Tapestry Q3 2025 Earnings Report

Tapestry EPS Results

• Actual EPS: $1.03
• Consensus EPS: $0.89
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $0.81

Tapestry Revenue Results

• Actual Revenue: $1.58 billion
• Expected Revenue: $1.53 billion
• Beat/Miss: Beat by +$56.54 million
• YoY Revenue Growth: +6.90%

Tapestry Announcement Details

• Quarter: Q3 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 8:00AM ET

Tapestry (NYSE:TPR) provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments: Coach, Kate Spade, and Stuart Weitzman. It offers women's handbags; and women's accessories, such as small leather goods which includes mini and micro handbags, money pieces, wristlets, pouches, and cosmetic cases, as well as novelty accessories including address books, time management and travel accessories, sketchbooks, and portfolios; and belts, key rings, and charms. The company also provides men products, which includes bag collections, such as business cases, computer bags, messenger-style bags, backpacks, and totes; small leather goods including wallets, card cases, travel organizers, and belts; and footwear, watches, fragrances, sunglasses, novelty accessories, and ready-to-wear items. In addition, it offers other products including women's footwear and fragrances; eyewear and sunglasses; and jewelry, such as bracelets, necklaces, rings, and earrings, watches, and other women's seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves, and hats. Further, the company provides kids items, housewares, and home accessories, such as fashion bedding and tableware, stationery, and gifts. It offers its products through e-commerce sites and concession shop-in-shops, wholesale, and third-party distributors under the Coach, Kate Spade, and Stuart Weitzman brand names. The company was formerly known as Coach, Inc. and changed its name to Tapestry, Inc. in October 2017. Tapestry, Inc. was founded in 1941 and is headquartered in New York, New York.

Tapestry Q3 2025 Earnings Call Transcript

Key Takeaways

• Tapestry delivered record Q3 results, with revenue up 8% at constant currency and EPS rising 27% to $1.30, driven by 15% growth at Coach and strong gains in Europe (+35%) and North America (+9%).
• The company raised its fiscal 2025 outlook to about $6.95 billion in revenue (up 4% YoY) and $5.00 in EPS, targeting ~100 bps of operating margin expansion and $1.3 billion of adjusted free cash flow.
• Tapestry added over 1.2 million new customers in Q3—two-thirds Gen Z and Millennials—while digital sales grew at a mid-teens rate and omnichannel execution drove high-margin direct-to-consumer growth.
• Coach achieved its highest quarterly gross margin in history (79% at Coach; 76.1% companywide) and continued strong AUR increases, underpinned by popular product families and heightened brand heat.
• Kate Spade’s reset is underway after a 12% revenue decline at constant currency, though margin expanded, and the sale of Stuart Weitzman to Caleres is expected to close this summer to sharpen portfolio focus.

Presentation

[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 the Global Head of Investor Relations, Christina Colon.

[Christina Colone, Global Head of Investor Relations at Tapestry]

Good morning. Thank you for joining us. With me today to discuss our third quarter results, as well as our strategies and outlook are Joanne Kervoisarot, 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.

[Christina Colone, Global Head of Investor Relations at Tapestry]

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 ks, 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.

[Christina Colone, Global Head of Investor Relations at Tapestry]

Joanne will begin with highlights for Tapestry and our brands. Scott will continue with 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 and A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Fervoisarot, Tapestry's CEO.

[Christina Colone, Global Head of Investor Relations at Tapestry]

Good morning.

[Joanne Crevoiserat, CEO at Tapestry]

Thank you, Christina, and welcome, everyone. As noted in our press release, our record third quarter results outperformed expectations, reinforcing our position of strength. Our talented global teams drove accelerated top and bottom line growth against an increasingly complex backdrop, clearly demonstrating the power of consistent brand building and our connections with consumers around the world. Touching on the highlights of the quarter. First, we powered global growth with total revenue gains of 8% at constant currency, outpacing guidance, fueled by 15% growth at Coach.

[Joanne Crevoiserat, CEO at Tapestry]

By geography, international revenue rose 8%, led by an increase of 35% in Europe, where our business has strong momentum and the opportunity for continued growth is significant. In addition, we delivered a sales increase of four percent in the total APAC region. In Greater China specifically, revenue growth accelerated, rising 5% as we continue to confidently invest behind our long term growth agenda in the region and with this important consumer cohort. And in North America, revenue increased 9% compared to last year, and gross and operating margin continued to expand, reinforcing our commitment to driving a healthy business. Second, we built new and lasting relationships with consumers around the world.

[Joanne Crevoiserat, CEO at Tapestry]

In North America specifically, we acquired over 1,200,000 new customers in the quarter, representing strong growth versus last year. And of these new customers, two thirds were Gen Z and Millennials. We are capturing consumers who are entering the category for the first time, which is instrumental to fueling enduring relationships, customer lifetime value and sustainable growth. New Gen Z and millennial consumers continue to transact at higher AUR than the balance of our customer base. And we achieved a meaningful increase in year one retention rates among Gen Z consumers at Coach, a key indicator that these relationships are sticky.

[Joanne Crevoiserat, CEO at Tapestry]

Third, we delivered compelling omnichannel experiences, delighting consumers across all touch points with our brands. To this end, we maintained strength in digital, which grew at a mid teens rate versus prior year and represented approximately 30% of revenue at accretive margins. Our global brick and mortar sales rose at a mid single digit rate in the quarter at strong and increasing profitability. Overall, our direct to consumer operating model is a clear differentiator and competitive advantage, driving real time consumer understanding and agility. Fourth, we fueled fashion innovation and product excellence as we continue to deliver creativity, quality and compelling value to consumers around the world.

[Joanne Crevoiserat, CEO at Tapestry]

This is on display at Coach, where we delivered strong and broad based growth, highlighting the vibrancy of the brand and product offering. Our commitment to disciplined brand building is also reflected in our strong gross margin, which continued to expand in the quarter. Importantly, our globally scaled and diverse supply chain is a key competitive advantage, enabling us to deliver craftsmanship to consumers while navigating the shifting backdrop, which Scott will discuss in more detail shortly. Overall, we generated record third quarter earnings per share, which exceeded our expectations and increased 27% compared to the prior year. This outperformance positioned us to increase our outlook for the fiscal year.

