TPR - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to this Tapestry Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Andrea Resnick, Global Head of Investor Relations and Corporate Communications.

Andrea Resnick

Good morning, and thank you for joining us. With me today to discuss our quarterly results are Victor Luis, Tapestry's Chief Executive Officer; and Kevin Wills, Tapestry's Chief Financial Officer.

including must forward-looking that of future statements Securities Reform we will conference the quarters begin, business Litigation certain our involve within Act, or we fiscal point current this out call Private in years. Before the for or projections the meaning

we may the quarterly in this filings the complete comments our future statements measures important statements. the could other with issued Forward-looking Commission results financial Securities for Please not in our press list factors today report those and a in from refer impact and guarantees results Exchange Non-GAAP included materially and are and our our on performance. of forward-looking XX-K, Form presentation expressed release actual risks are to our and our differ or morning implied that slides.

may as well and posted information presentation the the website, corresponding viewing slide. related today the You GAAP www.tapestry.com/investors, financial our release earnings the then on as find in reconciliations

me results let XXXX results Luis of as quarter and financial continue topics fiscal outline with Wills conference overall first Kevin outlook Tapestry 'XX. quarter operational our details this Now as brands. FY provide and an our and will well for call. of will summary Victor the the speakers three our on for for

Coach President Anna of not attend. Following Tapestry's President could Administrative Chief and Schulman, Bakst a joined session, question-and-answer & are will and Brand by that, Officer Eraldo hold and we Todd Both where we Kahn, Poletto travelling CEO be Joshua Brand. will and

like over Victor to conclude with some it Luis, Following summary to brief I'd will Q&A, now remarks. we Tapestry's CEO. turn

Victor Luis

At Tapestry reflect our you, identity, results new as our anniversary to our Thank of one-year Andrea, model. the Good continue multi-brand and of corporate our welcome, benefits diversified the everyone. morning. establishing

consistent a income, quarter we first our rate. was enhanced favorable gains earnings solid sales by operating per while performance and achieved were increases further tax strong expectations, in as share with Our

our executing four on focused remain Tapestry across strategic teams Our priorities.

our Kate phase And follow migrating the quarter. values and implementation designing, first evidenced of to the corporate harness significant margin focused First, leverage model. of $XXX To to first achieved core on and finance report, part our from we our $XXX as and Stuart track three functions $XX year we Weitzman become million on Coach Spade our tapestry.com. first by month. Tapestry, SAP's we employee on month, third engagement to corporate pillars; million the in for UN investments up results. chain, signatory community and corporate on remain in were Weitzman progress We've Spade strategic the deployed XXXX, power the building issued Compact scalable of annual after Spade's make multi-brand Driven to SG&A testing, run global our in report COGS ERP shared continued This from of synergies was to responsibility with citizenship, both our future we the services during operating years a on fiscal progress Earlier and Global initiatives. earlier to is include approximately fiscal to rate of to in quarter Kate we've successfully and end, 'XX. S/XHANA, delighted culture supply good infrastructure centered growth this million our Stuart over building systems that both this gross We continuing to capture responsibility the a and current including also support synergy model, expansion, and also Kate achieve environment in on made two empowerment. available Tapestry and

our higher what are our deliver us across of and distinctive is and we across a purchasing drives channels. product We having that of enables which were categories supply nimble, we chain, brands leverage in focused to all understand delivering flexible and across level innovation a categories compelling with on newness brands, frequency. innovation key velocity innovation; fueling of Second and increased

Nowhere for Weitzman's Kate and was Fashion during well Spring apparent York as well were as New very for Stuart our trade, this received. Coach of Week in Spade runway Collection, more the shows focus showing which all

from Australia, September driving We Stuart Malaysia brand's Spade Stuart as we These Third, Southern markets. China. in each distributor next the close which business Australia announce growth summer. global of these during partner, operations and growth, accelerate the an were expected completed business international excited and the Weitzman to Singapore, Weitzman buybacks agreement October, to will us development is to our in the in Kate to well acquire enhance and also as initiatives in allow

initiatives announced, previously global in on the priorities. agreements case of strategic are two focused these As the

leveraging opportunities consumer with brands globally unlocking the secondly, First, operating the a our the of model. and value for multi-brand Chinese

recent best there as entirely our China, This some the buybacks, understand on domestic China's investments that believe openings near-term concerns spending, may at domestic driving our evidenced demand that our volatility the hedge investment with are making are occur Indeed, against spend. in further where important, with across While aligned luxury into marketing we most times we store we new heightened emphasis by distributor spending. markets and we is the around brands. is Chinese view

