TAPESTRY, INC. — Call Transcript 2025

Today, 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 Colone. Good morning. Thank you for joining us. With me today to discuss our fourth quarter and full-year results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Please refer to our annual report on Form 10-K, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance. Non-GAAP financial measures are included in our comments today and in our presentation slides. For a full reconciliation to corresponding GAAP financial information, please visit our website www.tapestry.com/investors, and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brand. Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. Following that, we will hold a question and answer session where we will be joined by Todd Kahn, CEO and Brand President of Coach. After Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO. Good morning. Thank you, Christina, and welcome, everyone. Fiscal 2025 was truly a breakout year for Tapestry. We delivered $7 billion in revenue, an operating margin of 20%, and $5.10 in adjusted EPS, all growing meaningfully versus prior year. Notably, we also achieved key targets we set at our Investor Day three years ago, namely to achieve over $5 in earnings, return more than $3 billion cumulatively to shareholders, and drive best-in-class total returns. We delivered these results in the context of a rapidly evolving and uncertain macroeconomic landscape, reinforcing that our business and our exceptional teams are resilient, agile, and built for growth. Our record results are more than numbers. Our success showcases that our strategies are working and that our systemic approach to brand building is capturing a new generation of consumers around the world. Touching on the strategic highlights of the quarter and year, we powered global growth, delivering accelerated gains and outpacing the industry in our key regions of North America, China, and Europe. We did this by building lasting customer relationships, highlighted by strong new customer acquisition. During the year, we acquired over 6.8 million new customers in North America alone, fueled by growth of Gen Z and Millennial cohorts. We are creating emotional connections and reaching new young consumers as they enter our category, key to driving lifetime value and healthy, durable growth. We also delivered compelling omnichannel experiences, engaging with consumers wherever they interact with our brands to drive direct-to-consumer growth across channels. Our modern technology platform allows us to bring data-driven insights to our work. In a world that is increasingly powered by digital, our human connections have never been more important. Together, they are the foundation of our proven and profitable direct-to-consumer business model that is a core competitive advantage. Finally, we brought fashion innovation and product excellence to customers throughout the year, fueling brand relevance and desire led by Coach, where our brand heat and momentum are strong and growing. This is evident in our continued gains in AUR and gross margin. The creativity, craftsmanship, and value we offer to consumers at scale have been and will continue to be differentiators of our brands and business. As we look forward, we have proven our ability to navigate a complex and dynamic external backdrop. We will continue to execute, leveraging the power of our competitive and structural advantages, our global scale, our compelling value proposition, and the strong fundamentals of our business. Now, moving to our results and strategies by brand, starting with Coach. Coach is a storied 85-year-old brand, and this fiscal year was the strongest in history. Our success is rooted in our brand-building capabilities. We've been intensely focused on understanding our target Gen Z consumer and creating emotional connections that fuel brand desire, which have allowed us to reimagine a heritage brand for modern consumers. Coach is redefining what's possible when you blend consumer obsession with disciplined brand building and creativity. This is translating into compounding and durable growth. For the year, Coach delivered a 10% increase in revenue at strong margins, capped by 13% constant currency top-line gains in the fourth quarter, with double-digit growth across our key markets, with North America up 16%, China up 22%, and Europe up 12%. Our global growth, led by outperformance in our core leather goods offering, highlights that our unique, expressive luxury positioning is resonating around the world. This is evident in our strong customer acquisition results, as we welcomed over 4.6 million new customers to Coach in North America this year, with over 1 million new customers in the fourth quarter, of which nearly 70% were Gen Z and Millennials. Importantly, these customers are transacting at higher AUR and have a higher retention rate than the balance of our client base, demonstrating that these relationships are healthy and sticky. Now, touching on our fourth quarter results in more detail. First, we drove double-digit gains in leather goods, with broad-based growth across our offering. The iconic Tabby family continues to outperform and resonate with new and younger consumers. Our core Tabby Shoulder Bag 26 continued to anchor the offering, while Chain Tabby and Quilted Tabby remain global successes. Additionally, our New York family once again significantly exceeded expectations, proving to be a new and durable growth driver for the brand. Building on the strength of the New York platform in its first year post-launch, we're continuing to expand the Brooklyn and Empire collections while introducing new styles within the New York family, driving innovation and relevancy with our target consumer. Further, we grew our archival-inspired Coach Originals collection with a large Kiss Lock bag at $695, which in July once again sold out within minutes of launching online and within a day at stores, showcasing Coach's creativity and brand heat. Finally, our bag charms and straps also contributed to our momentum, providing consumers with further opportunities for personalization and customization, with the cherry bag charm remaining a particular Gen Z favorite as a way to enhance self-expression. Overall, Coach's growth in handbags and accessories continued to outperform the industry, demonstrating our innovation pipeline and the compelling value and craftsmanship we offer in the luxury market. With these advantages, we drove mid-teens handbag AUR growth for the quarter, led by North America. Further, handbag units also rose in the quarter globally and in North America, despite lower promotional activity at the brand. Looking forward, we expect gains in both AUR and units to drive our growth. Next, we grew our footwear business with a focus on sneakers, which drives lifetime value with our target Gen Z consumer. In the quarter, sneakers grew mid-single digits, led by the High Line and Soho sneaker families, which are driving momentum and selling at one compelling price point across all channels, another clear indicator that our One Coach strategy is working. Turning to marketing, we continued to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering. Coach's On Your Own Time campaign, featuring the spring 2025 collection and starring global ambassadors Elle Fanning, Nazha, Kōki, and Youngji Lee, continued to drive brand momentum across markets. Our sustained investment behind this campaign is in keeping with our strategy to deliver cut-through and continuous brand and product stories to consumers. We also added a second purpose campaign during the quarter, Not Just for Walking, in support of our Soho sneaker launch. The campaign was inspired by our consumer insights, showcasing what consumers want from a sneaker today in the many facets of their lives. Finally, we cultivated desire for Coach through unique, authentic, and immersive retail experiences. This is another example of how our teams are successfully turning insights into action. Our data continues to highlight that Gen Z consumers like to shop in the real world and in person, with engaging experiences. As a result, we've brought new store