[Joanne Crevoiserat, CEO at Tapestry]

We're on track to deliver fiscal year twenty twenty five earnings in the area of $5 per share, consistent with the outlook we provided nearly three years ago at our Investor Day, despite the rapidly changing global landscape. This is a testament to the power of our strategies, the agility of our operating model and the resilience and focus of our teams. These advantages are driving our success today, and I'm confident they will continue to underpin our growth long term. Now moving to our results and strategies by brand. Coach delivered another standout performance with accelerated growth in the third quarter, driving 15% top line gains as the brand's expressive luxury position continues to resonate with consumers.

[Joanne Crevoiserat, CEO at Tapestry]

We believe that the momentum we have unlocked is enduring and that Coach's success is compounding. We continue to build on our strong brand and cultural relevance, driven by product innovation and the creativity of our talented global teams who are operating with excellence, focus and intention. The Coach vision is clear, to be the world's most inclusive, genuine and loved fashion brand. And it is this vision that guides our strategies and fosters a brand purpose that cuts through with consumers. And our success is evident in our results.

[Joanne Crevoiserat, CEO at Tapestry]

We are driving meaningful new Gen Z customer acquisition through our outstanding product offerings, authentic brand values and deep understanding of our target consumer. We are winning in our core leather goods category, where we're outpacing the industry. And we're doing this on a global scale with strong top line momentum and exceptional margins, which increased nearly 100 basis points versus prior year. Now touching on the highlights of the third quarter in more detail. First, we drove double digit gains in leather goods, where we have multiple platforms for growth.

[Joanne Crevoiserat, CEO at Tapestry]

The iconic Tabby family once again led, over indexing with new and younger consumers, building strength on strength. The Tabby Shoulder Bag26 continued to anchor the offering, while the new chain Tabby was a global success. Additionally, our New York family significantly outpaced expectations, cementing itself as a new growth driver for the brand, with styles ranging from the viral Brooklyn Shoulder Bag 28 at $295 to the Soft Empire Carry Off 40 at $695 Further, we grew our archival inspired Coach Originals collection with the introduction of the large Kipsloc bag at $695 which sold out within minutes of launching online and within a day at stores. And finally, our bag charms and straps added to our success, providing consumers with further opportunities for self expression, with the Cherry bag charm remaining a Gen Z favorite. Overall, Coach's growth in handbags and accessories continued to outpace the industry, a testament to the brand's heat, innovation pipeline and the compelling value and craftsmanship we offer in the luxury market.

[Joanne Crevoiserat, CEO at Tapestry]

With these advantages, we drove mid teens handbag AUR growth, led by North America. Looking ahead, we are confident in the potential for further sustainable AUR increases. Next, we remain focused on fueling footwear, which drives lifetime value with our target Gen Z consumer. In the quarter, footwear grew mid single digits, bringing new and younger consumers to the brand. Growth in the category was led by the successful launch of the SoHo sneaker and the continued momentum of the Highline sneaker.

[Joanne Crevoiserat, CEO at Tapestry]

Building on our One Coach learning agenda, both sneakers are offered at consistent price points between retail and outlet channels, enabling us to amplify our innovation and big ideas with consumers. Turning to marketing. We continue to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering. During the quarter, Coach launched On Your Own Time, a campaign introducing Coach's spring twenty twenty five collection and starring global ambassadors Elle Fanning, Naja, Koki and Yung Ji Lee. This campaign was inspired by our ongoing discussions with Gen Z consumers across the world and shares a powerful message about having the courage to set the pace of your own life.

[Joanne Crevoiserat, CEO at Tapestry]

This campaign is continuing to deliver strong uplifts and consideration and purchase intent across markets. And as we deepen our learnings with each campaign, we are strengthening both our bold storytelling and our media execution. This strategy is driving the acceleration of sustainable customer acquisition and brand growth, and it's working globally at scale. In addition, we also cultivated enthusiasm for the brand through unique and immersive retail experiences. Our CoachPlay concept stores continue to outperform with higher Gen Z traffic, longer dwell times and higher return frequency.

[Joanne Crevoiserat, CEO at Tapestry]

We're taking these learnings to bring the highest impact elements of this concept to our store fleet more broadly. Overall, our holistic brand building activities helped to drive increases in new customer acquisition as we welcomed nearly 900,000 new customers to Coach in North America, of which nearly 70% were Gen Z and millennials. And at the same time, our retention rate with the Gen Z cohort also meaningfully increased, reinforcing that we're building lasting relationships with our consumers in support of durable growth. In closing, Coach is strong and delivering differentiated results by fostering emotional connections and delivering exceptional value to consumers. Powered by Tapestry's growth engine, we will continue to invest in brand building and innovation to drive long term sustainable growth, bringing this iconic brand to new generations of consumers.

[Joanne Crevoiserat, CEO at Tapestry]

Now, moving to Kate Spade. In the third quarter, revenue was pressured, declining 12% at constant currency, while profit met our expectations, driven by continued gross margin expansion. As we've shared, our work to reset the brand is underway, and we're making decisions today to drive sustainable growth long term. We know this work will take time, particularly in the context of a more uncertain backdrop. However, the actions we need to take are clear, and we are executing with focus and urgency.

[Joanne Crevoiserat, CEO at Tapestry]

Our strategies are informed by Tapestry's growth model with a focus on building brand heat, relevant product innovation and compelling experiences. As we build a healthier brand, we will be closely tracking leading indicators of progress along the way, informed by our learnings and success at Coach. These include first, increasing unaided brand awareness and search interest, followed by an improvement in traffic and customer acquisition, which will ultimately compound to drive top line growth. Now, turning to the strategic details. First, we're committed to fueling brand heat and relevancy through cohesive storytelling and incremental investments in brand media.

[Joanne Crevoiserat, CEO at Tapestry]

In April, we launched our spring campaign, which features Ice Spice and Charlie D'Amelio, two very influential and relevant Gen C celebrities. This is a further step toward a more effective spike and sustain marketing strategy that will enable us to reestablish Kate Spade as a top of mind brand for our target audience. Next, we continue to prioritize strengthening and elevating our handbag offering, bringing more innovation, focus and relevancy to our assortment. We are advancing our work to build blockbuster handbag families. During the quarter, we continued to amplify the Deco collection in retail and the Kayla and Kipp and outlet, which over indexed with new, younger consumers at strong AUR and margins, and we see further opportunity for these families going forward.