markets store stores quarter, locations across primarily acquired businesses. These brands, first were our XX took new total added international in focused new directly the including and we During net the operated and superior capabilities. X,XXX to for data brands, analytics experience. online fourth, delivering driving offline all and channels advancing a results our seamless we online, committed and to Across digital remain our

innovating accomplishments four database key management teams integrating in data advancing and data relationship have our of business helping data brands, on focused analytics. focusing customer pricing organization, on even each become labs programs optimize aggregate groups;; tools further for foundation promotion learning Early include, to drive insights more scientists, with across platform the data on allocation, team planning. machine and and Our on team customer progress product created. making is into business example team building substantial solid product engineers, predictive, or strengthening analytics the data-driven to the using our The supporting and us we main advanced is processes,

of our all customer capacity central Japan hugely important agility and for the and into into cloud, database. integrating for and Kate Moving our in-house data North Spade security, America data

and capture learnings Finally, coach tracking reporting brands. from implementing capabilities and of all taking our customer across of the for stores all our

forward, first Moving on foremost execution. we remain focused and

strategic the growth fiscal Tapestry our long-term double-digit support and you very our operating are As strong operating know, vision to the in and brands. EPS FY income our each ahead deliver and investments of proud and return continued goal quarter excited the our while revenue is to in XXXX right opportunities making income growth for of about 'XX. we first Overall, progress and in remain to

starting trends. with to the returning results first Now and category quarter

an first high single-digit at the the period premium on the rate rate that and globally billion single dollars, a dollar. quarter, appreciation market, June the basis, In which During growth given $XX consistent women's and deceleration handbag estimate over digit, slight with a high men's was quarter. is also grew we a of organic accessories the prior now from the US the

and as retail, goods channels. of drove brand embellishments and This introduction Coach margin the range family in with many sizes, from our penetration. reflected of the we SKUs materials $XXX significant of a categories August innovation and with the leading we QX our sales shown has led the digital It performance brand expansion. There at the its in terms in show specific of successfully rose our starting launched family. outperformance was and Looking cascaded with leverage and maintained about position handbag by income and gross in to highlights in most at operating quarter Further, leather in offers runway global Dreamer were In above. store priorities. initially offering line the silhouette February with X% keeping comparable compelling and across through

remain strong. Parker In addition, Charlie our and Bags groups

sneakers Beavers. the campaigns with number men's put and the August, His a with design cool embraced our ready-to-wear with channels the in of performance reinforce of and with by of collection. new and on-trend we and drivers. consistent brand leather achieved accessories across and men's sneakers. detailing. brand partnership expanding by goods. along our retail, the a women's as The higher elevated men's include goods women's comp to small Coach with handbags product style men's the The and assortment drive continue reach. trail to Partnering in to business. of authentic, outlet, first reinforce and include with and innovated experienced strengthen Coach Jordan we The Edit Selena driven footwear global handbags the significantly growth launches the will with Gomez, excited small women's and partnership fragrance materials, new our luxury outerwear, allow is of with the bags Signature and business. our footwear ready-to-wear included were elevate value icon bags through were we've and our beginning special these on substantial core coveted Michael as Salina's We traction as as well us will the globally. new slides offerings, proposition, September, We offered introductions. also face Stuart of specialty menswear with both fashion-forward men's pleased Included strong season. Michael strategy This to casual a rose In the growth with first a sport expanding to particularly styles We spring accessories. category this was selection loafers, AUR outside we offering continue bags advertising our launching announce across the categories, for we projects focus collection and the In ready-to-wear In will cross global well and very continued partnership by platform's that print we were our as among categories, by as and by and excited customer was leather notably with outlet, lifestyle, and and hardware our two led the crossbody who a In geographies, belt B. assortment vintage-inspired feminine multiple new notably to Bond XXXX on substantially

our in well Signature and growth also performed we platform in both in with in North price also delighted We strength notable retail.com Our and were the business, with across channels. our women's offering globally. men's America both e-commerce full drove and

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unlock announce excited Global partner to dreams. with mentioned, organization order B. providing schools high announced Coach students As a of own directors the help for first the dedicated we the for to recently, new we dream to Future Foundation, The as Men's. Project. Michael poverty Jordan were in is Ambassador philanthropic This in their also More find degrees to Coach personal tools an

with are Real nonprofit brand a We to that partnership work hash-tag with with Campaign. B. the Coach Dream Michael our delighted its Jordan find first so aligns on closely values to It leverages and

sales a comp into of performance trends in our our offering. consistent with detail the store previous global driven strong Overall, product quarter first get and with to mortar fairly conversion, our by primarily was quarter. comparable reflecting on Now bricks bit

these holiday impact we disasters globally. and strength in-store in shifts surprising year. gains, saw we was In traffic stores addition, in the globally, prior rise in was which saw Augmenting e-commerce given not of natural the business our the

globally. a rose strong international while by Asia European to other positive global rising our level. comps increase X%. Coach comp ago the also quite comps, against importantly rose comp negative, similar the Taiwan, Greater distribution. while was and businesses strong. which our total consumer year our solid, remained were sales up group China North Chinese comp America the new quarter, was with Europe our now and global During Japan quarter, the includes were driven slightly in business

