Chief Executive Officer at Tapestry
Good morning. Thank you, Kelsey and welcome, everyone. I'm pleased to report that the strong momentum we saw throughout last year has accelerated further in the first quarter with our sales now 9% above pre-pandemic levels. Our operating margin has improved 8.5 points compared to fiscal year '20 even as we've reinvested in key growth drivers for our business. The fundamental changes we've made to the Acceleration Program to transform Tapestry and our brands have enabled our teams to act with agility to drive highly effective customer engagement and support increasing demand.
This performance also reaffirms our confidence in our differentiated platform. Our three unique brands are enabled by our talented teams, technology infrastructure, globally diversified supply chain and a 90% direct to consumer model. These assets coupled with our growing data and consumer insights capabilities have fueled more targeted product development, more efficient pricing and more effective marketing, all of which support accelerating revenue higher gross margin, improving profitability and most importantly, stronger connections with our customers.
Now turning to the highlights from the first quarter. We continue to make meaningful progress against the Acceleration Program by sharpening our focus on the consumer leveraging data to lead with a digital first mindset and transforming Tapestry into a more responsive organization. First, we kept the consumer at the forefront of our strategy which drove further increases in customer recruitment. In fact, we acquired approximately 1.6 million new customers across our direct channels in North America, an increase of 20% with growth in both stores and online. Second, we leveraged our unique data and analytics capabilities to enhance engagement with our consumers. As a result, retention improved year-over-year at each brand, including strong re-engagement with the 4 million customers acquired last year in our North America digital channels.
In addition, we drove a higher number of repeat transactions and reactivated lapsed customers at an increasing rate. These examples highlight the advancements we've made to utilize customer insight to increase engagement with our brands and drive higher lifetime value. Third, we enhanced our expertise in the digital channel, a margin accretive business across brands. We've made significant investments including in talent to improve the customer experience and drive conversion. As a result, we realized a sequential acceleration in e-commerce revenue trends in the quarter, a meaningful achievement as we lap difficult online comparisons from last year.
Sales rose close to 50% with digital penetration now nearly 4 times pre-pandemic levels. At the same time, trends across our global store fleet again improved with operating margins that continue to exceed pre-pandemic levels. Fourth, we further strengthened our positioning in China, a region that represent significant long-term opportunity supported by the rising middle class. While I'll cover resurgences during the quarter, impacted traffic across the industry, we delivered sales growth of over 25%. Compared to pre-pandemic levels, sales increased roughly 65% accelerating versus the prior quarter. And importantly, we grew on both the Mainland and with Chinese consumers globally, which increased at a low double-digit rate versus fiscal year '20. And fifth, we increased global AUR at each of our brands, reflecting traction with our customer base and the deliberate structural changes we've made to reduce promotional activity and improve assortment productivity.
Now, let me touch on the first quarter highlights for each of our brands. Coach delivered another exceptional quarter, accelerating further often already strong base. Revenue rose 27% representing an increase of 15% compared to pre-pandemic levels or a 13 point sequential improvement. Operating margin expanded fueled by gross margin, which reached nearly 75%, the highest rate in any quarter in the last 10 years. These results are a testament to the increasing brand heat and strong customer demand and engagement we're seeing at Coach, highlighting progress against the brand's fiscal year '22 growth strategies. First, we drove another quarter of AUR gains as we benefited from strengthening pricing power and our deliberate actions to improve SKU productivity and lower promotional activity. Globally, Coach's handbag AUR increased high-single digits in both the retail and outlet channels. In addition, we achieved the 10th consecutive quarter of AUR improvements in North America, which rose low double digits. This continued improvement reflects our pricing power and strong engagement with consumers as we focus on enhancing customer lifetime value. In the quarter, we acquired over 900,000 new customers across our North America channels, a high-teens increase compared to the prior year.
At the same time, purchase frequency rose versus last year. Second, we continue to develop our iconic families to create a foundation for our product pipeline in future seasons with notable strength in key families such as Tabby and Rogue. In addition, we are led by Stuart Vevers creative vision who is building on 80 years of iconic Coach codes, notably the Signature C and Horse and Carriage, both of which have supported increasing sales across all channels. Third, we increased investments and drove stronger returns in marketing, leveraging our data capabilities to drive outsized growth in our digital business.
In the first quarter, e-commerce increased over 60% representing a sequential improvement on both a one and two-year basis underscoring the significant opportunity that this channel represents. Fourth, we again drove growth in China. Sales rose over 25% compared to last year with improvements across stores and e-commerce as we diversify our approach to meet the customer where they want to shop. This includes better leveraging existing platforms and establishing relationships with new online forums. As we build on the strength of our brand and our positioning with the emerging middle class, we continue to see tremendous long-term potential in China. And fifth, we outperformed in the men's business, in keeping with our ambition to deliver $1 billion in sales in the category over our planning horizon. In the quarter, we reinvigorated some of our iconic leather good silhouettes infusing camo print in retail and a basquiat collaboration in outlet.
In summary, Coach continues to stand out even amid external pressures. Customers are engaging with the brand at an increasing rate given the traction of our product and marketing. We're driving continued momentum as we enter the important holiday quarter. The brand has proven that the foundational changes we've made are working and our results are sustainable. We are increasingly confident in our ability to drive both revenue and profit gains for fiscal '22 and beyond.
Now moving to Kate Spade. The brand continued to make steady progress against the strategic priorities and outperformed internal expectations across the P&L. We built on the increasing traction we're seeing with consumers which drove top line improvement during the quarter. Importantly, direct sales excluding wholesale increased mid-single digits versus pre-pandemic levels, a sequential improvement compared to the fourth quarter. These results confirm that the growth strategies we're executing to return Kate Spade to its roots and improve the underlying foundation of the brand are taking hold.
