While sites are on hold, we appreciate your patience and ask that you please continue to stand by. Please standby. Your meeting is about to begin. Good day, and welcome to this Tapestry, Inc. conference call. Today's call is being recorded. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press 1 on your telephone keypad. 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 Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out 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 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 brand. Scott will continue with our financial results, capital 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'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO.

Good morning. Thank you, Christina, and welcome, everyone. Our second quarter outperformance demonstrates the compounding impact of our Amplify strategies. During the key holiday period, we delivered pro forma revenue growth of 18%, expanded adjusted operating margin by 390 basis points, and grew earnings per share by 34% versus prior year, each exceeding our expectations. These standout results, combined with the momentum in our business, enabled us to confidently increase our outlook for the year, reinforcing that our advantages are structural and sustainable and underscoring our commitment to driving durable growth and value creation. I want to recognize our exceptional global teams. Their passion, creativity, and disciplined execution made these results possible. Now turning to the strategic actions from the quarter, actions that are delivering results today while advancing our long-term growth ambition. First, we built emotional connections with consumers, acquiring over 3.7 million new customers globally in the quarter, driven by a strategic focus on Gen Z. This continues to be central to our healthy top-line growth as engaging consumers earlier in their purchase journey enhances repeat purchasing and lifetime value over time. We also drove growth with our existing customer base, demonstrating broad-based strength. These dynamics reinforce a durable competitive advantage, our ability to consistently attract and retain new generations of consumers to our brands. Next, we delivered fashion innovation and product excellence led by Coach, where desire and demand for the brand are strong. And we're winning in our core with our leather goods offering leading our growth driven by higher AUR and unit volume. The combination of craftsmanship, creativity, and value we offer to consumers at scale continues to be a clear competitive and structural advantage of our business and brand. And we powered global growth through compelling experiences, delivering double-digit gains in North America, Greater…

Thanks, Joanne, and good morning, everyone. In Q2, we outperformed expectations across revenue, operating income, and earnings, delivering record sales and EPS. In the quarter, on an adjusted basis, we achieved pro forma revenue growth of 18% led by 25% growth at Coach. We expanded operating margin by 390 basis points, and we delivered earnings per share of $2.69, an increase of 34% versus last year. Turning to the details of the second quarter. I'll begin with a discussion of revenue trends on a pro forma constant currency basis. Sales increased 18% compared to the prior year and outperformed our expectations. These results reflect strong global momentum. By region, North America sales increased 17% compared to the prior year, ahead of plan and led by 27% growth at Coach, driving share gains. Importantly, we did this while expanding both gross and operating margins in the region. In Europe, revenue grew 22% above last year, driven by strength in our direct business and reflecting market share gains in the region. Strong new customer acquisition, particularly among Gen Z, and increased local consumer spending continued to fuel our momentum. Given our market positioning and low penetration, we see significant opportunities for further growth in this large and attractive market. In Greater China, revenue outperformed our expectations, increasing 34% driven by broad-based growth across channels and continued market share gains. Digital was a notable contributor with Coach ranking as a top-performing brand over the 11 period. Our results reflect the impact of our steadfast strategies and investments and we are well-positioned to drive sustained momentum in this key region. In other Asia, revenue increased 12% led by growth primarily in Australia and South Korea. And in Japan, sales declined 6% as expected, driven by an intentional pullback in promotions. Now touching on revenue…

Thank you. If you'd like to ask a question, press 1 on your keypad. To leave the queue at any time, press 2. Once again, that is 1 to ask a question. And we'll pause for just a moment to allow everyone a chance to join the queue.

Thank you. Our first question comes from Matthew Boss of JPMorgan. Please go ahead. Your line is open.

Thanks, and congrats on a great quarter and the morning's material beat and raise.

Thanks, Matt.

So your fiscal 2026 earnings guide of $6.40 to $6.45, it's 15% or 80¢ higher than your forecast just three months back. Roughly 22% operating margin that's roughly two years ahead of your Investor Day timeline. So Joanne, what are you seeing today that gives you confidence in this delivery? And what do you see as the path to continued or ongoing revenue and margin drivers from here?

