-to-date, our business is trending roughly in line with last year, and our guidance, which Scott will cover in more detail in a minute at a high-level, assumes light growth in the market for the quarter and a recovery in China through the balance of the year. And we are seeing some green shoots with respect to domestic travel, including in Macau and in Hainan, which are important destinations. However, international travel is still down, and we see that as further opportunity going forward. Overall, seeing very encouraging signs of recovery in the short-term. And we are confident in the long-term opportunities for China as a growth vehicle for our brands and the category at large as we move forward. But Scott, turn it to you for unpacking our guidance assumptions.

Yes. Sure, Joanne, and good morning, Bob. If you look at the impact that China had on our outlook for the year, our projections, it's about $65 million. And just unpacking that in the second quarter, we had an expectation of being down about 10%. In reality, we were down about 20% based on the more extensive COVID-related impacts that we mentioned in the prepared remarks, that's worth about $20 million. And as you look at then taking the recovery curve that we had previously projected and rebase lining it off of that lower Q2 starting point, we then expect to continue to see meaningful improvement throughout the balance of the year, returning to growth in Q3 and up about 20% or more than 20% actually in the fourth quarter is where the comps get a little easier versus COVID a year ago. And that's where it's a little more than $40 million in the second half or about $0.10 in terms of earnings. And we are really encouraged just to build on what Joanne said and the start that we've had. Lunar New Year started off strong for us, and we are tracking well against that progression. And I would also just say, let's not lose the bigger picture here because while we have reflected what we see in China, and that has had a slight kind of negative impact. The business remains strong throughout all geographies, and I think this is a real testament to the resiliency and diversity of our model as even with these dynamic demand and revenue impacts that we continue to see, we are managing the business for the long-term, you see our gross margins being strong, inventory is in great position, and we were able to raise our earnings even with these dynamic impacts that we've seen in China. So I feel really good about the future there.

Great. Thank you.

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

Hey, good morning. Scott or Joanne, not sure who this is for, but two things quickly. First, on pricing, so AUR is up mid-single-digits again this quarter. Just -- anything you're seeing on pricing, any resistance that you've seen at all in the back half, are you assuming AUR continues to increase? And then just real quick, I know it's a smaller part of your business, about 10% on the wholesale channel. Can you just kind of comment POS trends you saw heading into holiday, what you're seeing quarter date. Any big changes there? I know there's been some stuff going on with some of your competitors. Just curious, again, knowing it's smaller. Just curious what you guys have been seeing with your brands. Thanks.

Yes. I will pick that up, Ike. As it relates to AUR, we did drive mid-single-digit AUR increases in the handbag category this quarter, both globally and in North America. And I think that's a testament to our focus on brand building and staying close to our consumer and the balance we have of delivering magic and logic. We've gotten behind our most important product categories, our icons -- our iconic product. We are delivering compelling creative innovation into the marketplace. And we see the customer responding. And we will continue to manage stay close to the customer and manage the business in a healthy way as we move forward. As it relates to overall handbag pricing, we do see opportunity to continue to grow AUR into the future across our brands. I will let Todd comment on that in a minute. Actually, maybe, Todd, you can touch on both subjects, …

Sure.

… but as it relates to your question on wholesale, Ike, to your point, we are 90% direct-to-consumer. And we control our destiny with our direct -- we love this relationship that we have with our customer. It allows us to stay close to move very fast with the customer as we see the customer moving. And it gives us a lot of data that we can then leverage to improve our execution and what we -- and how we go to market. Overall, our wholesale business was down low single digits for the quarter. So while there was some pressure, it was manageable and again, a very small part of our business overall, but Todd, I will pass it to you.