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store accessory our especially core and handbag partners. across at with We are growth our pleased sales department retail

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Looking a growth at Kate in Spade the decline a part also Kate the fell when consolidation results, prior up million results compared global This of the year. offset first was by stores the yet inclusion sales, new in which store Sales were China. Top to revenues, from well benefited period plant wholesale by quarter XX-day $XXX quarter from sales driven and totaled XX% the as of which X%. a not pullback disposition as stub year, partially prior full of as of excluded was comparable Tapestry. line

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our remains wallet focus business. durability, Given bag to consumer's outlet important the on and

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productivity. new to on net global globally are at XX are doors XX distributor XX in exceeding track date, First our To including in QX, new we to expansion, levels acquired including buybacks. of Australia add six and our meeting locations added on high expectations or stores

Second universal create tune are addressing make play evolving while fashionable covetable branding, to in spade our product lock a more feminine, attributes; and brand to our as we brand way codes to compelling and icons and we've our and such begun the to fun and instantly messaging recognizable core more distinctive. both

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of to buying and elements indirect chain, by evolved we as manufacturing, In model. goods of development visual the our fact, small profitability. materials synergies logistics. the improve business our through Spade supply fifth, Tapestry's optimize resources and merchandising COGS through and color for savings, and fiscal palette, and store also merchandising the are as we Spade And and bags platform from for and leather enhanced capturing reflected in thus accelerate transportation tapping 'XX Tapestry the growth and all is store into category such new global leveraging Kate have far expertise, construction The notably teams raw team openings and Kate year

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delivery prior Finally Weitzman, though delays, from year, trends with sales pressured below only margins. be improved by sales at impacted Stuart continue results negatively and to slightly last as quarter and anticipated which development

processes the levels production made shipments now stabilized, the capacity. and Importantly, reflecting added have manufacturing well talent as have we investment as and in

track a As we profitable sales in achieve to holiday result, remain the on growth quarter.

to in loafers XXX seen pleased end we quarter about which towards response has pumps classic and uptake. first the the were During our new the well excellent quarter, updated and SW as of consumer the came as sneaker,

and market we trends, shifted and success in saw had booties America Given Asia. into investment North

booties Our booty XX-XX for performed last and bodes new well reserve are iconic also the which the boot backstretch strongly, just week. now to our introduced

the issues Importantly, mentioned, quarter, make is rollout IS in shoe our addressing founder-led we truly the from global and last multi-category benefit expected our platform and Stuart spring, brand business the Tapestry as to scalable quarters. to as continued coming greatly from we and team manufacturer a to during accessories the Weitzman a footwear of the arose progress which transition continue over

Stuart benefit to not stable platform and beyond longer-term priorities fiscal which sustainable just are and 'XX creating will changed impact year to Weitzman for execution, direction create a improved year of growth. strategic and a on clear have Looking have ahead the focused our for the

and goals so. First is just to made progress are I continue development as our chain. priority and underpins we've mentioned further we and all most We refining therefore to evolving this achieve already ability product immediate supply and of foremost, will processes focused our and do understand that our and on significant our

authority offering Second, in we maintaining classifications in while footwear expand our our boots and new will sandals.

on the with Third, Chinese focus consumer. we expand will globally the

acquisition in last mid China on business As you month. our the our know, distributor China closed of back February and we Southern Northern bought

also we unique embraced to are seeing local delighted believe Chinese of We blend the tourist. excited the be we will brand the in with Japan We were with globally. our comfort as our and the by consumer consumer well where re-launch as traction are Chinese design

country, Osaka. gaining distributor the department location and the Different during the of credibility locations the infrastructure. our During in Fourth, desire through existing SW market the this growth we're in of brand in two quarter, weak and in XXX goods, Isetan the and for footwear, creating top in store operating leather we synergies run from [ph] handbags first close this we gaining with in Tokyo beyond directly and the businesses time in opened Tapestry time to Hunky fifth, around Japan, degree which the the we partnership trade are August powerful show marketing. past, first

are following through very In spring identifiable excited in month with financial boots launching continuing leading the and has leadership very it earlier review campaigns. this activation and outlook. fashion the that, we've of Weitzman. be seasonal benefit team he from strong globally. Kevin? talented built about vision the remain advertising across relevance at our consumers project geographies, while We confident influencer, we categories To celebrity this quarter long-term over our will are on-time China to this our we classifications deliveries with this in challenges With channels, across our building about destination and addressing a which are brand summary, an point excited our Kevin Eraldo's back quarter. all influencer supply fully our launched will and Stuart successfully quality the for for opportunities chain I'll under the in to and the be brand to turn We been and and