[Joanne Crevoiserat, CEO at Tapestry]

And as we bring more innovation to the assortment, we are also working to streamline our offering by reducing handbag styles by over 15% by fall and continue to clear deselection barriers through improved styling, ensuring our big ideas cut through with consumers. Overall, we're focused on creating distinctive product that is consumer informed, grounded in Kate Spade's unique brand DNA and modern and relevant today. Next, we're working to maximize omnichannel cohesiveness with a compelling, consistent brand message across all consumer touch points. As part of our efforts to improve the customer experience and fuel brand health, we are committed to reducing promotional activity and delivering continued gross margin expansion. As previously shared, reducing the level of promotional activity is a key building block to scale in a healthy way globally over the long term as we build for the future and connect with consumers on our brand values beyond simply price.

[Joanne Crevoiserat, CEO at Tapestry]

In closing, we are advancing our efforts to reinvigorate Kate Spade. The brand has a legacy of creativity, joy, wit and warmth, and we will build on this unique heritage while modernizing its expression, guided by a sharpened focus on our consumer. The steps to do this will take time, but we are confident in the potential and path forward. Importantly, the strength of our platform provides us with the experience, discipline and brand building capabilities to execute these strategies while delivering enhanced results overall. Our focus is clear, and we are committed to unlocking the untapped growth and value creation opportunities for this iconic brand.

[Joanne Crevoiserat, CEO at Tapestry]

Now turning briefly to Stuart Weitzman. As previously announced, we entered into a definitive agreement to sell the brand to Caleres, and we continue to expect the transaction to close this summer, subject to customary closing conditions. As diligent stewards of our portfolio and disciplined allocators of capital, this ensures that all our brands are positioned for long term success and that we maintain a sharp focus on our largest value creation opportunities. At the same time, we are pleased that we found Stuart Weitzman a home in Caleres, an ideal owner to guide its next chapter of growth. In closing, Tapestry delivered another standout quarter with accelerated sales and earnings growth that positioned us to increase our outlook for the year.

[Joanne Crevoiserat, CEO at Tapestry]

I want to thank our extraordinary teams for driving these strong and differentiated results. Moving forward, the external backdrop has become increasingly complex. That said, in the face of uncertainty, our purpose is unwavering, to stretch what's possible for our brands and business. To do this, we will harness our proven competitive and structural advantages that have allowed us to adapt and win in any environment, namely our global scale in an attractive industry, the compelling value we offer to consumers and the strong fundamentals of our business. I'm confident in our future and the meaningful opportunity to deliver durable growth and shareholder value.

[Joanne Crevoiserat, CEO at Tapestry]

I'll now turn it over to Scott.

[Scott Roe, CFO & COO at Tapestry]

Thanks, Joanne, and good morning, everyone. Our third quarter results exceeded our outlook, building on our track record of consistent execution as we unlocked accelerated growth. We delivered record third quarter revenue and earnings per share while generating over $1,000,000,000 in adjusted free cash flow year to date. Now moving to the details of the quarter beginning with revenue trends on a constant currency basis. Sales increased 8% to the prior year and outperformed our expectations.

[Scott Roe, CFO & COO at Tapestry]

These results reflect gains in North America and internationally. By region, North American sales increased 9% compared to the prior year led by strong double digit growth at Coach. Both gross and operating margin rose versus last year as we supported long term brand health. In Europe, revenue grew 35% above last year with growth across all channels driven by increased local consumer spend and strong new customer acquisition notably with Gen Z. In Greater China, growth continued with revenue rising 5%.

[Scott Roe, CFO & COO at Tapestry]

Our sequential acceleration was driven by both digital and stores with each channel delivering growth. Our differentiated results in China clearly demonstrate that our strategic initiatives and investments in the region are yielding returns with our brands and business positioned for long term sustainable growth. And in other Asia, revenue rose 14% led by growth in Australia, South Korea, and Thailand while Japan sales declined 2%. Now touching on revenue by channel for the quarter. Our direct to consumer business grew 9% compared to the prior year at constant currency, which included a mid teens percentage increase in digital revenue and a mid single digit increase in global brick and mortar sales.

[Scott Roe, CFO & COO at Tapestry]

And wholesale revenue grew in the quarter in keeping with our expectations and strategy to find targeted opportunities to expand our brands reach with consumers. Moving down the P and L, we delivered a gross margin of 76.1%, representing our highest quarterly gross margin in over fifteen years. This was ahead of plan and 140 basis points above prior year driven by operational outperformance. Our strong gross margin performance is a core element of our value creation model providing us with flexibility and fuel to drive long term growth. Turning to SG and A, expenses rose 7% and were even with prior year on a rate basis.

[Scott Roe, CFO & COO at Tapestry]

This included increased brand building investments and higher compensation costs offset by leverage on fixed costs. As compared to expectations, there was a benefit of approximately $20,000,000 or $05 primarily related to marketing timing with the fourth quarter. Taken together, operating margin increased 140 basis points in the quarter, driving profit expansion ahead of expectations and 16% over the prior year. And our record third quarter EPS of 1.3 grew 27% over prior year and exceeded our guidance. Now turning to our shareholder return programs.

[Scott Roe, CFO & COO at Tapestry]

As previously announced, in November, we executed a $2,000,000,000 accelerated share repurchase program, which remained underway during the fiscal third quarter. In addition to the ASR program, we have $800,000,000 remaining under our previous share repurchase authorization. Together with our dividend, which is expected at $1.4 per share for the year, we're positioned to return over $2,000,000,000 or more than 100% of adjusted free cash flow to shareholders in fiscal twenty twenty five, a testament to our strong organic business and robust cash flow generation. And now before turning to the details of the balance sheet and cash flows, I'd like to reiterate our capital allocation priorities, which are unchanged. We have two foundational commitments.

[Scott Roe, CFO & COO at Tapestry]

First, to invest in our brands and business to support long term sustainable growth, and second, to return capital to shareholders via our dividend with the goal over time to increase the dividend at least in line with earnings to achieve our stated target payout ratio of 35 to 40%. Beyond these two foundational commitments, our robust cash flow generation provides us with balance sheet flexibility for value creation. This includes the opportunity for share repurchase activity, which is on display this year. And finally utilizing our rigorous forward lens framework, we consistently evaluate opportunities for strategic portfolio management. Importantly and as previously communicated before moving forward with any acquisitions we will ensure Coach remains strong and Kate Spade has returned to sustainable top line growth.