Well, thanks, Matt, and good morning. This was truly a standout quarter, but it reflects the power of our strategies, our brands, and our business model. The results we're delivering reflect our systemic approach to building our brands and our business for healthy and sustainable growth. And our efforts, as you can see, are compounding. These are outcomes of the work we've been doing methodically over years. It starts with deeply understanding our consumer and then bringing the magic or in Tapestry fashion, bringing the magic and the logic together to deliver compelling product and experiences to consumers. And then investing to scale our efforts. And that's driving customer acquisition, which is strong around the world. That's what's driving our business today. And not only are we delivering healthy growth, with expanding operating margins, as you pointed out, we're also increasing our marketing investments that are driving new customer acquisition both today, but also for the future. So what gives us confidence in the future is that our strategies and our execution are working. And we outlined at our Investor Day last September, we have a massive TAM. With low share, and we're applying these disciplines around the world. We see a tremendous opportunity into the future to drive consistent and durable growth. In this momentum we have, we're confident in our capabilities and our brands and our team. And the financial outcomes are evident in our second-quarter results. But I'll turn it to Scott to unpack what that means for our outlook.

Yeah. Thanks, Joanna. Thanks for the question, Matt. You know, I would just say this is a moment we prepared for. So we've been known for operational discipline for quite a while, but what you see in the results in Q2 and in the outlook for the year is a new gear up growth. And when you add growth on top of this operational what you have is a really powerful machine. Just a few highlights I would point out. So thanks for the recap. 80¢ EPS increase. That's 15% over the prior guide, and 50 of that is the beat in Q2, but importantly, we also took up the second half. By 30¢. And that's really based on the top line. Right? So we took again, the beat in Q2 on the top line. And increased the second half. So now at 14% constant currency growth for the year, we've got a balance on a two-year stack first half versus second half. Based on the confidence we see in the future. And not only are we incorporating double-digit top-line growth, and operating margin with the investments in marketing that we mentioned. But also importantly, in this outlook, we're increasing our gross margin guide. So that means we've fully mitigated the impacts of tariffs this year based on the actions that we've taken and the strong AUR gains. Lastly, when you put all that earnings and gross together, it's a cash machine. So $1.5 billion. That's $200 million better than we guided last quarter. We're returning all of that $200 million, 100% of our free cash flow back to you, the shareholders, via additional repurchases. And I think that just speaks to the strength of the model and, frankly, our confidence in the future. But here's the best part. We're not done. You asked about the future. Think of this new guide, fiscal 2026, as the base the rebaseline for growth going forward. We've established mid-single-digit revenue and double-digit earnings EPS as our baseline. That's our floor. And with that, we see expanding gross margins and operating margins from here. Why? Global opportunities led by international that's accretive to margins. Gross margin expansion driven by AUR and AUC. SG&A leverage based on the growth we see discipline while we're investing back in marketing. So this new gear of growth with operational discipline from our standpoint yields exceptional TSR as you look forward.

Congrats again. Best of luck.

Thanks, Matt.

Thanks, Matt.

Thank you. We'll now move on to Brooke Roach with Goldman Sachs. Your line is now open.

Good morning, Scott and Joanne. Thank you for taking our question. What gives you confidence that the Coach brand can sustain its strong growth momentum in North America? Particularly as you begin to cycle very tough comparisons.

Yeah. Maybe I'll let Todd jump in.

Hey. I'm happy to take this question. I'm very confident in our growth momentum. In North America and all over the world. And my confidence is grounded in facts and experience. I appreciate that there was some concern about our ability to comp the double-digit growth in the quarter. But not only did we comp the comp in the most critical holiday period, we did it the right and sustainable way. Lower promotions, exceptional margins, and a 40% increase in marketing. Which is primarily designed to create desirability for the brand in the future, not simply in the quarter. We were able to achieve these results because of the exceptional talent and passion of the seasoned Coach teams around the world. Every day, they drive the business are focused on our consumers. It is their efforts that will deliver our $10 billion ambition in the future at best-in-class margins. Now let me turn let's look at what I call our confidence performance indicators or CPI. First, we introduced at our Investor Day, and Joanne mentioned earlier, we look at the TAM very differently. It's not just about swapping dollars from other brands. But the number of consumers we can bring into Coach and the category. And we're clearly doing that. When you examine the TAM through that lens, in North America, our market share is single digits. And globally, it's below 1%. Second, our focus on acquisition. Particularly with Gen Z, and soon Gen Alpha. Not only are we winning with them, but they provide our brand with a heat halo that positively affects all other ages. So when we talk about gaining 2.9 million consumers in the quarter, the highest in our history, If we simply hold retention rates, it will have a compounding benefit in the future. Third, our growth is overwhelmingly coming from our core category. Women's leather goods. That said, it is extremely balanced across family and brand codes. That can be built on and amplified. With no single family accounting for more than 10% of our sales. Four, AUR and units equally contributed to the quarter. Our AUR today is where the brand was fifteen years ago. And five to 10x below traditional European luxury. That said, we are clear-eyed in our sweet spot of the 2 to $500 price point to ensure we can continue to attract young consumers. On unit, we have significant runway. We are still below our pre-pandemic levels, 20% globally and 25% in North America. So to wrap it all up, our CPIs are strong. And gives us the confidence that we will deliver long-term healthy growth into the future.