concepts, pop-ups, and food and beverage to consumers across the globe, expanding into non-traditional formats and locations to delight consumers and build interest for the brand. In addition, the learnings from this work will enable us to move with greater impact as we expand our store footprint and deliver new brand experiences in the future. In closing, Coach is driving standout results, guided by a clear brand vision to be the world's most inclusive, genuine, and loved fashion brand. Our fiscal year 2025 results highlight that we are building strong brand and cultural relevance, fostering emotional connections driven by product innovation and the creativity of our talented global teams, who are operating with excellence, focus, and intention. From these exceptional results and this position of strength, we are confident in the future for this powerful, iconic brand. Now, moving to Kate Spade. Our actions to reset the brand for durable growth are underway. In the fourth quarter, performance was pressured, as expected. Revenue decreased 13%, while bottom-line results reflected continued gross margin expansion, as well as strategic reinvestment in brand marketing. As we've shared, we are in the early stages of this turnaround and will be focused on key leading indicators of progress, informed by our experience at Coach. These include 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. We are tracking these KPIs with consistency and rigor, leaning in where we see traction and pivoting, if necessary, to ensure our success. Overall, we are deliberately resetting the brand and backing it with disciplined investments. While these actions will pressure revenue and profitability in fiscal year 2026, they are essential to strengthening the brand's foundation and unlocking sustainable, profitable growth for the long term. Now, let's touch on the quarter. Our first strategic priority is to fuel brand heat and relevancy by investing in marketing focused on our target Gen Z consumer. We took a step forward in the quarter with the launch of our spring campaign, featuring influential Gen Z celebrities Ice Spice and Charli D’Amelio. Initial reads were positive, with strong organic engagement and a lift in consideration, consistent with our goal to reestablish Kate Spade as a top-of-mind brand for our target consumer. Our second key strategy is to strengthen our handbag offering, simplifying and elevating our assortment anchored in blockbuster families. During the quarter, we amplified the Deco collection in retail and the Kayla in outlet, which were featured as the heroes of our marketing campaign. As a result, both families were the top-selling bags in their respective channels, over-indexing with new, younger consumers at strong AUR. We are bringing more innovation to the assortment while we streamline our offering, reducing handbag styles by over 30% by fall, allowing us to stand behind our big ideas with clarity and intention. Importantly, we are bringing deeper consumer insights and methodical consumer testing to all aspects of this work to ensure greater relevancy throughout our assortment. Next, we are focused on maximizing omnichannel cohesiveness with a compelling, consistent brand message across all consumer touchpoints. Alongside efforts to create a more compelling consumer journey, we remain focused on driving higher full-price selling, a building block to scale in a healthy way. In closing, fiscal year 2026 is a year of investment for Kate Spade. We are taking strategic and financial steps to reset Kate Spade for long-term growth, applying our brand-building learnings from Coach and aggressively leaning into action to turn around the brand. While a turnaround takes time, we are confident in our path forward and the brand's opportunity for healthy and profitable growth. Now, turning briefly to Stuart Weitzman. As previously announced, we completed the sale of the brand to Caleres on August 4th. This action was consistent with our commitment to be diligent stewards of our portfolio and disciplined allocators of capital. I want to thank the Stuart Weitzman teams for their work to support the brand and customers during this transition and wish them success as they build their next chapter of growth with Caleres. In closing, Tapestry achieved a record year as we are successfully connecting with a new generation of consumers around the world. Importantly, we capped our future speed agenda, exceeding earnings targets with our strongest growth year and momentum building in our business. While the external backdrop is increasingly complex, our growth proves that our competitive advantages enable us to adapt and thrive in any environment. Our foundation is strong and our focus is clear. Our performance underpins our confidence that we have the strategy, capabilities, and team in place to scale and win, with significant runway for growth and value creation. I look forward to sharing our roadmap for continued growth at our Investor Day next month. I'll now turn it over to Scott. Thanks, Joanne, and good morning, everyone. Looking back at our results for the fiscal year, we exceeded our outlook. Additionally, we delivered our earnings and capital return targets set at our last Investor Day three years ago. This is a testament to our disciplined execution and financial agility, reinforcing our strong foundation and commitment to durable long-term value creation. In the year, we delivered revenue growth of 5%, with 10% growth at Coach. We increased gross margins by 210 basis points, and we grew earnings per share by 19% versus last year, while accelerating investments into our brands. Turning to the details of the fourth quarter, I'll begin with a discussion of revenue trends on a constant currency basis. Sales increased 8% compared to the prior year and outperformed our expectations. These results reflect gains in North America and internationally. By region, North America sales increased 8% compared to the prior year, led by 16% growth at Coach. Importantly, both gross and operating margin in the region rose versus last year. In Europe, revenue grew 10% above last year, driven by growth in our direct channels with increased local consumer spend and strong new customer acquisition, notably with Gen Z. We continue to see significant opportunities to grow in the region, given our positioning, momentum, and low penetration in this large market. In greater China, revenue growth accelerated ahead of our expectations, increasing 18% with growth across all channels, including notable strength in digital. Our strong performance in China underscores our strategic initiatives and investments are working, and our business remains well-positioned for long-term sustainable growth. In Japan, sales declined 11% amid a challenging consumer backdrop, and in other Asia, revenue decreased 1% as growth in Australia, New Zealand, and South Korea was offset primarily by a decline in Malaysia. Now, touching on revenue by channel for the quarter, we grew in each channel while achieving strong and increasing profitability. Our direct-to-consumer business grew 6% compared to the prior year, which included a mid-teens percentage increase in digital revenue and a low single-digit increase in global brick-and-mortar sales. In wholesale, revenue grew in the quarter, in keeping with our expectations and strategy to find targeted opportunities to expand our brand's reach with consumers. Moving down the P&L, we delivered a record fourth-quarter gross margin of 76.3%, 140 basis points above prior year, driven by operational outperformance. Our strong gross margin is a core element of our value creation model, providing us with flexibility and fuel to drive sustainable growth. As we've seen in the year, AUR growth is driving roughly 2/3 of our margin improvement, with the balance coming from AUC, and we see both levers contributing to operational gross margin gains and into the future. Turning to SG&A, expenses rose 10%, driven by an increase in marketing expense, which was 13% of sales in the quarter, while we drove 120 basis points of leverage in the balance of the business. Taken together, operating margin increased 30 basis points in the quarter, driving profit expansion of 10% over the prior year, which was ahead of expectations. Our fourth-quarter EPS of $1.40 grew 12% over the prior year and exceeded our guidance. Now, turning to our shareholder return programs, in fiscal 2025, we returned $2.3 billion to shareholders, a testament to our strong organic business and robust cash flow generation. This includes $300 million in dividend payments and $2 billion in an accelerated share repurchase program. This program is expected to result in an average purchase price of about $78 per share. Before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities. We have two foundational commitments. 