[Scott Roe, CFO & COO at Tapestry]

These clear capital allocation priorities are underpinned by our firm commitment to a solid investment grade rating and maintaining our long term gross leverage target of below two and a half times. Now turning to the details of our balance sheet and cash flows. We ended the quarter with 1,100,000,000 in cash and investments and total borrowings of $2,700,000,000 representing net debt of $1,600,000,000 At quarter end, our gross debt to adjusted EBITDA was 1.6 times. In addition, after our quarter end, we repaid our April 2025 bonds at maturity totaling $3.00 $3,000,000 Adjusted free cash flow for the third quarter was an inflow of $135,000,000 and CapEx and implementation costs related to cloud computing were $36,000,000 Inventory levels at quarter end were 6% above prior year, excluding $87,000,000 of Stuart Weitzman inventory reflected in assets held for sale on our balance sheet. Our inventory continues to be current and well positioned globally and by brand in support of our growth ambition.

[Scott Roe, CFO & COO at Tapestry]

Now moving to our guidance for fiscal 'twenty five, which is provided on a non GAAP basis. We are raising our fiscal twenty twenty five revenue, earnings and cash flow outlook. We continue to view this outlook as prudent and achievable, and we remain clear eyed about the realities of the external environment balanced with the opportunities we see for our business. For the fiscal year, we now expect revenue of approximately $6,950,000,000 representing growth of 4% versus prior year on a reported basis, including an expected currency headwind of nearly 50 basis points. Touching on sales details by region at constant currency, in North America, we now expect revenue to increase 3% to 4%.

[Scott Roe, CFO & COO at Tapestry]

In addition, we still expect growth in Europe in the area of 30% where we are underpenetrated and have strong traction. In Greater China, we remain on track to achieve low single digit growth over the prior year. And in other Asia, we continue to anticipate high single digit gains while in Japan we're now forecasting a mid single digit decline. In addition, our outlook assumes operating margin expansion of approximately 100 basis points versus prior year. We anticipate gross margin expansion to drive this increase due to improvements in both AUR and AUC.

[Scott Roe, CFO & COO at Tapestry]

Both freight and FX are still expected to have a negligible impact on gross margin changes for the full year. On SG and A, we expect expenses to increase above the pace of revenue growth, driven by increased marketing expense. While we remain diligent with respect to overall expense control, we continue to make deliberate, growth focused investments in our strategic priorities. Moving to below the line expectations for the year, net interest expense is now expected to be approximately $25,000,000 The tax rate is now expected to be approximately 17.5%, and our weighted average diluted share count for the year is forecasted to be approximately $223,000,000 shares. So taken together, we're raising our EPS guidance to be in the area of $5 representing high teens growth compared to last year and ahead of our prior guide of $4.85 to $4.9 This guidance fully embeds all trade policies as of April 10.

[Scott Roe, CFO & COO at Tapestry]

Incremental tariffs are expected to have an immaterial impact on fiscal twenty five results based on the timing of our fiscal year end. Moving on, we now anticipate adjusted free cash flow of approximately $1,300,000,000 and finally, we expect CapEx and cloud computing costs to be in the area of $160,000,000 We anticipate about half of the spend to be related to store openings, renovations and relocations with the balance primarily related to ongoing digital and IT investments. Touching on the shaping of the fourth quarter, to start, given the dynamic nature of the rapidly shifting market, it's important to note that our revenue trends quarter to date are in line with our Q3 results. However, while we see no slowdown in our business to date, we're taking a more conservative approach to the quarter to go outlook. For the quarter, we are estimating revenue to grow at a mid single digit rate on both a reported and constant currency basis.

[Scott Roe, CFO & COO at Tapestry]

Further, we're forecasting operating margin to be in the area of prior year, which incorporates the expectation for continued gross margin gains offset by higher SG and A costs, including the previously mentioned marketing expense timing shift from the third quarter. So taken together, we're modeling Q4 EPS to be over $0.95 Before closing, I want to provide some additional context on our business in light of tariffs and the shifting global trade landscape. First, as it relates to our supply chain, our products are primarily manufactured in Vietnam, Cambodia, and The Philippines. These countries taken together represent 70% of our production, including Vietnam, which accounts for one third of our total production. Conversely, we have very limited manufacturing exposure to China with less than 10% of our production in the region across all categories.

[Scott Roe, CFO & COO at Tapestry]

This primarily includes for jewelry and ready to wear with negligible exposure in our core leather goods category. As a point of reference, over the past twelve months, roughly $900,000,000 of our cost of goods sold was related to product imported into The US. Touching on our tariff mitigation strategies, we're taking thoughtful actions to protect the compelling value, quality, and innovation we offer to consumers. To share some color, we pulled forward inventory receipts ahead of the incremental tariffs going into effect in April. In addition, we're leveraging our agile supply chain to optimize our global manufacturing footprint, minimizing our tariff exposure where possible.

[Scott Roe, CFO & COO at Tapestry]

We have scale and long standing relationships with our service providers and we're actively working together to unlock efficiencies. And most importantly, I want to thank our supply chain organization. Their deep global trade expertise, operational excellence, and culture of continuous improvement allowed us to take swift action in the face of this uncertainty. Overall, while we're not immune to external factors, we're in a position of strength with structural advantages. Our fundamentals are strong and our business has momentum with compounding growth fueled by innovation, customer acquisition and AUR gains.

[Scott Roe, CFO & COO at Tapestry]

In closing, we delivered another record breaking quarter highlighted by accelerated top and bottom line growth. And we raised our outlook for fiscal twenty twenty five and are on track to achieve EPS in the area of $5 while returning over $3,000,000,000 to shareholders over the last three years consistent with the target we outlined at our September 22 Investor Day. Moving forward as we face an increasingly complex environment, we remain confident in our brands, our people and our strategy with a differentiated and highly cash generative business model that has proven agile, resilient and adaptive to change. We'll continue to focus on the factors within our control, operating with a commitment to discipline and consistency to deliver long term growth and shareholder value. I'd now like to open it up for your questions.

[Scott Roe, CFO & COO at Tapestry]

Our

[Operator]

first question is coming from Ike Boruchow of Wells Fargo. Your line is open.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

Hey, good morning everyone. Really, really strong quarter. Good to see it. I guess this very high level maybe for Joanne, what's driving it? I mean, especially at the Coach brand, I just don't think you guys have put up numbers like this in twenty years.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

What's driving it? How are thinking about the business in the future in a more dynamic environment? Can the brand sustain this kind of heat? Just kind of curious your thoughts. Thanks.