Great. Thanks so much.

Thank you. We'll now move on to Ike Boruchow with Wells Fargo Securities. Your line is now open.

Hey, everyone. Congrats on my end as well. Maybe for Scott, two regional questions. First, China, 5% plus from low double. Pretty impressive. Can you elaborate on the strength and outperformance you're seeing in that region? Is it share? Is it category? Is it both? Then I wanted to also ask, even though, you know, you didn't raise it, Europe holding at 20%, it's still pretty impressive. And there's actually several brands that have been reporting that have been talking down Europe a little bit. Given what they've been seeing recently. Can you just comment on what you're seeing in the European market how you're bucking the trend and just how you're kind of viewing the macro in that region? Thanks.

Hey, Ike. It's Joanne. Maybe I'll jump in here. And talk about strategically how we're thinking about international. As we talked about in our investor day, our international markets represent considerable opportunity for us. And I think what you're seeing around the world is the global resonance of our brand. And the effectiveness of our regional execution. We have teams on the ground, and we're building capabilities. So to your point, we did accelerate in China in the quarter. China continues to represent long-term opportunity for our brand. We performed well ahead of our expectations, but we're also well outpacing the industry in China. So I'll pause there for a second and say what is driving our growth and our share gains, significant share gains in the market? Is new customer acquisition, which is being led by Gen Z. So a consistent theme around the world. We are seeing growth across channels in China. Digital led the growth, which means we're meeting our customer where they are on the ground. And to your point, our updated guidance, we do expect over 25% growth for this year. We are growing share. But again, it continues to represent a significant long-term opportunity for us. And I'll touch on Europe, but then I'm going to toss it to Todd to give you a little bit of color of how we bring this to life because I think that's important. Europe is a consistent story. Right? We have an opportunity to grow penetration in Europe. It's low penetration for us today, and we see long-term opportunity to continue to build our penetration in Europe. And we're taking the same strategies of doing diligent and disciplined brand building in attracting a local consumer that's who's driving our growth, and it's a young consumer again. And, you know, the tactics and execution on the ground in each of these regions has been, at a very high level, getting to know their customers, and then, as I say, bringing that magic and logic together to deliver compelling product and experiences. But maybe, Todd, you can add a little color on how that's coming to life.

Thanks, Joanne. Let's go around the world in sixty seconds. But first, China, as Joanne said, first, let's remember, we're building on an incredible base. We've been there for over two decades. We have hundreds of stores. We are very close to the Chinese consumer. We integrate our marketing campaigns to make sure they're responsive to the Chinese consumer need. And I do think what continues to resonate is the idea that our value and values cut through. And then our relevancy most recently, we did a collaboration with Clot, a very cool streetwear brand in China. That reinforced all of those attributes of Coach. So we feel very good. You'll see us re-up more marketing in China in a very targeted city approach, not you know, not global across all of China. But very tactical. And we measure it, and we see it work. And then it gives us the confidence to put more money in. In Europe, it's such a fun and terrific story. Our team in Europe is doing a sensational job. When you really look at Europe, we talk about Europe, but, realistically, we're in England. And a little bit elsewhere. So the opportunity to continue to expand France is gonna be our next big push. And there, we're doing things in such so many right ways. We see a big wholesale opportunity. So you know, I think you know from Joanne Scott, and myself, we don't like key money, and we don't like buying temples for real estate. So we love the approach of going into youthful neighborhoods, where the stores can make money, and or wholesale and digital. And that approach is winning. And, again, what is so important, the consumer sees the value. Of our offering. And, ultimately, I think it'll allow us to grow for many years in more and more countries in Europe.

Thanks, guys.

Thank you. We'll now move on to Rick Patel with Raymond James. Your line is now open.