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. Consistent with this, the board authorized a 14% quarterly dividend increase for an anticipated annual rate in fiscal 2026 of $1.60 per share. 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 was on display in fiscal 2025 and remains a value creation driver going forward. Finally, utilizing our rigorous four 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. 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 2.5x. Now, turning to the details of our balance sheet and cash flows, we ended the quarter with $1.1 billion in cash and investments and total borrowings of $2.4 billion, representing net debt of $1.3 billion. This incorporated the paydown of bonds totaling approximately $300 million in April. At year-end, our gross debt to adjusted EBITDA was a full turn below our leverage target at 1.4x. Adjusted free cash flow for the year was an inflow of $1.35 billion, and CapEx and cloud computing costs were $153 million. Inventory levels at year-end were 4% above prior year, excluding $92 million of Stuart Weitzman inventory reflected in assets held for sale on our balance sheet. This included the strategic pull forward of receipts in light of the current trade landscape. Our inventory continues to be current and well-positioned globally and by brand. For fiscal 2026, we expect inventory levels to be modestly down year-over-year on a reported basis. Now, before turning to our guidance, as you saw in our press release, we recorded a non-cash impairment charge of over $850 million related to Kate Spade. This was based upon the current business trends, the outsized impact of tariffs, which disproportionately affects Kate Spade as the vast majority of its business is in the U.S., and the incremental investments we're making in support of profitable long-term growth. Now, moving to our guidance for fiscal 2026, which is provided on a non-GAAP basis. To start, I'd like to give some context by disaggregating the top-line momentum we're seeing in the business and our focus on supporting revenue growth from the current dynamics impacting our profitability in the fiscal year. First, on sales, our trends in the first quarter are strong, and in fact, we've accelerated into the new year, led by Coach, with stronger full-price selling. We are building the brand for continued healthy gains well into the future. This is our priority, and we're executing behind it. Having said that, we are facing greater than previously expected profit headwinds from tariffs and duties, with the earlier-than-expected ending of de minimis exemptions being a meaningful factor. In aggregate, the total expected impact on profitability this year from tariffs is $160 million, representing approximately 230 basis points of margin headwind. We're taking thoughtful actions to mitigate these impacts while continuing to deliver the compelling value, quality, and innovation that is foundational to our brands. We're leveraging our agile supply chain to optimize our global manufacturing footprint, minimizing our tariff exposure where possible. We're also working closely with our longstanding service providers to drive efficiencies. I remain confident in our ability to address these headwinds fully over time, given the strength of our business and the agility of our supply chain. Overall, we view our guidance as prudent and achievable. All in, we expect to drive continued mid-single-digit revenue growth on a pro forma basis, deliver strong operating margins above prior year, and return over $1 billion in capital to shareholders in the fiscal year. As we action our mitigation strategies on tariffs, we believe our longer-term earnings growth delivery will accelerate. Now, turning to the details, this guidance excludes Stuart Weitzman from fiscal 2026 expectations. For the fiscal year, we expect revenue to approach $7.2 billion. This represents pro forma revenue to grow at a mid-single-digit rate on both a nominal and constant currency basis, with FX planned to be an 80 basis point tailwind. Touching on sales details by region at constant currency on a pro forma basis, in North America, we expect revenue to increase mid-single digits. In addition, we expect growth in Europe in the area of 20%. In greater China, we expect to achieve high single-digit growth over the prior year. In Japan, we're forecasting a high single-digit decline, and in other Asia, we anticipate high single-digit gains. By brand, this guidance incorporates high single-digit growth at Coach at constant currency. At Kate Spade, we're embedding a high single-digit decline in revenue with sequential improvement planned in the second half of the year. In addition, our outlook assumes operating margin expansion. We anticipate gross margin to decline in the area of 70 basis points. This assumes operational gross margin expansion of 120 basis points, due primarily to improvements in AUR, slightly offset by an FX headwind of 20 basis points. Further, we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman. Offsetting these planned margin drivers is a 230 basis points headwind from incremental tariffs and duties, which incorporates the timing of policy implementation, product sell-through, and mitigating actions underway. For context, this is a headwind of $160 million in the fiscal year, which assumes we mitigate 30% of the annualized run rate of $235 million. On SG&A, we expect expenses to be approximately even with prior year, resulting in at least 100 basis points of expense leverage. This reflects our diligent expense control, partially offset by ongoing growth-focused investments in our strategic priorities. To this end, we expect marketing as a percentage of sales to increase around 80 basis points versus last year, reaching over 11% of revenue. We also realize a 20 basis point benefit to expenses from the sale of Stuart Weitzman. All in, this means operational SG&A leverage is expected to be at least 160 basis points. For some texture on operating profit by brand, we anticipate Coach will maintain its operating margin even with tariff pressure and continued brand investments. At Kate Spade, we expect a modest profit loss given the outsized tariff impacts and brand investments, as mentioned. Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $65 million. The tax rate is expected to be approximately 18%, and our weighted average diluted share count for the year is forecasted to be approximately 213 million shares, which includes the expectation for $800 million in share repurchases. Taken together, we expect EPS to be $5.30-$5.45, representing 4%-7% growth compared to last year, including over $0.60 of tariff and duty headwinds. Moving on, we anticipate adjusted free cash flow to approach $1.3 billion, and finally, we expect CapEx and cloud computing costs to be in the area of $200 million. We anticipate about 60% of the spend to be related to store openings, renovations, and relocations, with the balance primarily related to our ongoing IT and digital investments. Touching on the shaping for the year, to start, given the dynamic nature of the rapidly shifting market, it's important to note we could experience volatility by quarter, notably within profit, as tariff and duty impacts work their way through the P&L. Now, to our current assumptions, we expect pro forma constant currency revenue to increase high single digits in the first half and low single digits in the back half. For Q1 specifically, as mentioned, we've started the year strong with revenue trends accelerating at