Kevin Wills

the you and good highlights taken morning. has just and Victor Thanks Victor through strategies.

through financial year some important the as of for Let our well now details fiscal the outlook take as quarter you me of 'XX.

can Before results. about earnings reconciliation comments as please based I make posted as are I'm mind, GAAP non-GAAP Corresponding to found be on well website release the keep the our today. results in on in begin, the related

our are 'XX, expense more with to this in comparability. presented been structure announced, align as results In have the reporting for QX changed our FY year our organizational and closely business. on addition, of beginning and previously results basis prior management the recast Accordingly, we

see information, as with filed X-K release today. our SEC earnings please the more as For well the

joint the approximately delivered sales $X.X currency we the turning the rose X% billion. and international brand, benefits approximately comparable financial offset continue Total in store year down performance North or wholesale Mainland Sales we basis assuming delivery forma growth, of results year. own Weitzman, sales were quarter X% to China disposition and operating reported basis the basis on our XX% and partially the Hong strategic over sales driven for by and sales. income development the pro delivered a Kong, EPS results expected multi-brand Now positive to on constant for revenue, Tapestry; entire X% At quarter of pullback negative strong overall, for America X% as prior Taiwan, pressure by year. first and as last at highlighted were store sales to with by model. delays and we on Stuart Macau in sales Coach, results. of both Kate versus by increased reflecting distribution ventures Touching growth primarily reported prior Spade a the gains Kate Spade, new At store and consolidation comparable increasing the reflecting

inventory challenges Currency quarter. year-over-year points a of to prior up margin, benefit driven significant increase with in basis expansion generated of of in cost total basis anniversary gross due approximately to XX.X% at year. the the an Coach's of the the XXX Tapestry XXX benefits gross Coach was gross points Turning gross points prior product basis approximately versus to and margin by margin we year, XX mix margin increase

by margin gross prior versus was realization margin of migrate currency. new year, expenses the points in Spade's Weitzman's million SG&A as supply and COGS basis In points distribution. brand The as XX.X% Kate including to of the costs Kate the XXX Stuart associated addition, down versus and XX.X% compared expenses chain. totaled $XXX from basis projected prior venture prior Tapestry basis sales of the in as to year, expanded regional Spade gross on million joint XXX and was well as SG&A year. respectively XXX synergies reflecting the store pressure increase we consolidations buyback points with as represented $XXX driven

Our operating prior as income totaled line XX.X% year, prior Coach with Operating income margin driven strong of was partially Kate $XXX in an Stuart year's by quarter, $XXX pressure operating million Weitzman. over in Spade at margin both the and expansion offset increase X% million. by anticipated of at representing

as rate year. was effective the expense driven rate The tax equity benefit $XX tax prior from deduction, interest - compared lower the was quarter was compensation net projected, ASU the quarter, Their in million compared the projected for which QX. XX be XXXX $XX year's XX.X% for forecasted. XX.X% cannot prior by to in than the As as to million

net the In guilty than headwind a legislation of or addition, originally favorably derived compared while changes benefited the deduction. resulting to lesser foreign with the US anticipated, our expectations tax the impact income from provision we also in FDII intangible

$X.XX quarter Taken EPS together, over our XX% the up prior year. in was

buyback Australia We two and locations Coach locations net six distribution acquired and to globally, while the global as China by brand, for in of new of stores moving of Weitzman, we five a part we opened Southern XX net opened net globally. closed new six for stores acquired Stuart Now Spade locations business. Kate

$X.X and sheet outstanding notes. our borrowings to of end billion consisting balance senior Turning flows. approximately the were million while first quarter, At short-term the were primarily our and $X.X of our cash cash

year compared a in of $XXX in year decrease As compared in as quarter the of repayment term Inventory discussed, to the ending million levels debt loans the reflects our million position prior as at XXXX. in January were of to ago, X%. reduction inventory $XXX end $X.X billion previously

we levels the Kate normalize a half into back not XXXX. As of Spade's reminder, did inventory

our comfortable activities in with operating felt we year heading a holiday outflow Net million compared to Importantly, season. an $XXX inventory $XX cash position million ago. as of an the from outflow was