Thank you. Good morning, and I'll add my congrats as well. Can you provide a little more detail around AUR and the opportunities going forward how do we think about the benefit from pricing? And is there anything to flag in terms of sales mix towards larger bags? Certain quality materials that could be a swing factor, for AUR moving forward?

I'll just hit the top of the wave but let Todd talk about what's really driving AUR growth at Coach. But AUR, at TAP is about driving healthy growth. And we are driving healthy growth. We're driving AUR growth, in the quarter, We've been doing that consistently, and it's a function of brand heat and the investments we're making in our brands, the innovation we're delivering, and the quality that we deliver, I think the value proposition of our brands is unmatched in the marketplace. So AUR for us is not just a reaction to cost. It really is thoughtful about how we deliver a strong value proposition to consumers. And at the end of the day, AUR is a math equation. It's how the consumer votes. Right? AUR is the average unit retail of where they're placing their dollars. And we continue to stay close to consumers. To make sure we understand and leverage those insights into the product and experiences we're delivering, and we're seeing our customers respond. New customers are coming in at higher AURs, so we're driving healthy growth. And we got a great innovation pipeline to keep it going. But Todd, do you want to touch on that?

Sure. Thank you. Again, all the things that Joanne said are so relevant. And but when you go down one more level, first, let's talk about our sweet spot, the 2 to $500 range. That's a lot of range. To continue to take price where it makes sense. We also are constantly animating product. And that animation we do it in a way that the consumer sees the value. And that's how we get it. This is not a march up to just increase AURs on this like for like 10%, 10%, 10%, which we've seen other people do, and we know what happens there. So our task is to really always reflect back on value. We also benefit from mix. Mix is a big driver here. You've heard me talk about our one coach strategy. Bringing collection product into outlet stores raises AURs. We also are seeing a really interesting phenomenon, which is our customer, they may come in by a Terry as their first back. Their next bag is often a higher AUR bag because they've had such a great experience with Coach, they are aspiring to be even better. And that is so powerful for us. But there's two things that are important truths that I want to make sure everybody realizes. One, we are not gonna compromise our value to drive AUR. We will always ensure that the value of the product is there. Similarly, we're not gonna artificially drive units through promotion. That balance is how we achieve optimal results consistently over many quarters and years.

Thank you very much.

Thank you. We'll move now to Adrienne Yih with Barclays. Your line is now open.

Great. Thank you very much. Huge congratulations. Really powerful. It really, kind of the message that's coming through here very clearly is that the model itself, and the ten, fifteen years of discipline is actually remote. And so, Joanne, with that, having said that, it seems like you've always been sort of forward on your forward foot in terms of what's coming next and where to invest. From an IT perspective, how are you harnessing sort of the power of AI? How much of the CapEx IT is in these AI foundational investments? And how quickly can you see sort of some of the demand side payback, not necessarily the cost side efficiency? And then for Todd, the Kitslock I saw was back in stock in January. And then you mentioned that no product families are more than 10% really, I guess my question is, what's coming for newness this year, and how do you instill this culture of innovation right, without letting any of these particular franchises get bigger than 10%. Lot of times, we kinda get risk-averse when we're doing a little bit too well. So just you know, what have you instilled in the entire you know, creative organization that allows you to unleash that creativity. Thank you.

Thanks, Adrienne. Great question on AI. I assumed that I was gonna get a question on AI today. So I would say this is something that, as you mentioned, it's a competitive advantage for Tapestry. We are a direct-to-consumer business. We have a lot of data. And we've been working on harnessing that data. And leveraging tools. So we're already applying AI tools across the value chain from product development, as you know, to inventory management, to pricing, to marketing, AI tools are embedded. And what we've been focused on at Tapestry is putting the tools in the hands of the decision-makers in our organization, which is so critically important. And that is where I think that is the moat, to have our teams understand, trust it, and leverage those tools and those insights to make better decisions at Tapestry. And you're right. It does drive efficiency. But it's also driving growth. And we've invested for many years in these capabilities. In fact, we have a patented data fabric. So this is not new to Tapestry. I do think it's a competitive advantage. What that does is it positions us well to adopt new technology. And our teams are insatiably curious. They're testing and learning with these tools. And it is driving more efficiency. But also driving creativity. And I'll give you just a couple of quick examples. We have designers that are leveraging AI. They'll do a sketch. So there is still a human and a need for design eye. They do a sketch. But what AI helps is they can iterate on that sketch. They can do color multipliers. They can make design tweaks much faster than we could in the past. So the speed in the process of design inception and the idea through getting samples and working it through our process, increases. And when speed increases in our supply chain, and that product development timeline, that leads to better outcomes for our consumers and drives our growth. We're also using it in marketing to harness consumer insights and ideate on content creation based on those insights. Again, human in the loop. That human creativity and translation of the insights to creative content is important, but these AI engines are helping us speed up the process of creating AIs, do some testing, learn faster, and that speed is paying off in content creation as well. These tools are new, and our teams are aggressively testing and learning, and we'll see where it takes us. But we are well-positioned, to continue to drive with AI tools and with data.