[Joanne Crevoiserat, CEO at Tapestry]

Well, morning, Aik, and thanks. We did deliver a standout quarter. And I think one that illustrates the power of our business model and the unique strengths and structural advantages that we have to navigate in really any environment. To your point in the quarter, we delivered accelerated top and bottom line growth that exceeded our expectations, and we did this at increasing margins. And that enabled us to raise our outlook for the year.

[Joanne Crevoiserat, CEO at Tapestry]

And there are really four key structural advantages that we think about as we think about navigating a dynamic environment. And those are also the things that helped contribute to our success to date. And I would say the first is that we're building strong emotional connections with consumers. And we play in a category in handbags that have proven to be durable over time because of the emotional connection that consumers have with our category. I think second is our high margins and strong cash flow and our direct to consumer model.

[Joanne Crevoiserat, CEO at Tapestry]

These fundamentals insulate us from some tariff exposure, but also allow us to read demand signals sooner and allows us to react sooner. And that brings in our diversified and agile supply chain. This supply chain we've built over decades, and it's proven we've navigated disruptions in the past, both on the supply side and on the demand side. And I think underpinning it all is the value that we're delivering in the global market. We are delivering incredible, exceptional innovation, I can say, at compelling value, and customers are responding, which helped us deliver the results from the quarter, the beat and raise for the year.

[Joanne Crevoiserat, CEO at Tapestry]

And I do think it's notable that we're on track to deliver $5 in earnings per share. That's consistent with the targets that we set at our Investor Day in 2022. Our teams have done an excellent job navigating through volatility and delivering on the commitment we made three years ago. And that gives us confidence that we're in a position of strength, and it shows our ability to adapt and win in all environments.

[Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo]

That's great. Congrats.

[Joanne Crevoiserat, CEO at Tapestry]

Thanks, Mike.

[Operator]

Our next question is coming from Lorraine Hutchinson of Bank of America. Your line is open.

[Lorraine Hutchinson, Managing Director at Bank of America]

Thank you. Good morning. It was encouraging to hear that the 2025 outlook would have an immaterial impact from tariffs. If the environment stays where it is today, can you provide some guardrails around what 2026 impacts might look like?

[Scott Roe, CFO & COO at Tapestry]

Lorraine, I'll take that. This is Scott. So first of all, I think you can appreciate our long standing and consistent practice. We'll give you guidance on next year at the end of our next fiscal, which will be our fourth quarter. But there are some things I can say that might help you a little bit.

[Scott Roe, CFO & COO at Tapestry]

First of all, remember, we've taken a number of actions already to mitigate impacts of tariffs. We mentioned I mentioned that in my prepared remarks, but some of those are we brought some inventory in ahead of times before effective dates. We're looking at optimizing across our diverse supply chain with a very agile team that's informed by the insights of, I would say, crackerjack trade expertise that's allowing us to optimize across that diverse supply chain. And lastly, we're working with our suppliers. We have scale and we have long standing relationships, strategic relationships with very important suppliers and we're working collaboratively to find opportunities to mitigate the cost of any potential tariffs.

[Scott Roe, CFO & COO at Tapestry]

But there's two things we won't do. We'll never sacrifice innovation or quality as we think about trying to find those mitigating actions. And I also mentioned in the prepared remarks and in some of the documents that we gave you, just some ways to dimensionalize potential exposures to tariffs. So about $900,000,000 of cost of goods sold is related to imports into The US market. So obviously, if you do simple math, a 10% incremental tariff across the board would be $90,000,000 Now that's unmitigated, That's before any of those actions that I talked about and we made substantial inroads already at finding mitigations against those any potential exposure that we might see.

[Scott Roe, CFO & COO at Tapestry]

So, you know, everything I've said here is related to the cost side. And if you think about gross margins, independent of cost, we also have a long standing history of AUR gains, right? So you think about mitigating the cost side coupled with our brand building, consumer engagement, our ability to raise AURs over time because we're delivering a more compelling value, that gives us confidence in our ability to maintain margins. Maybe Todd, a little more on the AUR side of that equation.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Sure, Scott. Thank you. One thing we don't do, we're not just looking at cost to deal with AURs, we have compelling reasons to increase AURs and just for grounding everyone. Know, the last five years, we've been able to raise our global AURs at Coach in 18 of those quarters. That that should give you a lot of confidence in what's happening at Coach.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

And I will say with real conviction, the brand heat today is at its best in the last five years. We have real momentum at Coach and and you see it in a number of ways. We talk about brand heat, which is really desirability. We talk about innovation and I'll give you two quick examples. In this last quarter, we had a really fantastic product in both retail, and in outlet.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

And in outlet, we launched a collection called powder pink. We had lines outside our door. This is not during a Black Friday or a holiday period. This is just for a collection that we launched and it was millions of dollars of result in literally ten days. Similarly with our launch at retail of our crystal sig collection, just compelling product and what gives me so much future confidence is we know these results and based on the data that we see, our innovation pipeline will continue to get better and better.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

So I feel very good about not only the brand heat, the innovation, the quality, but absolute value that we're offering our clients. Again, you've heard me talk about this before, but in a world where twenty years ago Coach would play and European luxury, traditional European luxury was 2x our price points, today they're 10x. That just gives me more and more confidence globally that our value proposition cuts through across the world. And you see that in markets like Europe and Asia and of course, the 20% we delivered in North America.

[Lorraine Hutchinson, Managing Director at Bank of America]

Thank you.

[Operator]

Our next question is coming from Matthew Boss of JPMorgan. Your line is open.

[Matt Boss, Equity Research Analyst at JP Morgan]

Great, thanks and congrats on a really nice quarter.

[Joanne Crevoiserat, CEO at Tapestry]

Thanks, Matt.

[Matt Boss, Equity Research Analyst at JP Morgan]

Maybe two parts. Joanne, if you could elaborate on the new customer acquisition that you cited. It seems like it's really driving the inflection in North America and just some of the retention metrics that you're seeing and initiatives around that.

[Matt Boss, Equity Research Analyst at JP Morgan]

And then, Todd, I wanted to circle back, maybe just forward looking, how you see the merchandising assortment position today to take continued market share? And maybe if you could just assess the product and the relative value at Coach, maybe relative to Luxury, or just what you're seeing. Is it trade in, trade down? Maybe just elaborate on the market share acceleration that you're seeing.

[Joanne Crevoiserat, CEO at Tapestry]

Sure, Matt. I'll kick it off. And I'm glad you called out new customer acquisition. This is a metric and KPI that we've been focused on from the beginning of our transformation. And I used to say new customer acquisition is like oxygen for brands.