Coach. As a result, we're anticipating a low double-digit total sales gain in the quarter. This includes a 70 basis point tailwind from FX. Turning to margin, as we mentioned, we expect gross margin pressure for the year due entirely to tariff and duty headwinds, primarily in the second half. In Q1, we anticipate reported gross margins to increase by approximately 100 basis points. SG&A is expected to leverage both in the first and second halves, while in Q1 specifically, we expect slight deleverage on higher marketing expense. We expect operating margin expansion in the first half, driven by a Q1 increase of roughly 80 basis points. In the second half, operating margins are planned in line with prior year, despite tariff and duty pressure. Taking a prudent approach to our guidance, we expect EPS growth for the year to be led by the first half, with Q1 forecasted to grow by more than 20% to approximately $1.25. In closing, we delivered another record-breaking quarter and year, highlighted by strong top and bottom-line growth. We achieved over $5 in EPS and returned more than $3 billion to shareholders over the last three years, consistent with the targets we outlined at our last Investor Day. This showcases our differentiated and highly cash-generative business model that has proven agile, resilient, and adaptive to change. Moving forward, we are confident in our brands, our people, and our strategy. Our fundamentals are strong, and we have competitive and structural advantages that position us to drive durable growth and shareholder value in both the year ahead and for years to come. I'd now like to open it up and take your questions. Thank you. At this time, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw yourself from the queue, you may press star two. Our first question is from Brooke Roach of Goldman Sachs. Please go ahead. Good morning, Joanne, Scott, and Todd. Thank you for taking our question. Can you help us unpack your outlook for fiscal 2026 and what you're seeing in the business right now? Specifically, can you talk about the strength at Coach and your strategies to mitigate the impacts of tariffs over time? Thank you. Thank you, Brooke, and good morning. I'll kick us off and start with the breakout year we just delivered, which I think illustrates the power of our business model and our strategies. Just to recap, this year we delivered strong top-line results with an inflection to mid-single-digit growth well ahead of the industry, and we capped the year with an even stronger fourth quarter. Importantly, we did this at increasing margins, meaning that we're growing in a healthy way and in a durable way. We delivered earnings per share above $5, which was our commitment three years ago, amid an incredibly complex environment, which showcases the agility of our teams. Importantly, our momentum continued. The Coach business accelerated into the first quarter. This all points to the fact that we're driving durable growth. This is our focus, and we are executing. In terms of fiscal 2026, we expect continued growth. Our guidance calls for mid-single-digit top-line growth and mid to high single-digit earnings growth, inclusive of tariffs. We're clear-eyed about the environment. We're incorporating the latest news on tariffs, both in how it could pressure consumers as well as the impact on our business. Even with tariffs, we're continuing to expand our operating margin this year, and we're well-positioned to fully offset the impact of tariffs over time. We have momentum, and we see tremendous runway ahead. I'll turn it to Todd to talk about the strength he's seeing at Coach. Thanks, Joanne. Good morning. As we noted, in the fourth quarter, we grew 13%. What was important about our growth was it was broad-based in leather goods. We grew in the key markets that we focused on: North America, China, and Europe. We delivered a 10% total year-to-year growth, well ahead of the industry. What is even more impressive, I think, is where we're at right now. Our quarter to date, as Joanne mentioned, we've seen an acceleration from our exit rate in Q4. That acceleration is coming with lower promotions year-on-year. In the quarter, last quarter, we added 1 million new customers in North America. 70% were Gen Z and Millennials. Additionally, we added 1.7 million customers globally. This strong traction with younger consumers is our future. We then turn to innovation and the value we offer our customers. Let me talk about one specific bag that was mentioned in our prepared remarks, our Kiss Lock bag. That bag was launched by our Creative Director at last September's runway show. We've done two drops of that bag, and the last one sold out within hours. Since that last drop, we have 81,000 customers just in the United States who have registered to be notified when we're going to do another drop. In fact, last week, we added another 4,000 customers when Sarah Jessica Parker was featured carrying the bag in Just Like That. That's an example of the brand heat we're talking about. That's an example of the momentum that Coach has. When I look at that, I look at our investment in the brand, particularly over the last three years, and the resulting brand heat. This places us in the best position to continue to grow AURs and mitigate duties and tariffs. Thank you. Thank you both. I'll pass it on. Our next question is from Ike Boruchow of Wells Fargo. Please go ahead. Hey everyone, let me add my congrats. One for Joanne, one for Scott, I believe. Just again, back to the accelerate. I mean, clearly there's an acceleration in the business. You're guiding 1Q above what you reported for 4Q. Todd gave some helpful comments, but maybe Joanne, can you help us with the data or the new customer growth? Anything you look at that gives you confidence in an ability to kind of lap the robust comps that really began during the last holiday? Just curious how you kind of frame that. Then Scott, I just wanted to ask about tariffs. I think three months ago you gave some confidence in maintaining margin when you had about $90 million of headwind. Now it sounds like you've got more like $160 million with the new tariffs, but you're also kind of not guiding to mitigate any of that in your guide. I guess the question is, is that highly conservative? Do you still view an ability to maintain the margins as on the table? Has anything changed? Just curious your thoughts. Thank you. Thank you, Ike. Let me kick it off with your question around the consumer and new customer acquisition, which is a really important question. It is the foundation of our growth. It is the focus of our brands, to make sure that we're continually acquiring new customers to our brands. That focus and those brand-building capabilities, we've been building those for years. We're investing behind those capabilities, both in our technology infrastructure, but most importantly, the marketing investments that we're making. You see us continue to grow those investments. We expect to continue to acquire new customers to our brands. That is our focus. What is important is that we're seeing this young consumer gravitate to our brand so that the execution, particularly at Coach, is at a very high level, that the young consumer sees Coach as a brand for them in everything we do at every touchpoint. That is what's driving the customer acquisition. Importantly, we're seeing these customers come back with more frequency. Our retention rates on these young customers are actually higher than our other cohorts, which I think bodes well for the durability of our growth. We're going to capture these young customers at the point of market entry, and we're going to keep them and drive lifetime value. That is fuel for our future growth. It's a foundation that we will continue to build on with more new customer acquisition. That's how we're thinking about comping the comp. We're just building a foundation and getting stronger from here. Just before Scott answers, sorry, I just want to give you one little tidbit that maybe helps demonstrate this. We are killing it with bag charms. One of my questions was, I haven't seen a material move in UPT. What we found out when we dug and looked at the data is