Fantastic. Maybe just a quick build, Adrienne, too. You asked about the investments. So of our $200 million of CapEx, we said over half of that was related to our stores. And the remainder is in technology. That's not a real big number in a company that our size. It's because of what Joanne said. A lot of that tech debt is behind us. And we have the foundation. So on it's more of a change management philosophy opportunity for us as opposed to a big investment challenge in terms of adopting AI. Sorry, Todd. Go over to you.

No worries. You know, one of the most pleasurable aspects of my job is to sit with Stuart our creative director, our merchant, and see what's coming. And the last night, I did a walkthrough for future product. It's just so good. You'll see it some of it next week. At our runway show, which is where we push the envelope, new ideas, new innovation, comes about. And what I love and what you've seen over the last probably almost dozen shows is the commercial aspect of our shows. Taking down ideas from runway and making them big commercial ideas is how we're winning on product. And a steward and the merchant are incredibly focused on making sure it's relevant to a timeless Gen Z consumer while at the same time putting it through the lens of is it coach? We don't just chase trends. Quite honestly, our team creates trends. And they're doing that with this consumer in mind. And this is the essence of what we've been saying probably twenty-five years now balancing logic and magic. It's really good. If you like the kiss lock, you're gonna love some of the new sizes that's coming in. Probably saying more than Stuart wanted wants me to say at this point, but it's really good.

Fantastic. Congrats again.

Thank you.

Thank you. We'll move now to Bob Drbul with BTIG. Line is now open.

Hi. Good morning. Think this is for Todd, but generally, are you seeing any signs of demand slowdown in some of your signature styles like Tabby and Brooklyn? Especially as you know, if there's competitor silhouettes that have been launched and you know, can you just talk a little more about your innovation? Do you think that it's strong enough to drive incremental growth from where we are?

Yeah. Thanks. Thanks, Bob. That's a good follow-up question to the one I just got. You know, it's really interesting. Some of you have followed us for a long time. There was a period of time where maybe one silhouette or one colorway was pervasive. That's not the case today. Today, we are so well balanced, and was interesting we were hindsight literally earlier this week with our merchants and global buyers on the results of the last quarter. And we were looking at the future buys for the balance of this year and into next year. And we honed in on Tabby, the New York family, and Terry, I looked at the team. A little mischievously, and I said, TNT equals explosive growth. That's where we are. That's what you'll see. These are icons that will continue to fuel what we're doing.

Thank you.

Thank you. We'll now move on to Dana Telsey with Telsey Advisory Group. Your line is now open. Miss Telsey, your line is now open. Please proceed with your question. We'll move on to Mark Altschwager with Baird. Your line is now open.

Great. Thank you for taking the question. Congrats on the amazing results here. Scott, just on gross margin, can you talk about what's driving the outperformance on the operational side? And how you're thinking about the opportunity there in the back half of the year? The guidance seems to incorporate maybe a bit of conservatism there given the first half results but trying to better understand, some of the puts and takes and the timing. Thank you.

Yeah. Sure. Thanks for the question, Mark. Operational improvements as we call them are really driving the gross margin outperformance. So what does that mean? AUR is the biggest part of that. Also, we do have mitigating actions in the supply chain. Frankly, most of those start to accelerate as we get into next year. There are some mitigating actions related to tariffs that we see this year, but the lion's share of that next year. And maybe I'll just give you a little bit of shaping. But before I do, let's not bury the lead. We just took up our outlook for gross margin year over year this year, fully offsetting the impact of tariffs on a full-year basis. And as we've said since Liberation Day, right, there's gonna be quarter by quarter timing that's gonna be a little noisy and mess and we see that both in the guide for this year and as we think about going forward. And the reason for that is we at the time that the tariffs were imposed, you have inventory on hand, which needs to sell through, and then the tariff goods as they come in, it takes a while for them to sell through. So we'll see the majority of that tariff impact a little bit into next year, and then you start to comp for this year start to hit in the second half, specifically in Q3 and Q4. those impacts. And then, again, compounding AUR gains along with some of the mitigating actions which accelerate next year. So all those things together give us the confidence this year give a full-year guide of an increase in gross margin and also have the confidence to say next year, even off that base, we have confidence that we'll be able to continue to increase our gross margins as we look at fiscal 2027 and beyond.