[Joanne Crevoiserat, CEO at Tapestry]

But we've been quite intentional about going after new customer acquisition, and importantly, acquiring a new and younger consumer to our brands for a couple reasons. One, it was clear that by 02/1930, most of the consumption in our category was going to be Gen Z and Millennials. So we knew we had to appeal to a younger generation of consumers with all of our brands. So we began to become more intentional about it, and we really put the consumer at the center of everything we do. And we call out new customer acquisition every quarter intentionally.

[Joanne Crevoiserat, CEO at Tapestry]

And that's what everybody in our company is really focused on. How do we engage more consumers and engage them with deeper emotional connections to our brands, so that we're not just selling a bag at a price. We're connecting these consumers to our brands on an emotional level. And that's what proves to be durable over time. And the exciting thing about acquiring a young consumer is that the lifetime value opportunity is long.

[Joanne Crevoiserat, CEO at Tapestry]

So we see that. But we also see young consumers influencing all age groups. So we haven't forgotten about our entire customer mix. We love all of our customers. And when we talk about our growth, we're seeing growth across age groups, across income demographics.

[Joanne Crevoiserat, CEO at Tapestry]

But our focus on acquiring a new and younger consumer is breathing a lot of life into our brands, a lot of relevance into the way our brands show up in the world. And again, because these young consumers are so connected, digitally connected across the world, honestly, they're driving choice for all generations and influencing all generations. So that's helping us drive our brand heat. And you mentioned retention rates. We're actually beginning now, and we called it out this quarter, to see these young consumers coming back with higher frequency.

[Joanne Crevoiserat, CEO at Tapestry]

So the year one retention rate of Gen Z at Coach is going up. It's higher. And that is a great sign for us, as we talk about this lifetime value and the durability of this business over time. It's a great leading indicator of what's to come for Coach. So, we have a lot of confidence in the future.

[Joanne Crevoiserat, CEO at Tapestry]

And I'll pass it to Todd talking about the positioning of Coach.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Thank you, Joanne. Just one thing on the customer. In addition to capturing these 900,000 new customers, 70% as we noted were Gen Z and Millennial. I believe we're bringing new customers into the category and I think that's incredibly important. We are very focused on point of entry because as Joanne mentioned, if you get them a point of entry, their lifetime value really increases.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Now, in terms of people coming into the market that you mentioned and I'm sorry.

[Matt Boss, Equity Research Analyst at JP Morgan]

Product. Yeah.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Yeah. The product. Sorry. Our merchandising position. You know, it's interesting.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

I think anybody who buys a Coach bag is is is buying up regardless of where they came from because the absolute value is there. So we're clearly taking market share across the spectrum. When the category is growing at, you know, globally one percent, let's say, and we put up, I'm sorry, when the category is going to North American about 1% and down globally, when we put up these kind of numbers, we're clearly taking market share and I think it's coming across the board and I'll give you one proof point that gives me a lot of confidence. We've talked about the list index which talks about the hottest brands globally. In the holiday quarter, we moved from 15 to five on the list index.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

In the last quarter, the first calendar quarter of this year, we moved to four. I'm not going to do an editorial for who those other brands are, but we're really one of the only American North American based luxury brands. That tells you a lot about the consumer behavior because the list index not only measures sales, it measures search, it measures intent to buy, and relevance. And I feel very good and one of the things we've done these last five years and you've seen us do is we're focused on these big families, these big ideas whether it's Terry, whether it's Tabby, whether it's the New York family and what that allows us to do is to keep bringing innovation in a consistent way So the merchandising strategy becomes very clear and very compelling for our customers. And again, I emphasize that in the first question we had, but the compelling value globally is really resonating.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Know I've said often I don't like the idea of somebody having to say three or four months salary to buy a handbag. Okay that has never been coaches DNA. We want to make people feel confident, We want them to feel good about their purchase and buy something of true value that represents values and I think that gives us a lot of confidence in the future.

[Operator]

We'll take our next question from Michael Binetti of Evercore ISI. Your line is open.

[Michael Binetti, Senior Managing Director at Evercore ISI]

Hey, guys. Congrats on a great quarter. Just a couple from me. On the gross margin, nice to see the beat in the quarter. As I think about the contribution, Kate Spade coming in a little above the 100 basis points for the company that you guided to coach a little below.

[Michael Binetti, Senior Managing Director at Evercore ISI]

Is that how you planned it? Or were there any new dynamics at hand for the Coach brand to think about? And can you talk a little bit about the Coach brand gross margin outlook from here? What's embedded in 4Q? I know, Scott, you said it was operational improvements, but what's embedded in 4Q?

[Michael Binetti, Senior Managing Director at Evercore ISI]

And then just the puts and takes after fiscal twenty twenty five excluding the tariffs. I know we still have a lot to learn there. And then I guess on AURs, I know Todd gave us some thoughts through the product lens. It's very obvious and we've all learned the lesson of not questioning you guys on the AUR growth here. But could you Scott, could you break down those drivers of the acceleration a little bit from the finance side?

[Michael Binetti, Senior Managing Director at Evercore ISI]

And I know you said there's further opportunities for expansion, but just a few thoughts on how you start to lap these two mid teens AUR quarters in a row now as we think about our models after the call today since it's taken such a nice step up in the last couple of quarters.

[Scott Roe, CFO & COO at Tapestry]

Yes, boy, there's a lot there, Michael. I can always count on you when when I hear your name.

[Michael Binetti, Senior Managing Director at Evercore ISI]

I'm happy to resummarize

[Scott Roe, CFO & COO at Tapestry]

if you like. I know you're coming my way, but so first of all, I'm not sure exactly what you were saying on the gross margin. But listen, one of the reasons for our beat versus guidance is gross margin strength, and it's all driven by operational. And a lot of that AUR, but also AUC. Again, I always say AUC is the underappreciated part of our story.

[Scott Roe, CFO & COO at Tapestry]

So we've been consistent in finding opportunities to find efficiency, at the expense of quality or innovation, but we're finding AUC opportunities. But a lot of this strength is in AUR and it's all the things that Todd just said. So there's no magic in there. There's no big mix. There's no other extraneous things.

[Scott Roe, CFO & COO at Tapestry]

It's solid fundamentals here, four yards at a cloud of dust. We're continuing on AUR. And so where is it coming from? It's coming from both merchandising. It's less about like for like price.

[Scott Roe, CFO & COO at Tapestry]

I mean, there is some of there is some of that, of course, and and we don't think cost plus. I hope that came through in what Todd said. Right?