they're coming back more frequently. A young customer may buy the bag and then come back a week or two weeks later to actually buy a bag charm. That gives us two opportunities to interact with them. As Joanne and I have talked about in many calls, we have the best sales team in the world. Their ability to get them back in the store and sell them is so powerful in terms of our special sauce. I just want to throw that tidbit. I know Scott, you want to talk about tariffs and what we're going to do about them. I can't wait, Todd. Thanks for the pass-off. And Ike, I appreciate the way you asked the question, by the way, because you're exactly right. I mean, of the $0.60 that impacted or is impacting our guidance, 2/3 of that, if we just went back one quarter, were not in effect, right? In fact, just a couple of weeks ago, the early termination of the de minimis exemptions came into vision. You think about that $0.60, that's a one-time increase in cost, which is impacting our gross margins, but we have massive underlying strength even in our gross margins. I'll just remind you, our operating margins are guided to expand even with this $0.60. I guess you could say if not for tariffs, add $0.60 to this guide. That's not the reality, though, right? The tariffs are real and we're going to fight our way through it. One other perspective I would give you is, listen, we have momentum and the first word in supply chain is supply. We're not going to sacrifice service to our business. We have great momentum. We're taking share. We want to feed that momentum and we don't want to take any knee-jerk reactions based on a frankly dynamic and ever-changing environment here as it relates to tariffs and duties and the landscape. As we start to understand the rules of the game, I've never seen an organization that's better at playing that game and getting after it. I have every bit of confidence that our gross margins and operating margins will continue to expand as we move into next year and beyond. I can't wait to hopefully you'll come and see the model and get a muffin at our Investor Day in about three weeks or so. We'll give you more illumination into what that long-term guide path looks like. Thanks, guys. Our next question is from Matthew Boss of JPMorgan. Please go ahead. Great, thanks. Joanne, at the Coach brand and the continued strength of the business, how best to think about the inflection in units that you're seeing despite the impact of lower promotions? How do you see the go-forward interplay between AUR and units as both contributors to the revenue build? Scott, just on gross margin, could you give any elaboration on the phasing of gross margin for fiscal 2026 or any front half versus back half assumptions to consider? Thanks, Matt. I'm going to kick it off briefly, but then turn it to Todd because I'd like him to talk about the Coach brand and our unit growth. We have effectively reached the tipping point at Coach where we've done the work to build the brand and we're acquiring new and younger customers who are transacting at high AUR. We've cut the tail, the long tail of SKUs, and stepped away from promotional activity that had a drain on units over the last few years. Our business is incredibly healthy. Maybe with that, Todd, I'll let you finish the sentence. Thanks, Joanne. Yeah, I mean, not only did we cut the tail, but we're constantly improving it. It wasn't a one-and-done exercise that we did four years ago or five years ago. No, actually a little bit longer. We're constantly looking at our product offering, focusing and focusing. One of the things about telling deeper and richer stories is doing it on fewer big ideas. That's what's cutting through. Our guidance for the year has most of our growth coming through AUR growth. We believe units will continue to grow as well. It's very powerful for us. I am not interested in churn. We are interested in building long-term sustainable growth over the many years to come. That's how we're doing it. We're going to continue to do it that way. One thing you'll hear us talk about at our Investor Day, we're going to see we're back in the business of growing stores. Particularly in North America, you're going to see us talk about a growth in physical locations because one of the things our data points to is this younger consumer, they like being in the real world. They like shopping. They like interacting. That's how we can win. I'm excited by you'll see us grow, continue to grow AUR. We're far from done, but you'll start seeing us grow units as well. Yeah, and a nice tie-in as I give you a little illumination on the gross margin phasing. Just picking up where Todd left, you know, the advantage of our structurally high gross margins and the fact that we have a history of and a confidence in continuing to grow them is one of the things that makes that D2C work, right? The profitability of our stores continues to increase. That's really what's unlocking the opportunity for expansion and yet another growth factor as we look forward. I think we said a little bit of this in terms of the phasing, but think again about the impact of tariffs. We've got underlying operational gross margin strength led by the AUR that Todd just talked about. That happens throughout the year. Remember, I also said in the prepared remarks that we brought a little inventory in ahead. It'll take a while for that rabbit to work through the snake, right? As the tariffs become effective and we sell through the lower tariff goods in the first half, then in the second half, you'll start to see those higher tariff goods start to hit the P&L. You're going to see stronger gross margins in the first half. I think we guided to a little over 100 basis points in Q1, for example. That's really driven by the operational strength that's structural and ongoing. Then you'll see some of those tariffs start to hit in the second half. Your gross margins will be a little lower in the second half. The other thing I would say is as it relates to mitigation, as I said in my earlier comment to Ike, we've got a lot of plans in place. Now that we understand better the game board and what we're shooting for, those mitigation plans are well underway. Some of those are quick. A lot of them take a little longer. As we get into next year and beyond, you'll start to see more of those mitigations coming into effect in the gross margin line in 2027 and 2028. Great color. Best of luck. Yeah, thanks. Our next question is from Adrienne Yih of Barclays. Please go ahead. Great. Good morning. Let me add my congratulations. I guess I'll start with kind of from just a structural modeling question. The last time that Coach brand was at these types of gross margins and north of 30% operating margins was sort of about 2005, 2006. I know that the wholesale was a bigger portion of the business, but Joanne and Scott, can you talk about, and Todd, can you talk about structurally what is different today and what enables Coach to continue to kind of expand on both those line items? Can you also, Todd, talk about kind of pricing as a mechanism to mitigate the tariffs? I haven't heard a lot of discussion about that. I know you did take some pricing earlier in the year. Is there a plan for the fall season? Is there another plan perhaps for spring of next year? Thank you very much. Yeah. I'll go ahead. I think since it was mostly all Coach. While I wasn't here in 2005, I was here just shortly thereafter. We are a different company. We are more direct-to-consumer than in 2005. We have more geographic diversification than 2005. Back in that era, if you go pre-2010 through 2012, we really had, we were Japan and the U.S. Today, we have giant pillars of growth in China, in Asia, and now most recently you see us do tremendous growth in Europe. I think structurally we're in a far better place to deal with that. It's a different kind of company. Second, the innovation that we're bringing to the table in terms of product offering, Stuart has been with us for about 11+ years. I feel in some ways, and he and I just walked through the showroom, I get the benefit of seeing the showroom many seasons ahead of what you get to see. We both left there and saying, this is