Great. Thank you, Joanne. Just let me do the wholesale first. Just to reground us for Coach, obviously, our largest brand, North America wholesale represents less than 4% of our business. So it's an important business. We value our relationships with our wholesale partners, but it doesn't drive our business. And as Joanne said, we've migrated to really of being a direct-to-consumer business, understanding our customers in a much more profound and deeper way and love that relationship and the long-term value we can create. Regarding handbags, we were very happy with the mid-single-digit constant currency handbag growth we saw globally and in North America, which is an important point. And one of the things we always focus on is emotion trumps price. And we have offered incredibly emotional product for our consumers. One of the great examples I can give you is, right now, we’ve a heart-shaped leather bag in outlet. It can I think hold a big iPhone, but I'm not 100% certain of that. We sell that for around $199 and I think I'm on fumes right now in terms of inventory. Compare that to our City Tote, which is a phenomenal high-functioning tote, which average AUR of 150. So this idea that we can, as long as we create emotional product that resonates with the consumer, the example I gave you in particularly over indexes with the younger consumer. So we are really excited by that. We will continue to allow us to grow our AURs and not just in handbag and not just in small leather goods, but we see lots of opportunity in men, lifestyle and footwear.

Okay.

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

Thanks. Good morning. I wanted to get your insight on the promotional environment. You called out a more promotional -- some more promotional selling at Kate. What are you seeing at the Coach brand? And what is your outlook for both brands in the second half and beyond?

Well, maybe I will kick it off and then again, have Todd weigh in on the Coach brand. What I will say is, as we think about the environment that we saw in Q2, particularly this is really a North America focused comment, definitely seeing a more cautious consumer through Q2. We delivered a slight revenue decline which was a continuation of our first quarter trends and the macro environment is challenging. And this holiday, we saw what I would call a more normalized promotional environment versus a year ago when we were -- and many were supply constrained. This holiday, we delivered record Thanksgiving week and Cyber Monday sales results, which I think shows that consumers were value-driven and they were more selective in their spending outside of those peak periods. So it was a reversion to what I would call more normalized traffic patterns in the environment in North America. But even in that context, we just talked about it, we drove higher handbag AUR in North America, which is a testament to the product innovation and the data driven business model that we are applying and we've been disciplined in our approach to managing our brands and our business for the long-term that allowed us to deliver higher gross margin, operating margin and profit dollars versus last year in North America despite the softer demand environment and the external pressures we are seeing. So we are continuing to take a prudent approach to running and forecasting the business with an eye on continuing to build our brands for the long-term. And I will pass it to Todd on Coach.

Thanks, Joanne. It is a promotional environment. We know that particularly in the holiday quarter, it always has been. What separated us, I think, is the journey we've been under for the last couple of years in focusing on our icons, reducing the tail of our products that drive markdown expectations and liability and leaning in on expressive luxury and leaning in on purpose and leaning in on values. And that is evidenced by our gross margin. So we didn't have the pressure that we had to deal with, and I feel very good that that's going to continue. Again, it goes back to this idea that we can separate ourselves when we focus on our customer, focus on our product, create a storytelling around the product that really is compelling. And ultimately, being 90% direct-to-consumer, we have a greater opportunity to control our own destiny.

Our next question is from Matthew Boss of JPMorgan.

Great. Thanks and congrats on another nice quarter. So maybe a two-part question. So, Joanne, could you speak to maybe the cadence of top line as the second quarter progressed. How best to think about trends you're seeing notably in North America at the Coach brand maybe post holiday? And then, Scott, as we think about gross margin, is there a way to break down the driver of the 50 basis points gross margin upside in the second quarter? And then if you could just quantify or maybe even directionally help walk through some of the key puts and takes for gross margin in the second half outlook, I think that would be really helpful.