Thank you.

Thank you. We'll now move on to Michael Binetti with Evercore ISI. Line is now open.

Hey. Thanks, guys. Thanks. Let me add my congrats on this. Just I'm just curious on the units versus AUR. There was a lot of quarters in a row where the total growth at Coach looked exactly like AUR growth in the mid-teens. And then last quarter, saw the unit contribution looks like increased to about mid-singles, and now we're here in the mid-teens. Can you just talk to us a little bit about what's driven that acceleration and what you see is durable there. And then, I guess, Scott, looking out at the long-term model, you know, earlier someone mentioned you're getting close to your earnings guidance for '28. And the year is 2026 right now. I think '28 was guided to about $4.2 billion in SG&A. You'll get close this year, but SG&A is now guided to about 54% of revenues. Do we should we still think about SG&A at 55% of revenues on a higher base than '28? Or as we move to this new revenue level, is there potential to show better leverage in the out years versus the plan?

Yeah. Do you want me to start with the sec yeah. I'll take the exciting part first, Todd, and then I'll give you the more pedestrian part. Just kidding, of course. So, yeah, you know, Michael, I'm not we're not gonna give new guidance right now as you can imagine. I appreciate your recognition that we are we are moving ahead. And I just point you back to one thing that I would I hope is evident now is we found a new gear of growth. Right? And as you think about how you think about Tapestry, how you think about this model, we've definitely moved into a higher echelon of growth. We talked about mid-single digits. Being our floor, and we're certainly moving or performing ahead of that. What it means for the future, I think you should take confidence we're not gonna I'm not gonna get into giving specifics. As it relates to SG&A, I will say this. As we continue to grow with the operational discipline we have in this organization, we would expect to continue to leverage in all non-growth enhancing parts of the P&L. So there will be leverage as you think about going forward with the accelerated growth, We also have said consistently we intend to keep investing back into the business and specifically in marketing. So do I expect leverage over time? Yes. In terms of what that looks like, we'll give you shaping as we get to the end of this year and look into next year.

Yeah. And so when we look at unit growth, you know, in handbags, they were both mid-teens. And we feel very good about that. Again, it goes back to this customer acquisition. Engine that we're driving. So that's driving unit. We're not churning units on promotion. And that creates much more sustainable long-term growth for us. That's why I pointed out that unit count from FY '19 is still materially down. So if you think about the math for a minute, 2.3 million new 2.9 million new customers in a quarter. Again, retention rates. One of the things we've talked about I'm giving you conservative guidance that the retention rates stay the same. We're seeing with the younger customers, they actually are coming back a little bit more frequently. So that is good news. But even if you take the conservative retention rate, as we keep acquiring more and more customers, and they maintain the retention rate, our unit count will go up. Then you take opportunities like that's one of the things we like about footwear. The frequency of footwear purchases is higher than handbags. So if we get them in through a handbag, they like footwear, Our productivity in our stores go up. Our unit count goes up. And overall connectivity with our customer and the brand is sustainable for a long period of time. So we got a lot of room to go on unit. But remember the two truisms I said. We're not gonna drive artificially units through promotions. We're gonna keep playing our game successfully over time, and I think that's how we'll win.

Alright, guys. Love it. Thank you so much, and congrats again, Encore.

Thank you. Thanks, Michael.

Thank you. That concludes our Q&A. I will now turn it over to Joanne Crevoiserat for some concluding remarks.

Thanks, Leo. As we shared this morning, our ALPHA outperformance reflects the power of Tapestry, the result of deliberate strategies and disciplined execution over time that are driving our growth today and position us for the future. And I especially want to thank our exceptional global teams. This performance is yours, and it reflects the creativity and passion you bring for our customers every day. With strong fundamentals and momentum, we're moving forward with confidence. And we're focused on delivering sustainable growth and long-term shareholder value. Thank you for your interest in Tapestry and for joining us today. This concludes Tapestry's earnings conference call.

We thank you for your participation.