the best we've seen the brand ever. The consumer will vote. Hopefully, they'll be as enthusiastic, but we feel very good about that. In our history, in our DNA at Coach, we always talked about blending magic and logic. Today, under the Tapestry engine, we took that and put it on steroids. We are more data-driven. We have more insight. We don't lose sight of the magic, but the magic is informed magic. I feel very good. On price overall, we're going to continue to use our data to inform our pricing. That's important. Those opportunities, geography, channel, product mix is all working in our favor. Examples of the One Coach strategy, where we're bringing our collection product, Brooklyn, Tabby, other products like that into outlet stores, selling at full price. That gives you natural AUR growth. It enhances what's already in the outlets because at the end of the day, the consumer sees brands, not channels. We're winning across a multitude of dimensions that will continue to allow us to take price, focus on the customer, and grow from here. Great. Fantastic. Scott, one quick question. The $800 million that you're now targeting for our share repurchase activity, should we assume or think about that as this sort of new repo run rate? I know in the 2022 analyst day, there was this notion of a consistent $700 million annually. Thank you. Yeah, so you know, I can't really go beyond what we've said right now, which is $800 million is this year. Here's what I'd ask you to take away. We got a really strong profitability and cash flow profile. We're a full turn below our leverage target. We got a lot of firepower, right? We know that our repurchases have been and will continue to be part of the value creation equation. You know, $800 million is this year, and we'll be happy to give you an update in a few weeks at our Investor Day about a longer-term perspective. I hope you take away, Adrienne, that we're in a strong position, and we've got what I would argue is a shareholder-friendly capital allocation positioning here in a history of returning that cash to shareholders. Absolutely. Congratulations. See you in a month. Yeah, thanks, Adrienne. Due to the interest of time, callers need to limit themselves to one question. Our next question is from Lorraine Hutchinson of Bank of America. Please go ahead. Thanks. Good morning. I was hoping to ask for more details on the drivers of the 160 basis points of operating SG&A leverage this year, and then your thoughts on the longer-term opportunities to maintain that leverage, or if the store rollout might offset some of this in the out years. Yeah, that sounds like a me question. A couple of things. We did get a small benefit just foundationally from the Stuart Weitzman disposition, so, you know, roughly 20 basis points. I'll also tell you, we are increasing our investment in MAP spending or marketing, right? Off an already record high base, we're continuing to invest, and even with that, we're finding leverage across the SG&A line, and that's one of the reasons why we can talk about margin expansion for the year. A lot of it has to do with, you know, the productivity of the fleet that Todd just mentioned, right? As we sell through and we're increasing our full-price sales, we're increasing sales across all D2C channels, and when you do that, you get leverage in your four-wall cost. The profitability is up, as we said, and that's a great driver of cost. I would say on the, if you want to say, you know, air quotes, corporate costs, we're also being very diligent, and we're investing in those things we think that matter, and those would be things like understanding the consumer on a deeper level, things like, you know, our customer data, our data fabric, our AI initiatives, some of the things we're doing around data and analytics, and everything else, we're taking a pretty hard view and looking for efficiencies. That's the model, right? Invest in things that are difference-making, and we'll set up growth in the future, find efficiencies across the rest of the P&L, and that coupled with a nice acceleration in gross, top-line growth to mid-single digits, that sets up that flywheel that we've been talking about. Thank you. Thank you. Our next question is from Michael Binetti of Evercore. Your line is open. Hey guys, thanks for taking our question here and for all the details today. I'm guessing this one will go to you, Scott. Could you just unpack the commentary on de minimis as I think about our conversations through the quarter? I know you guys are doing some scenario planning around tariffs rates changing, but how are you guys leveraging de minimis in the past, and how does that change? Maybe how much of the 230 basis points is from de minimis? I think that's kind of the surprise here. I'm guessing that means perhaps that some warehousing capacity needs to move back into the U.S., or maybe just a thought on what that means operationally. I'll follow it just by saying maybe just Europe, the growth rate a little slower in fourth quarter relative to the first nine months. Maybe just context on that and then the reacceleration to 20%. Okay, without going too much in a rabbit hole, de minimis, as probably you're well aware, is really the ability to ship duty-free on e-commerce from outside of the U.S. and into the U.S. market. With the recent tax bill that was passed, it was scheduled to expire in 2027, which was our expectation until a couple of weeks ago when there was an executive order which accelerated the removal of de minimis. That was about a third of the $0.60 that we talked about. What does that mean? That $900 million that we talked about before now is bigger, right? You had goods coming into the U.S. that were duty-free, now they're subject to duty, and they get the full impact of that, the reciprocal tariffs that are now in effect, at least as we understand them at this point in time. That probably is a surprise to many. I don't know how many people are paying attention to de minimis, but that was an opportunity that we had taken advantage of. It was the law at the time, and now the law has changed. We have to address that. The good news is, as it relates to capacity and whatnot, as we think about our network, it's pretty agile and a combination of owned and 3PL. I'm not saying it's nothing, but our ability to manage within that is not a significant disruptor, and we have plans underway to take advantage of that. That's not going to be a significant cost or interruption of service issue as we go forward. It's just more work for our supply chain team. As it relates to the guide, this is a little different than we have typically guided in terms of philosophy, because usually what we do is we just say we're going to take the rates that we see and simply project those forward. We feel like as we're entering a new year and we have great momentum, as evidenced by our Q1 guide, we think it's prudent at this point in the year with the real estate of the entire year ahead of us and the full impact of tariffs and the dynamic environment out there to be prudent in our second half assumptions. We have done that, right? We've been a little conservative in the second half in light of the overall consumer backdrop. I want to be clear, it has nothing to do with the trajectory of our business. We're not seeing any change in the consumer reaction. In fact, we've seen an acceleration in Q1. Could we do better in the second half? Let's see. We feel like being prudent at this early stage in our full-year guidance is the right position. Yeah, just to jump in, the specific question on Europe, a slight reduction in Q4 versus what we were achieving before that is all intentional on our part. That is making sure that the wholesale accounts that we deal with are appropriate for the brand. That's us being very intentional. It doesn't indicate any kind of slowdown in consumer demand. Okay, thanks for the help. Yep. Our next question is from Paul Lejuez of Citigroup. Your line is open. Hey, thanks. It's Tracy Kogan filling in for Paul. As far as the acceleration you mentioned that's happening in 1Q, I was wondering if you could give a little more detail by region on that. Secondly, what is your