$XX $XX of an CapEx same of Free million $XX million year. Our versus the was last million period year. cash spending outflow $XXX last million outflow flow was an versus in

allocation policy, unchanged. priorities long-term our to capital turning our Now remain

creation. order growth continue First, our sustainable we to in drive in will invest value to and brands

looking a acquisitions our with initiatives, capital and to our balance shareholders us Overall flexibility. brands on focus strong will while strategic sheet seek maintain expansion allowing for great will growth for opportunities finally, we returning support dividends. with strategic to Secondly,

a XXXX non-GAAP we Starting at fiscal low XXXX total presented a our increase to billion. our to continued XXXX single-digit to Tapestry consistent mid-single-digit with following is comps. positive continue expectation with million practice, to moving rate for at sales, prior for includes This single-digit driven expect by Now from the Coach on in revenues fiscal outlook, growth basis. to $X.X low guidance the $X.X

at a increase fiscal results, Kate in Spade expect positive year. as from rate sales of as double-digit by new XXXX comps We second reported distribution fueled well the to half the

fiscal As we in second expect growth discussed, the revenue quarter. Weitzman Stuart

continue we by income rate, expansion, deleverage. margin driven to part revenue project to gross the operating addition, growth offset in the In rate growth exceed SG&A by

systems and operating and consolidations organic Our incremental the of growth from as buybacks investments. realization of Spade impact as distributor income synergies of Kate the the reflects the gains acquisition well business, our

XX% due the projected year. a rate expected handbags, The is XX%. impact In addition, tax on still of is approximately represent X% prior income now reflects now the actualized China interest be full-year year taxable the impact the clarification for of is ASU announced the to new in $XX of requiring the in our over first provision, the to benefit Net tariffs to of expected tapestry's about decrease foreign-derived the XX%, expected XXXX of impact than regime inclusion million less guidance FY deduction production. quarter. XX deduction introduction 'XX and of certain XXXX earnings the – tangible federal tax income of equity a current guilty. from FDII expense compensation The additional and as corporations of the which contemplates controlled guilty increase XX% from foreign around tax guidance The US the primarily of fiscal previous known rate to at

We $X.XX. of of horizon. per to $XXX average diluted FY'XX, continue to still level expect $X.XX expect the of EBITDA for to Overall, the we year million to diluted from outstanding $X.XX million. share be our up of be the the spend our planning for the We to $XXX range over in which peak are we guidance range in million previous projecting earnings year expect approximately would to XXX the weighted shares in range to now $X.XX be

million of the integration million. incur approximately in of efforts outlined charges $XX $XX As acquisition our implementation we press expect approximately pretax nonrecurring charges to estimated pretax now ERP attributable to and company's release, and

Finally, turning to FY 'XX brand. directly operated distribution plans by

Coach, Japan. continue store and primarily expect closures net America to 'XX we due North For count to in a decrease modest net our in in FY

operated store 'XX. net Spade, locations in to remain advance track by to Kate FY on base XX we directly new XX For

Singapore, locations XX see of where international to to locations operations project new XX Australia we we growth. openings, and this expect the XX approximately markets also new brand's We've net Stuart continue the in we for notably Specifically, Weitzman, added net year, door opportunity open primarily Malaysia and fiscal for China. to significant XX in in to acquisition

successful total 'XX, in the of were Southern we of there business China a the buyback FY following in acquired operations announced, brand's Northern China a brand's As in locations. for six

now agreement by operating it to Q&A. Tapestry to supported to we open to to the 'XX, support Stuart also to fiscal In and back making first made sheet across on global Beyond to expect drive results. we pleased we've committed continue like Question-and-Answer and summer. healthy were while in investments We our a we of Overall, our solid next Weitzman optimistic FY balance Australia, about buy are remain delivering income right Session strategic progress strategic growth I'd initiatives. business close quarter the opportunities vision sales team very our in 'XX. operating the FY the growth performance closing, an and income which with to up and the double-digit strong goal to to portfolio long-term EPS pleased of XXXX, return be brands, we in announce and

Operator

Thank is first of from opened of you. question Instructions] Bob Our At the this comes questions. Drbul time, [Operator Guggenheim. line floor for

Bob Drbul

about across to and on portfolio your the and if the was morning. given consumer talk focus you are exposure Good transpiring? is Tapestry the was consumer wondering how Chinese I China, could Chinese what you feeling about your