Yes. Well, I will take the first part of the question, and it's an interesting question. The cadence of the quarter, I would say, if we're talking about North America specifically, and we could talk about globally, but North America specifically, the cadence of the quarter was more normalized. I think a year ago, we all saw a pull forward in demand as many, and we were supply constrained. And as I just mentioned, this year, this holiday, we saw a more normalized cadence where customers were shopping during the peak periods. Importantly, we were welcoming so many more customers back into our stores, which was fabulous. And obviously, we are well-positioned with a great team to take advantage of those changes and trends. Obviously, the conditions in China played out much differently than we expected and impacted the cadence of the business on a more global scale with softness in December when they were reopening and the changes in the COVID containment policy and COVID infections impacted that market. So a lot of different changes, some we anticipated, some we didn't. But our teams really moved with agility to deliver for our customers and manage the business in a really healthy way. Even in the face of the shifts, we were delivering higher AUR in our handbag category, we saw the resilience continue to see the durability of that category with our consumers and we delivered higher gross margin and exceeded our expectations for profitability as well. Scott?

Yes. Just taking it from there, Matt, the second quarter being really was what we would call operationally related. So it was the combination of price increases versus a discount. So as we said, discounts may be a little elevated versus the strange year last year when we were under unit constraints and supply issues. This is, as Todd and Joanne said, more normalized, and we are operating with discipline, and we said we would even -- we are not going to chase the last revenue dollar just to drive top line. We are really focused on the long-term health of the business, and Todd said, focus on a motion versus just price. And you see that reflected in the second quarter. And as we turn to the full year, I think we outlined it in the prepared remarks, but freight has gotten a bit better for us, FX as well and some of the operational impacts. So we took our gross margin guidance up slightly in the second half. And as you see that, it's about 130 basis points benefit now for the full year. And remember, that's for freight. And remember, in the first quarter, that freight was negative. So the 130 reflects the negative in the first half and some of the benefits we are seeing in the second half. So that benefit continues to grow as we move through the second half and what should be a tailwind as we go into next year.

[Operator Instructions]. We will move next to Michael Binetti of Credit Suisse.

Hey, guys. Congrats on a great quarter. I want to just ask you -- when you think about -- what do you think are the most important things for your teams to focus on to get North America back to positive growth here? I'm sure that's the discussion you're having. On AUR, you mentioned smaller handbags. You've heard a little bit about that. I wonder if that trend continues, that become a pressure on continuing to report the nice positive AURs we had. But more importantly, last quarter you lowered revenues a bit and you held the EBIT margin nicely. Now you're raising, but there's a lot of moving parts. As you look at the second half plan, Scott, I guess, two things. Where do you see opportunities for upside? And if you're able to tap those numbers, do you think you need to bring some of those costs back that you may have removed earlier to stabilize EBIT for us? Or maybe just help us think about flow-through.

Yes. Let me kick us off with how we're thinking about driving growth into the future, particularly in North America, but also globally. I think as we leverage our direct-to-consumer model and our platform, one of the things that we're really focused on is making sure that we drive growth with our customer file, both an acquisition as well as average spend per customer, which you saw in the second quarter, a continuation of that trend. So leveraging that direct relationship that we have with our customer and staying close to that customer and driving more. So that means that we have to show up where they are. We have to be investing in marketing, taking advantage. So that's first, deepening our relationships with our customers. Second is delivering compelling product and innovation. And we're focused on that and doing that every day. And maybe Todd can talk about some of the great innovation that's happening at Coach, and delivering compelling omni-channel experiences. So this was a quarter where we saw customers come back into our stores. And we have the advantage of having two very profitable channels to meet our customers where they are. And that customer is increasingly omni-channel, shopping across both channels. So those are the real keys to -- and I should say that omni-channel customer is spending more with us. They're our highest lifetime value customers. So leaning into our customer relationships, our product and product innovation, including our lifestyle categories for growth and meeting them where they are in an omni-channel basis. And all of those things you can see came to bear in the second quarter. And as we continue to further our strategic agenda going forward, we think that will drive our growth. But maybe toss it to Todd to talk about Coach.