guidance with Zoom in terms of the magnitude of price increases at the Coach brand? Thank you. Maybe I'll just comment on. The acceleration, yeah, go ahead. Go ahead, Scott. Yeah, go ahead. No, I was just going to say. The acceleration we're seeing is widespread, as Scott was saying. We both want to jump in on this because it's a fun party. The acceleration we are seeing is widespread. The Coach strategies are working globally, and we're driving our business globally. We're seeing nice customer response, and it's been very, very consistent in terms of acceleration. In terms of price increase, maybe Todd, I'll let you talk about what you're assuming for AUR growth in the year. Yeah, again, our AUR growth is projected to be mid to high single digit throughout the year. We feel very good about that growth when we really look at buy the bag, buy the style, buy the silhouette. Again, putting more first full-price product into outlet automatically lifts our AUR as well. We feel very good about the mix and where we can take AUR. Great, thank you. Thank you. That concludes our Q&A. I will now turn it over to Joanne Crevoiserat for some concluding remarks. Thank you, Leo. I want to close by thanking our exceptional teams for delivering another record year and share three important takeaways from our results. First, we deliver on our commitments. This is on display with our fiscal 2025 EPS of over $5, which we outlined three years ago. Our strategies are working, our business is agile and poised for growth, and we know this is key as we continue to build connections with consumers and execute with discipline in a dynamic landscape. Second, we have strong fundamentals and momentum highlighted by the double-digit growth we're seeing at Coach, which accelerated at the start of this year. Third, we have unique competitive and structural advantages to drive durable growth and shareholder value into the future. I want to thank everyone who joined us today for your interest in our story. Thanks and have a great day. This concludes Tapestry's conference call. We thank you for your participation.

Speaker 9: Today, 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 Colone. Today, and welcome to this Tapestry conference call. today and welcome to this tapestry conference call Today's call is being recorded. today's call is being recorded At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone. at this time for opening remarks and introductions i would like to turn the call over to the global head of investor relations christina colone

Speaker 3: Good morning. Thank you for joining us. With me today to discuss our fourth quarter and full-year results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Please refer to our annual report on Form 10-K, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance. Good morning. good morning Thank you for joining us. thank you for joining us With me today to discuss our fourth quarter and full-year results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. with me today to discuss our fourth quarter and full-year results as well as our strategies and outlook are joanne crevoiserat tapestry's chief executive officer and scott roe tapestry's chief financial officer and chief operating officer Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. 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. this includes projections for our business in the current or future quarters or fiscal years Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. forward-looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward-looking statements Please refer to our annual report on Form 10-K, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance. please refer to our annual report on form 10-k the press release we issued this morning and our other filings with the securities and exchange commission for a complete list of risks and other important factors that could impact our future results and performance Non-GAAP financial measures are included in our comments today and in our presentation slides. For a full reconciliation to corresponding GAAP financial information, please visit our website www.tapestry.com/investors, and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brand. Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. Following that, we will hold a question and answer session where we will be joined by Todd Kahn, CEO and Brand President of Coach. After Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO. Non-GAAP financial measures are included in our comments today and in our presentation slides. 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. 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. now let me outline the speakers and topics for this conference call Joanne will begin with highlights for Tapestry and our brand. joanne will begin with highlights for tapestry and our brand Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. scott will continue with our financial results capital allocation priorities and our outlook going forward Following that, we will hold a question and answer session where we will be joined by Todd Kahn, CEO and Brand President of Coach. following that we will hold a question and answer session where we will be joined by todd kahn ceo and brand president of coach After Q&A, Joanne will conclude with brief closing remarks. after q&a joanne will conclude with brief closing remarks I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO. i'd now like to turn it over to joanne crevoiserat tapestry's ceo

Speaker 7: Good morning. Thank you, Christina, and welcome, everyone. Fiscal 2025 was truly a breakout year for Tapestry. We delivered $7 billion in revenue, an operating margin of 20%, and $5.10 in adjusted EPS, all growing meaningfully versus prior year. Notably, we also achieved key targets we set at our Investor Day three years ago, namely to achieve over $5 in earnings, return more than $3 billion cumulatively to shareholders, and drive best-in-class total returns. We delivered these results in the context of a rapidly evolving and uncertain macroeconomic landscape, reinforcing that our business and our exceptional teams are resilient, agile, and built for growth. Our record results are more than numbers. Our success showcases that our strategies are working and that our systemic approach to brand building is capturing a new generation of consumers around the world. Good morning. good morning Thank you, Christina, and welcome, everyone. thank you christina and welcome everyone Fiscal 2025 was truly a breakout year for Tapestry . fiscal 2025 was truly a breakout year for tapestry We delivered $7 billion in revenue, an operating margin of 20%, and $5.10 in adjusted EPS, all growing meaningfully versus prior year. we delivered $7 billion in revenue an operating margin of 20% and $5.10 in adjusted eps all growing meaningfully versus prior year Notably, we also achieved key targets we set at our Investor Day three years ago, namely to achieve over $5 in earnings, return more than $3 billion cumulatively to shareholders, and drive best-in-class total returns. notably we also achieved key targets we set at our investor day three years ago namely to achieve over $5 in earnings return more than $3 billion cumulatively to shareholders and drive best-in-class total returns We delivered these results in the context of a rapidly evolving and uncertain macroeconomic landscape, reinforcing that our business and our exceptional teams are resilient, agile, and built for growth. we delivered these results in the context of a rapidly evolving and uncertain macroeconomic landscape reinforcing that our business and our exceptional teams are resilient agile and built for growth Our record results are more than numbers. our record results are more than numbers Our success showcases that our strategies are working and that our systemic approach to brand building is capturing a new generation of consumers around the world. our success showcases that our strategies are working and that our systemic approach to brand building is capturing a new generation of consumers around the world Touching on the strategic highlights of the quarter and year, we powered