Victor Luis

of total being XX consumers, more. brands some mid-to Well, we're as in the the traditional in more compares which teens to luxury a sales of high as terms with today high tapestry Bob, Chinese

that points the about in of is the tremendous really investments for brands. opportunity one still excited us to market which we're incredibly the making So all across reasons and we're

pointed in we've of growth. tremendous for past, opportunity point the As all the conditions still there to

we've got which range. XX% middle as of points You've market, on last of and the Kate market well opportunity doing brand the still very stages to Coach fast awareness are population Stuart decade X% very most a as that well large early over the experience and in class. our Coach, which for market well is today in XX that cities a unaided in the compares brand brands, awareness, which tremendous cities growing our which that mature with X% has for more. and have Weitzman unaided course very based a in with And million there have to with that a a touched XXX Spade,

are some with see the the rates category continues consumer just seen what driven of course we we're seeing new the to current So to by the nothing the really growth that that in consumer overall fluctuation Chinese exchange there especially decade, there we've last and of the that in excited globally opportunity fluctuations. about outpace

Bob Drbul

ask Great. you any half just do the in comp have for? that talk inflection and been on Kate how the second And you're minus a five you've concerns business, if Spade I can the just about looking follow-up, on about could feeling you

Victor Luis

has business work a the no there quarter Incredibly first pleased in talked and at product once flash consistent. in had the course was we and suggested, as that pull longer excited see No, take that's Internet the quite which taking look with our driving synergies a that into has look we inflection the in been always we and half done gross about. the reflected saw support last we're look the the a the XXX from we've that new all both you and at comping you'll in brick-and-mortar stores, fourth bit performances very back are second the we if two-year little that of Bps of quarter get Obviously take stack year. the team improvement of about place margin we as

are internal we've excited only about they teens So it. the it bought because not already

really I that All positive is reaction. of which of from nice we're our the we've a but enthusiasm capsule their launched my got for as QX, in mentioned and wholesale heading we've in excitement also getting in customers, seen Bob, that couple notes weeks

newness pull potentially over still comes in saw to impact small loyal continued performance has quarter, from and impacted quarter What immediate the last overall, of by in consistent customers that until been So pleased. the of and very Nicholas we're collection a just strong the reflected which in news lack seeing in the forward sales is today which we founder's our was tragic passing. really the

guidance all given. that towards So pointing we've the

Bob Drbul

you Thank Great. very much.

Operator

Research. from [Operator David Instructions] Our Edge question Consumer line comes of next Schick of

David Schick

as that's traffic, you're traction helpful different Coach of strata if morning. the you. in in Thank thank us been update you was could the the seeing talking Congrats you Good on a past, the driver and about brand us on comp Hi. price you. traffic the said, on but update

Victor Luis

Sure. I'll let that. discuss Josh

Joshua Schulman

of to channel continue both retail good, the best AUR see the and in channels, continued the Parker be we what the to build $XXX half strategy of deliberate price notably started those fiscal bucket, of quarter. second in $XXX 'XX Yeah, and which some in our of is our reflective Charlie really of better, to in have and you strength that strategy the first spring the a into introduction down

starts up there. -- the Victor really that we and addition, and his key by opening remarks introduction from of pleased in really Dreamer, start referenced skew In were the $X.XX

in where see the did a about channel, also were retail that good product. So our particular as AUR the customer encouraged In outlet Victor we to the in price by edit, really maintained channel. we we're feeling response mentioned, higher mix the

edit broader significant the edit the it result, the small relatively the outlet meaningful as That were on newness EUR and so outlet first floor with total introducing we've the learnings impact our you that gross specifically said, and as a represented pleased it the even course set Of know launches expanded holiday weekend. quarter a and in array we in seen margin a way. over didn't the have significantly in penetration and a North on to are an of America so outlet, the really in with we

about So we go we look season. we're forward the what to of we're peak seeing seeing this and as the customer's into holiday the excited reaction to

David Schick

Thanks so much.

Operator

Our next of Boruchow of the comes Irwin from line question Wells Fargo.

Irwin Boruchow

Good nice Hi. on a everyone. morning, quarter. Congrats

quarter, the business about as a in or at year So of out the think promotional higher quickly bad outlet? Coach more so for then really strong for saw it is North remainder you quarter, cost for how first you the piece brand, Victor, for America the price the level at you just that Kevin, handbag or of gross margin talk just performance much gross about changes the could versus how then you first margin any and directional could relates the good chance in so that to maybe of And Coach? any nature the tailwind pricing

Victor Luis

then jump and on Josh? we'll Josh promotional margin, first let gross in I'll discuss Kevin the environment let

Joshua Schulman

in I significant environment in deliver the margin. gross expansion as environment year. that of to Yeah, we promotional most calendar were And really we've that didn't from our been seeing for able mentioned, the change what much

as we are as our America significantly well XXX year specifically prior from from North and North expanded did basis direct point our there the businesses. America year gross within margin So expand entire last

Victor Luis

And Kevin?