[Michael Binetti, Senior Managing Director at Evercore ISI]

We're Yeah.

[Scott Roe, CFO & COO at Tapestry]

Looking at value and innovation. So as we merchandise new products and new drops and new colors and, continue to refresh and update and innovate around our iconic products, we're always finding opportunities to test whether that value and innovation is working with the consumer and make sure that we have the right price value relationship. And so far because of the brand heat and all the things that are being delivered particularly in the Coach brand, we're seeing that there's been zero resistance from a price standpoint and we're generally using our data and analytics to find the right balance and make sure we don't get too greedy and also that we just have the right relationship. So that's one of the reasons we have confidence, right? The combination of brand heat, understanding the consumer receptivity to that price value relationship and being very sensitive to that.

[Scott Roe, CFO & COO at Tapestry]

And we think we've got that dialed in pretty good and that gives us confidence in the future. So I don't know if I'm answering your question. As it relates to Kate, I think Kate is a really nice story of the machine, right? In the sense of supply chain, finance, working with the brand teams to even in what we would say has been a tough backdrop from a demand and top line standpoint, we're focused on quality. This is something you've heard us say for quite a while, chasing the last dollar.

[Scott Roe, CFO & COO at Tapestry]

Some of the actions we're taking honestly do even have some top line impact, but we're continuing underneath that to manage inventory well and continue to grow our gross margin. So we look at that as an indicator and or a green shoot for the future. And that's an important metric that we keep an eye on.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Yeah, thanks for the I just wanna jump in just to clarify the coach gross margin comment you made because my team will never forgive me if I don't. We achieved a 79% gross margin this last quarter, probably the high I believe the highest gross margin in Coach's history for the third quarter. So we feel very good about this neighborhood that we're in and we'll continue to be in this neighborhood.

[Michael Binetti, Senior Managing Director at Evercore ISI]

Great job. Okay, thanks a lot guys for all the detail.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Thanks Michael.

[Operator]

Our next question is coming from Brooke Roche of Goldman Sachs. Your line is open.

[Brooke Roach, Vice President - Equity Research at Goldman Sachs]

Good morning and thank you for taking the question. How are unit volumes trending at the Coach brand both in North America and internationally? Given the strong growth in AUR that you've seen, what do you think is the right medium to long term balance between AUR and unit growth?

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

I guess I'll take that. We're bringing new clients to our business and over time you'll continue to see us grow units. But this AUR that we've had, we've grown so materially since I'll take the starting point of 2019. We're behind 2019, but in 2019 our AUR was about 70% lower than it is today in North America. So each of these interactions is as I always say, one client, one customer that we interact with.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

I am very pleased that we are selling less product on promotion. That's just a general truism that creates sustainable brand growth and because of that and because of these new customers, we're going to see a not only AUR continue to grow but we will start seeing unit to grow as well. But again, the brand positioning is one of strength And the fact that we are not just pumping units into the market to create sales volume gives me sustainable long term growth.

[Brooke Roach, Vice President - Equity Research at Goldman Sachs]

Great. Thanks so much.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

You're welcome.

[Operator]

Our next question is coming from Rick Patel of Raymond James. Your line is open.

[Rick Patel, Managing Director at Raymond James Financial]

Thank you and congrats on the strong execution. Can you unpack your performance and strategy across Coach, Full Price and Outlet, just given the evolving macro? How do you maintain the momentum you have while remaining nimble given consumer preferences could be subject to change here in the coming months?

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Thanks for the question. It's very interesting. We've been talking a lot about our performance across the fleet. And we've talked to you a little bit about our one coach strategy, where we're putting more and more what was historically full price product in, traditional outlets at full price and it's resonating with the consumer as as we've seen over and over again. We want to be consumer centric, not channel centric and what that means is when somebody comes into Sawgrass Mall outside of Fort Lauderdale, Woodbury Common, that might be the only mall they go to, it might be their best mall in the area, it might be the mall that they're visiting as a tourist.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

They come in knowing they want the tabby back and so we're giving them that opportunity at full price across the channel and we're extending that one coach concept into other categories like footwear. Footwear has been something that we're very very focused on but not just chasing any trends in footwear. We're very focused on sneaker business and this last quarter we launched our Soho sneaker at a hundred and $45 across all channels at one price point. It's resonating really strongly particularly with that young consumer we're going after. So you're going to see us blur the lines more and more across channels because the value proposition is there.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

It's there, it's compelling, it's recognized by the consumer. So, I think you'll hear us talk continue to build on the momentum of this one coach idea and blurring the channels. Again, putting that consumer at the heart of everything we do.

[Rick Patel, Managing Director at Raymond James Financial]

Thanks very much.

[Operator]

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

[Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group]

Congratulations on the nice progress. With the uptick in acceleration in digital and store sales that you saw this quarter, what how the marketing obviously is very effective. How do you think about marketing by channel and what you're what you're looking at? And as you look even towards next year a little bit, remodels of stores, opening new stores, what do you see as as the balance of where you're looking to show up given the competitive moat that you're building around the Coach brand? Thank you.

[Joanne Crevoiserat, CEO at Tapestry]

Well, maybe I'll kick it off and then toss it to Todd to give you some details on Coach specifically. But appreciate you noting that we grew on our direct channels. We think our direct business is a competitive advantage, Dana. And we do we are able, through our direct business, to meet consumers wherever they are. And that includes having the strong digital capabilities, as well as really compelling in store experiences.

[Joanne Crevoiserat, CEO at Tapestry]

So we grew in both channels this quarter, strong growth in digital and growth in stores and at increasing profitability across channels. So we think that's a competitive advantage for us. And we care about the experiences that we deliver to consumers in each of those channels, making sure that those channels are fit for purpose in terms of how the customer interacts with our associates, their discovery, their brand discovery, the inspiration we provide. So we spend a lot of time on that. And you asked about our media investments, and I would say marketing overall.

[Joanne Crevoiserat, CEO at Tapestry]

We talk a lot about the fact that we've increased our marketing and brand building investments over time. I think I went back to pre pandemic levels. We were at 3% to 4% of our sales at one time, and we're approaching 10% of our sales now invested in marketing and brand building. And as we built the capabilities, the brand building capabilities and the experience and expertise to drive these investments into places that are driving high return, we are very intentional about those media investments, and where we show up with what content, and based on where the customer is in their journey. And that's not something we'll ever be done with.