Thanks, Joanne. A couple of things to reinforce. First, we did add 1.5 million new customers that Coach this last quarter in North America at average higher AURs. So we are -- the expectation of the AUR and where they enter the brand is different than in years past. Second, as I said before, emotion always comes price. So when we think about bag size, the correlation between -- yes, if you have a very large bag, typically you have a higher AUR. But some of our highest AUR bags, as I indicated, with the heart bag in outlet. But if you take Bandit, if you take Tabby, if you take some of these beautiful bags these families that are iconic that we add texture and different materials, we command higher AURs, whether it's Shearling or Pillow tabu [ph] or other opportunities to take a family, create an icon and expand on it and grow our AUR. So again, I am not as concerned by whether we sell large bags or small bags, I'm concerned about bringing in a customer, creating a connectivity and making sure we have them and that they believe that the Coach brand represents their values, and that will create a sustainable, profitable growth for us in the future.

Yes. And, Michael, I guess, adding on to what may be our longest question of the morning, you asked me what inflection points you catalyst could be for upside in the second half. And I'd just point you back to -- or remind you how we've approached from initial guidance all the way through now halfway through the year, is we are taking the trends that we see, and we are projecting them forward, right? So whether it's North America down low-single-digits, it's -- I think, now have spend a lot of time on what our assumptions are in China. From a top line standpoint, obviously, that could be better. Could China get open up and come back faster, it could. Could it be slower? It could. I think we've got reasonable estimates, same with North America, right? Our business has been very consistent. We haven't predicted a big up or down. And so as that dynamic continues to evolve, we know our brands are strong. We are running for the long-term, and we are going to adapt to whatever demand environment we see. We are not trying to force it or push it, and we are maintaining those strong gross margins. So any upside we do see, will come through on the bottom line. On the other side, investments are largely in our control. And I hope you've seen that we've been disciplined at trying to both be prudent in light of a very dynamic environment, while at the same time, maintaining investments on what we think are going to drive us in the long-term, whether it's a little more than 8% from a marketing standpoint, even a little higher than that in the second quarter. And continuing to invest in our capabilities around digital, data analytics, et cetera. Those are obviously within our control, but we think this quarter is a great testament to the fact that those are paying off. So we will continue to be prudent, managing our expenses as carefully as we can while not sacrificing the long-term. And as Todd and Joanne said, one of the biggest things that gives me confidence in the future is that gross margin as we continue to manage the price increases and being diligent on the discounting. We see those gross margins coming in and we see that for the quarter, and we see that for the full year.

Thanks a lot. Got it. Appreciate it.

Yes.

Our next question is from Brooke Roach of Goldman Sachs.

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

Yes, Brooke, I would love to answer that question. I would say the big picture here is no new news, right? We've talked about the quality and the quantity of inventory being well-positioned and coming into our peak holiday season, we felt good about it. And the answer is, we still do. We are up about 30%. We said by the end of the year, we'd be up single digits. If you can expect sequential improvement as you move through the third, and I told you where we expect to end for the fourth quarter. And it's funny, on China, a quarter ago, we were talking about do we have too much inventory in China and now is at reopen do we have enough inventory in China. Again, I would say this points to the diversity of our -- and flexibility of our model. We've got bonded ware houses. We're able to, within some degree, reposition inventory. We've got inventory in China. We feel good about the quality of that inventory. And as that starts to reopen, we think we are really well-positioned there as return to growth in the second half in China.

Thank you.

Our next question is from Oliver Chen of Cowen.

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

Thanks, Oliver. The consumer and the consumer data that we have are -- have been a real meaningful driver. In terms of our understanding of our consumer and where they are and their expectations for our brands, we're leveraging that data in a number of different ways. We are leveraging it through the full value chain from product creation as we understand and do market mapping and understand what our consumers are looking for from our brand as well as from our product, including the younger consumer and we are leveraging it as we think about how we market and which products resonate with which consumer bases. We have, importantly, a technology infrastructure that allows us to harness this data and really embed it into the decision making that's happening day-to-day. And as we see those, it does show us opportunities to drive higher lifetime value. We understand how customers are coming into our brands, what they're likely to purchase next in terms of driving frequency and how we engage them more fully in our brand and not just in one product at one price. And I think you've seen that through the second quarter. That is, again, a huge advantage of our direct-to-consumer platform. We are continuing to build on the platform, and we are applying new technology every day. And having a modern technology infrastructure allows us to move very quickly to apply new technology, to allow us to utilize that data even better. And I think our results show it. It's new customer acquisition, but you also see it in increased spend per customer as we lean into the learnings from that and our teams leverage it throughout the business. And Todd, I don't know if you want to take the SKU -- SKU question on Coach.