Kevin Wills

with XXX Overall as up we gross pleased points. basis margin indicated the the quarter Good for morning. about very we Sure. were performance

guidance on guidance, in We year, have gross are our expansion the giving specific a gross reflective year. not aggregate the for we increase margin expecting for but margin

we're doing Victor reflective mentioned work quarter. Kate was about for we synergy gross margin part the As the the in good in earlier, feel which performance

Irwin Boruchow

Thanks.

Operator

our of Jaffray. Erinn comes of line Murphy next question comes next -- Piper Our question from from

Erinn Murphy

job. nice and morning Good Thanks. Great.

to for your then I up know said your Just a you a assuming guidance huge and me. on now have of tariffs. guys Is back for on tariffs, they you couple go XX% go the that lot assumes to peers Wanted China trying move to exposure much the for at working price we in 'XX? you guys increasing price. a 'XX? Just particularly to are how any field playing into plans Spring increases you in your have price understand bigger production see Do it segment

Kevin Wills

question. Kevin. will the Sure. take I tariff This is

effect to latter As the September you indicated me, X%, XX% in XX% January into of increasing the the part X. tariff excuse went

comments, that bit on our than have a a of as is good and our small having our X%, handbags little production is of indicated headwind news we for less We the leather in But it China included in is and guidance us. goods.

it's little certainly a while this point. material not impact headwind, bit a of at So

Erinn Murphy

you're so And Spring not in taking 'XX? pricing of

Kevin Wills

At such plans. have we this moment, no

ship, continue at look but we'll course to have think should at such plans. moment, what Of happens the no we

Erinn Murphy

Got thanks? on can just reference it. versus clarification you peak, former And just David's question, ask now if could a where outlet their I AURs are

Kevin Wills

AUR you add of Erinn, channel, don't and decide In by terms those Joshua, anything? provide we could those but

Joshua Schulman

Nothing more than about what trends I explained we're the in pricing general. what seeing in

Erinn Murphy

you. Thank

Operator

and comes of Chen next Our Oliver Cowen from question Company.

Oliver Chen

little customer are in ambassadors your will learnings brand most prior profile which how impact here? Michael of take you. you'll and may that a on what the see traffic bit on from of product and your the also broad consumer opportunity customer and thoughts Jordan what we've terms in Chinese shops lines And China are profile then shopping on he exciting, your that B. briefly as manifest that caution Thank thoughts how is confidence. any you seen announcement Hi. in China, your

that thinking, interplay what wondering into So how just thanks? you're great quarter,

Victor Luis

Sure. Thank you.

the Michael on I'll and China to Billion, hand the is that start Josh work doing me Let exciting there. and then over team Jordan

to the resilient border the most of we R&D any in but of times of has look long-term say compared may consumer. that, I to the we've luxury much the or China, what's traditional seeing really crisis, than domestic as flows controls, under luxury, around we've be the our not to be feel have and course travel. about or experience Oli, more we over decade last in impactful and and value on and impact see the of now quickly globally. the in consumers the periods of such B? more and and much about we decade had are And whenever potential I grow right has the we last around excited would been the for Daegu brands that that well. accessible depreciation confidence concerns shocks appreciation traffic course Michael really so that on are a that continue opportunity brands based negative heard not seen lot over their couldn't think around for impact the exchange there the impacts the great dollar that market, most terms exciting is is We have We're when Overall, of there that more tend talk as good the feared the I about of for that appreciation In rates of being to

Joshua Schulman

to steward global organic social So face are first he know a a of with the we represents this and with we that I and already billion really see currently as has the capsule and excited his of as was preps and know were so business the couldn't And because you he if and men's and in that that is path saw growth getting. them. on tell Michael types and Michael weekend you B. the a be around Coach to media, in of in values and is about a the stride talked about our We've and before appearances first the holds. and product working be him career he the their his he inorganic together. appeal really hitting they appeal posting energy already and shooting entire of so already more I team men's you universal his the for quite driver of truly way types campaign They're don't we business. is having lot saw that for this universal projects a $X a importance Jordan really he will working wearing clear excited Coach collaboration about it's in B. total as Jordan XX% started beyond. our Coach

the So we're great to looking forward collaboration. things from

Oliver Chen

Very Best regards. Thank helpful. you.

Victor Luis

Thanks Oliver.