In the quarter, we maintained a consumer-centric approach in our execution acquiring over 650,000 new customers across channels in North America, a significant increase over last year. At the same time, we reactivated lapsed customers with outsized growth among those customers left over three years reflecting a renewed connection with our core customers and confirming the efforts to clarify the brand's positioning are gaining traction. Second, we continue to build out our core product offering by amplifying key platforms.
Most notably, the Knot and Spade Flower again outperformed expectations and act as strong foundations for future growth. The strength of these recent introductions coupled with deliberate actions to improve full price selling and pull back on promotional activity fueled another quarter of global handbag AUR growth, which rose low double digits. The progress we've made has increased our confidence in Kate Spade's pricing power as we deepen our connection with consumers and execute on our strategic agenda. Third, we drove brand heat by deploying marketing centered on our Kate Spade community and leaning into our DNA as a best-in-class storytelling brand. We employed new ways of reaching our customers including a variety of social media platforms and re-imagined an uniquely Kate Spade approach to New York Fashion Week, which featured a pop up Apple Orchard in downtown Manhattan incorporating our iHeart New York collection.
Fourth, we maximized our lifestyle positioning by continuing to strengthen the foundation of ready-to-wear, footwear and jewelry, all of which outperformed our expectations. Overall, the brand's differentiated and broad offering supports our goal to increase lifetime value as those customers buying lifestyle products tend to purchase more frequently and spend more. And fifth, we utilized our already strong digital platform to continue to grow e-commerce sales, which rose over 15% in the quarter as we test, learn and scale innovative and new ways to engage the consumer online.
In closing, we're leading with our values to strengthen the emotional connection with our passionate Kate Spade community. We are excited by the brand's progress and our solid performance underscores that we have the right strategy in place. We have significant [Technical Issues] in our ability to achieve $2 billion in revenue at high teens operating margins over the planning horizon.
Turning now to Stuart Weitzman. The brand has made continued progress towards achieving our overarching goal of restoring profitability in the current fiscal year. To achieve this, we advanced our growth strategies in the quarter. First, we improved operating margin compared to prior year further increasing our confidence in a return to profitability this year. This was driven by continued outperformance in high growth areas including digital and China. Our e-commerce channels rose over 30% globally driven by customer experience upgrade to improve conversion. And in China, a market that remains a significant opportunity for the brand, revenue increased over 25%. Second, we recruited an increasing number of new customers compared to last year and drove higher retention rates overall. The consumer remains at the forefront of our strategy as we capitalize on shifting market trends. Most notably, the return to in-person socialization and the growing need for occasion and dressy footwear. At the same time our iconic collections continued to resonate. Notably, the Nudist [Phonetic] family, which brought an increasing number of new and younger customers to the brand.
Third, we drove brand heat through a tailored offering supported by marketing actions to engage the consumer. Stuart Weitzman's momentum was evidenced by a return to AUR growth which rose low double digits compared to prior year reflecting deliberate actions to lower promotional activity as well as select price increases, which we intend to continue on a strategic basis. This was a key driver of the gross margin expansion of over 250 basis points. Fourth, we strengthened our wholesale partnerships, specifically with key domestic full price partners resulting in high-teens growth in the channel.
Overall, our solid execution is evidenced by our improving financial performance. We're laser focused on the consumer by offering compelling product and marketing to enhance customer engagement and increase our productivity in key regions and channels. This in turn will support our goal to restore profitability in fiscal '22.
Now turning to the overarching strategies for the holiday quarter. The consumer backdrop is healthy and our recent internal survey work in North America highlights for the handbag and footwear categories remained strong. We're remaining nimble on keeping the customer at the center of our priorities. First, we are controlling the factors within our control and playing offense. We've moved quickly and taken bold and deliberate actions to mitigate industry wide inventory constraints. We're also messaging to customers earlier in the holiday season to elongate the shopping period and capture demand early. Importantly, we will be maintaining our disciplined around discounting and selectively increasing prices as we lead with messaging on innovation and value over price. Separately, we are creating engaging omnichannel customer experiences as in-store traffic continues to improve and online engagement increases.
Across brands, we're employing exciting initiatives to surprise and delight consumers during this important shopping period. At Coach, we've kicked off the holiday season in a truly iconic fashion with our recreation of Jennifer Lopez's All I have video, nearly two decades after the original, featuring our signature code. At Kate Spade, we're creating magical holiday moment with our, To All a Sparkly Night collection which captures the sense that the little things can be life's biggest indulgences.
And at Stuart Weitzman, our recently launched campaign featuring, Kate Hudson arrives just in time for the start of the holiday season as well as celebrations for our 35th anniversary. Overall, our first quarter results in the momentum we're delivering are evidence that our strategy, led by the acceleration program is working. We've radically transformed our Company realizing material operating margin improvement while fueling investments in key growth areas of our business. We're largely a direct-to-consumer business with a digital first mindset building a deeper understanding of our customers. We're utilizing these capabilities, along with the additional benefits of our multi-brand platform to drive even further growth at Coach and accelerate the trajectory of both Kate Spade and Stuart Weitzman over our planning horizon. I'm encouraged by the growing vibrancy of each of our brands and the strengthening engagement with consumers, backed by the work of our talented and passionate teams.
Our confidence is underscored by the stronger outlook for fiscal year '22 and additional shareholder return plans announced today. We've entered the second quarter with momentum and have proactively put in place plans to deliver for our customers, this holiday season and into the New Year. We are well positioned to capture market share at structurally higher operating margin in the years to come, creating significant value for all our stakeholders.
With that, I'll turn it over to Scott, who will discuss our financial results, capital deployment priorities and fiscal year '22 outlook. Scott?