[Joanne Crevoiserat, CEO at Tapestry]

This is a process of continuing to improve our execution behind our media strategies and investments. What I can say, what is on display, is the compounding effect of these strategies. And you can see that at Coach. As we continue to hone those capabilities, we're seeing the compounding effect of the brand building and the brand heat we're driving at Coach, in addition to all the other things that need to come together to deliver a great customer experience, including the creativity and product and the store experience and the digital experiences. And we're investing in store experiences as well.

[Joanne Crevoiserat, CEO at Tapestry]

And maybe I'll toss it to Todd and he can share a little bit about some of the excitement that's happening there.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Thanks, Joanne. And one thing about the marketing is Joanne noted, historically, Coach spent about 3% today. We're as Joanne said, we're spending 10%. I will say over the last couple of years, we've refined our thinking. We've gotten so much better at this.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

We are really spending across the funnel and we're elongating our stories to have deeper, richer stories because to cut through one of the things we talk a lot about is you have to create sustainability and constant messaging. So years ago, we would have new messaging every month. Today, we fundamentally do two campaigns annually and drive that recall over and over a goal. So we talk about spike spike and sustain is something we're doing very well. In terms of the physical locations, it's very interesting.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Gen Z particularly, and and maybe it's because so many of their formative years were in, you know, COVID restrictions. They love being in stores. They love experiential retail. So you're you've seen us roll out some new concepts like Coach Play. You've seen us lean into food and beverage with the Coach coffee shops that we started in Asia and now we're bringing to The US.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

And you're gonna see us again continue to evolve our store design to speak in an authentic way, in an approachable way to this younger consumer, but also in a luxury way. We believe in this concept of expressive luxury. Expressive luxury doesn't lose sight of the luxury component of what we do because our product, have fashion shows, our creative director is always thinking about new ideas, new concepts. We're not following trends, we're creating trends. So we feel very good about where coaches and what we'll do in the future.

[Operator]

Our next question is from Mark Altschwager of Baird. Your line is open.

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Good morning. Thank you for taking my question. First, with Coach, was hoping to get a little bit better sense of some of the regional drivers. Is it the same product that's hitting at the same time across the globe here? And then China, obviously, momentum currently.

[Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co]

Just how are you navigating the risk of consumers potentially souring on U. S. Brands? Thank you.

[Joanne Crevoiserat, CEO at Tapestry]

Well, maybe I'll pick up the last part of your question and start with China. And then I'll toss it to Todd for the regional, the broader regions for Coach. But to your point, our business accelerated in Greater China in the third quarter, growing mid single digits. We're seeing that broad based growth, Growth in digital and in stores across city tiers. And we are driving Gen Z acquisition.

[Joanne Crevoiserat, CEO at Tapestry]

I will say, that's in a market, to your point, that has been in our category pressured. Some of the numbers we see is that the market was down double digits in our category, but yet we're growing. And we're doing that because we're acquiring a new and younger consumer, and we're delivering incredible value and innovation to that consumer. And it is a discerning consumer in China, and we're seeing momentum building there. So we continue to see China as an important region.

[Joanne Crevoiserat, CEO at Tapestry]

We're confident in the long term opportunity, And we're staying close, importantly, staying close to consumers so that we can read and deliver what they want, what they need. And we're not seeing any signs in our business or in our global consumer work of pressure on anti American sentiment. Again, we're seeing strong engagement from consumers, continued new customer acquisition, and we're delivering growth in China. And in China, we expect to deliver low single digit growth for the year with continued acceleration in the fourth quarter. So our business is on track in China.

[Joanne Crevoiserat, CEO at Tapestry]

We have great teams on the ground building the business. We were just there a few weeks ago talking to the teams in the region, and we feel good about the opportunities ahead. And now I'll toss it to Todd to talk about maybe more color on China, but also what's happening in the other regions.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

Yes, thank you, Joanne. One of I think the reasons we're winning is we redid our strategy on regionalization. A great bag is a great bag everywhere. And Tabby and Empire and Terry, these are winning with our target consumer because of first the fact that we're going after and we have clarity, we have a muse, our creative, our marketing people are always going after the customer and the value has been well translated across all regions. One data point that gives us confidence, Gen Z are the most homogeneous generation, ever to come about because what they're seeing when we put Bella Hadid and put a bag on her that looks compelling.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

It's compelling in Shanghai. It's compelling in Paris. It's compelling in New York and it's desirable. And what that allows us to do is take our marketing dollars instead of constantly trying to regionalize stories, and spread it so thinly. We're able to concentrate and it's a little bit of a merchandising fallacy to believe that every business unit needs a 30% tail of product.

[Todd Kahn, CEO & Brand President of Coach at Tapestry]

So one of the things we did five years ago, we started to cut the tail of that special product that gives us that creates that beautiful coach economics flywheel of more gross margin, less markdown, more focus on like product that allows us to lean in on what's winning globally. So we feel very good about this strategy and it is working and it allows us to capture new customers globally.

[Operator]

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

[Joanne Crevoiserat, CEO at Tapestry]

Well, I to close by first thanking our exceptional global teams for not only delivering a standout third quarter, but for the strong results they've consistently delivered over the last five years. As you heard, we accelerated top and bottom line growth in the third quarter and raised our outlook for the year, showcasing the strength and resiliency of our brands and our business. And while the environment is uncertain, we are well prepared and well positioned. We have momentum, strong margins and cash flow, a flexible direct to consumer model and agile supply chain, and we offer compelling value at global scale. These advantages are underpinning our success today, and I'm confident they will continue to drive durable growth into the future.

[Joanne Crevoiserat, CEO at Tapestry]

Thank you, everyone, who joined us today for your interest in our story. Thanks, and have a great day.

[Operator]

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

Participants

Executives

• Christina Colone, Global Head of Investor Relations
• Joanne Crevoiserat, CEO
• Scott Roe, CFO & COO
• Todd Kahn, CEO & Brand President of Coach

Analysts

• Ike Boruchow, Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo
• Lorraine Hutchinson, Managing Director at Bank of America
• Matt Boss, Equity Research Analyst at JP Morgan
• Michael Binetti, Senior Managing Director at Evercore ISI
• Brooke Roach, Vice President - Equity Research at Goldman Sachs
• Rick Patel, Managing Director at Raymond James Financial
• Dana Telsey, CEO and Chief Research Officer at Telsey Advisory Group
• Mark Altschwager, Senior Research Analyst at Robert W. Baird & Co