Operator

line Baird. of of Our next Altschwager question the from Mark comes

Mark Altschwager

Victor I you back the all, and on I you. am great volatility beginning from And last year. you're spending benefit year you about just the results change the then easier could seeing thinking of remainder QX how talk the comp. relative be picking about of expecting North versus talked I Could the that international? Good can pace over wanted circle to thanks, any in you're Coach North Thank separately, growth comparison the true America about at your American up about quarter? in the contribution volatile, you are within signs how at from think and wondering source, morning.

Victor Luis

North and America we were international. the performance in pleased In very QX, both with

no As we the comps guidance go distribution and look overall our the particularly comp the in that. and period easier we to have we compare either low obviously on the in we holiday as able and to that single-digit of the the will achieve on change next QX forward, we has into our be or quarters geographic believe expectation

Joshua Schulman

we're last few consumer quarters. What from the consistent the performing those Europe. mark into Australia much Asia over the is discover Asia markets to And US seeing terms than you. flow, in the tourists Thank and today so it's PRC better as consumer, Chinese down continues more of or pretty the Japan overall Southeast

trends. So consistent pretty

Operator

the Sachs. of from Walvis Our next line question comes Al of Goldman

Alexandra Walvis

for taking on had Good morning. And thanks question. question the I Stuart. a

to could development the we that in the then to second or your achieve profitable the that innovations new likely any we I stage? should phased at strategy changes whether drive understand are in inflection. that quarter guidance to you more there walk are from likely to through us to and second be this holiday interested finally first if sales would wondering be quarter the the reiterated expect to that see the are at I You and was delays when growth those quarter. past delivery brand in business

Victor Luis

our Sure. of upcoming products. exciting Actually deliveries pre-spring this much week very begin and very we on-time

comfort So the are of on back from team fit and has that track and in product of a now and on work the that time done and regards fully fashion. benefits to lot all we

that. excited very So about

have course the it own our right internal buying course that stores. is wholesale from read of other teams as product the for well orders now both on Of that as our we

into the notes strengths and boots perspective, strengths as I many the has we space we've core in launch in on sneaker, season, the category, that you I brand. a of have been for returning seen From been So inventory mentioned ways received are brand's the with in marketing the of which been very is and one of would in winter has to say sneaker the focused excited course mode booties fall that very and very my which XXX now well put chase which is right newest the globally. of our back SW to team the

that November on would into timely focused to but and the I quality and of now from basically the and us. we're back seasons, track team issues deliveries Eraldo say So spring the the course behind put the first of week of execution on future are have very

Alexandra Walvis

best. Thank the helpful you. all Very and

Victor Luis

Thank you.

Operator

time gentlemen, for we and ladies And one more have question.

Our question Instinet. of Simeon comes Nomura from Siegel

Simeon Siegel

me a strong for margin. morning. squeezing Good Coach Thanks Thanks. Congrats on in.

think out just America then are it. versus are of there I about, was? you thanks. that geographically license, Did moving to if how say missed pieces Sorry any And with North international still the the licensed

Victor Luis

part on Simeon, the question buybacks. of distribution second your

Simeon Siegel

Yes.

Victor Luis

vast are the Yeah majority brands complete. the now across all

Asia the consumer. the So of a international, in biggest being we I that. of of strategy on in then terms opportunities, U.S. mentioned let now on anything executed very touch and our capturing with have the further expect focus And which Josh and we near-term I'll would Chinese to not much as in course

Joshua Schulman

Yes US said similar that we were to and global. both had international

Simeon Siegel

or comp the the margins? On

Joshua Schulman

of In comp. terms

Simeon Siegel

just there was… was wondering I if

Joshua Schulman

We America mentioned North and saw well. as specifically margins Direct global the outlet. in America North I increases And and margins

year, with in As we globally, margin did challenged but you mix channel we were particularly remember that see it expansion. the last issues,

Simeon Siegel

luck. of a Great, thanks Best guys. lot

Joshua Schulman

Thank you.

Andrea Resnick

joining for for it today. remarks, some to turn back I'll us now you Thank over Victor? concluding Victor

Victor Luis

Andrea. you, Thank

and close say of thank our brand you by the of our hard want incredibly rebranding. you celebrate usual teams we I and of worked us all could as of prouder anniversary team congratulating across all XX,XXX globe. and strong Just the want joining of They first as to to to members be Tapestry not

you. incredible an ahead be house business robust Thank endless excited a for by opportunity I the of not laying could at brands we're us. model more of importantly More and strong the foundation

Operator

and conclude ladies you, does today's Thank gentlemen. call. This

disconnect may day. and You wonderful have now a

Tapestry (TPR) 30 Oct 182019 Q1 Earnings call transcript