Yes. Overall, again, it's so amazing what we are able to see and do with the platform we have with Tapestry and how rich the data is. And we are really understanding how best to animate the individual icon. So we are testing ideas earlier. Our merchants, our creative teams, we're bringing in our timeless Gen Z customer to influence some of that very early. So a great example is Tabby and Shearling in the quarter did exceptionally well. And when I walked through the showroom looking at fall next year, we took some of that learning and how to amplify it. We also recognize that this idea of time placed and occasion matters. So how we focus on each time place and occasion, one of the opportunities we identified in outlet was to have a compelling backpack. And again, that you'll see the icon being launched in the fall, which will be incredible. I'm actually been wear-testing it. I love it. So, we see these opportunities. I know Joanne is going to say I'm not the timeless Gen Z customer, but internally, I am. But we really look at that, and the data is informing and it doesn't just inform on the hind-sighting, it informs upfront. So as we get better, as we understand it, it informs our pricing. It informs our promotions. It informs our placement. It really informs everything we do. So I'm very excited by the platform. I'm very excited by the opportunity to continue to animate existing icons without constantly trying to create new icons every year, which would have been the historic norm.

Thanks, Todd. You’re timeless and congrats on [indiscernible].

Thank you.

Our next question is from Mark Altschwager of Baird.

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

Thanks, Mark. We feel great about Kate and the progress that we are making. And I think some of the points that you made in terms of who the customer is. We acquired 1 million new customers at Kate over the quarter. We drove handbag AUR growth in the quarter. The environment was, I would say, more normalized from a promotional standpoint. And while the promotions were higher than last year. Last year, the Kate business was extremely supply constrained. So I would say that would be an anomalous year. The promotional levels were still lower than 2 years ago at Kate Spade. And we are applying the same tools across our platform between Coach and Kate. But one of the key differences is Coaches icon strategy has deep history and heritage. And at Kate, we've been building out our core handbag platform with success, but we are still in building mode at Kate. Again, we called out really encouraging signs. We talk about the core platform, the Knott and the Katy as we've been developing a more solid core foundation there. Those continue to perform. We introduced a new leather program, Gramercy that's off to a great start. Additionally, Kate has, in its history, never really had a signature platform, and we've really been leaning into the spade flower. We talked about Monogram platform that we had. And again, that's another platform that we can continue to leverage at Kate to continue to build resilience into the model and durability into the model at Kate in addition to the novelty, et cetera, that is such an important part of the Kate DNA. So the teams are making progress at Kate Spade and building on the foundation. We have a very passionate customer base at Kate Spade. And we are expanding that customer base. We are seeing higher spend per customer. We're leveraging the full complement of lifestyle categories. We saw mid-teens growth in lifestyle categories at Kate, which we think is an important driver of long-term customer value as we go forward. So we feel good about the progress at Kate and we are investing in the future because we are confident in the future runway ahead.

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

Thank you.

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

Thank you, and thank you for joining us and for your interest in our story. Today, we delivered record holiday earnings, outperforming our expectations and positioning us to raise our outlook for the fiscal year. A huge thank you to our talented team around the world who continue to drive our results. Importantly, our performance highlights Tapestry's competitive advantages, the power of our iconic brands and strong consumer engagement platform as well as our globally diversified direct-to-consumer business model. We have a clear strategy to drive significant long-term sustainable growth across our portfolio, and we're confident in the runway ahead. Thanks again, and have a great day.

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