global growth, delivering accelerated gains and outpacing the industry in our key regions of North America, China, and Europe. We did this by building lasting customer relationships, highlighted by strong new customer acquisition. During the year, we acquired over 6.8 million new customers in North America alone, fueled by growth of Gen Z and Millennial cohorts. We are creating emotional connections and reaching new young consumers as they enter our category, key to driving lifetime value and healthy, durable growth. We also delivered compelling omnichannel experiences, engaging with consumers wherever they interact with our brands to drive direct-to-consumer growth across channels. Our modern technology platform allows us to bring data-driven insights to our work. In a world that is increasingly powered by digital, our human connections have never been more important. Touching on the strategic highlights of the quarter and year, we powered global growth, delivering accelerated gains and outpacing the industry in our key regions of North America, China, and Europe. touching on the strategic highlights of the quarter and year we powered global growth delivering accelerated gains and outpacing the industry in our key regions of north america china and europe We did this by building lasting customer relationships, highlighted by strong new customer acquisition. we did this by building lasting customer relationships highlighted by strong new customer acquisition During the year, we acquired over 6.8 million new customers in North America alone, fueled by growth of Gen Z and Millennial cohorts. during the year we acquired over 6.8 million new customers in north america alone fueled by growth of gen z and millennial cohorts We are creating emotional connections and reaching new young consumers as they enter our category, key to driving lifetime value and healthy, durable growth. we are creating emotional connections and reaching new young consumers as they enter our category key to driving lifetime value and healthy durable growth We also delivered compelling omnichannel experiences, engaging with consumers wherever they interact with our brands to drive direct-to-consumer growth across channels. we also delivered compelling omnichannel experiences engaging with consumers wherever they interact with our brands to drive direct-to-consumer growth across channels Our modern technology platform allows us to bring data-driven insights to our work. our modern technology platform allows us to bring data-driven insights to our work In a world that is increasingly powered by digital, our human connections have never been more important. in a world that is increasingly powered by digital our human connections have never been more important Together, they are the foundation of our proven and profitable direct-to-consumer business model that is a core competitive advantage. Finally, we brought fashion innovation and product excellence to customers throughout the year, fueling brand relevance and desire led by Coach, where our brand heat and momentum are strong and growing. This is evident in our continued gains in AUR and gross margin. The creativity, craftsmanship, and value we offer to consumers at scale have been and will continue to be differentiators of our brands and business. As we look forward, we have proven our ability to navigate a complex and dynamic external backdrop. We will continue to execute, leveraging the power of our competitive and structural advantages, our global scale, our compelling value proposition, and the strong fundamentals of our business. Now, moving to our results and strategies by brand, starting with Coach. Together, they are the foundation of our proven and profitable direct-to-consumer business model that is a core competitive advantage. together they are the foundation of our proven and profitable direct-to-consumer business model that is a core competitive advantage Finally, we brought fashion innovation and product excellence to customers throughout the year, fueling brand relevance and desire led by Coach, where our brand heat and momentum are strong and growing. finally we brought fashion innovation and product excellence to customers throughout the year fueling brand relevance and desire led by coach where our brand heat and momentum are strong and growing This is evident in our continued gains in AUR and gross margin. this is evident in our continued gains in aur and gross margin The creativity, craftsmanship, and value we offer to consumers at scale have been and will continue to be differentiators of our brands and business. the creativity craftsmanship and value we offer to consumers at scale have been and will continue to be differentiators of our brands and business As we look forward, we have proven our ability to navigate a complex and dynamic external backdrop. as we look forward we have proven our ability to navigate a complex and dynamic external backdrop We will continue to execute, leveraging the power of our competitive and structural advantages, our global scale, our compelling value proposition, and the strong fundamentals of our business. we will continue to execute leveraging the power of our competitive and structural advantages our global scale our compelling value proposition and the strong fundamentals of our business Now, moving to our results and strategies by brand, starting with Coach. now moving to our results and strategies by brand starting with coach Coach is a storied 85-year-old brand, and this fiscal year was the strongest in history. Our success is rooted in our brand-building capabilities. We've been intensely focused on understanding our target Gen Z consumer and creating emotional connections that fuel brand desire, which have allowed us to reimagine a heritage brand for modern consumers. Coach is redefining what's possible when you blend consumer obsession with disciplined brand building and creativity. This is translating into compounding and durable growth. For the year, Coach delivered a 10% increase in revenue at strong margins, capped by 13% constant currency top-line gains in the fourth quarter, with double-digit growth across our key markets, with North America up 16%, China up 22%, and Europe up 12%. Our global growth, led by outperformance in our core leather goods offering, highlights that our unique, expressive luxury positioning is resonating around the world. Coach is a storied 85-year-old brand, and this fiscal year was the strongest in history. coach is a storied 85-year-old brand and this fiscal year was the strongest in history Our success is rooted in our brand-building capabilities. our success is rooted in our brand-building capabilities We've been intensely focused on understanding our target Gen Z consumer and creating emotional connections that fuel brand desire, which have allowed us to reimagine a heritage brand for modern consumers. we've been intensely focused on understanding our target gen z consumer and creating emotional connections that fuel brand desire which have allowed us to reimagine a heritage brand for modern consumers Coach is redefining what's possible when you blend consumer obsession with disciplined brand building and creativity. coach is redefining what's possible when you blend consumer obsession with disciplined brand building and creativity This is translating into compounding and durable growth. this is translating into compounding and durable growth For the year, Coach delivered a 10% increase in revenue at strong margins, capped by 13% constant currency top-line gains in the fourth quarter, with double-digit growth across our key markets, with North America up 16%, China up 22%, and Europe up 12%. for the year coach delivered a 10% increase in revenue at strong margins capped by 13% constant currency top-line gains in the fourth quarter with double-digit growth across our key markets with north america up 16% china up 22% and europe up 12% Our global growth, led by outperformance in our core leather goods offering, highlights that our unique, expressive luxury positioning is resonating around the world. our global growth led by outperformance in our core leather goods offering highlights that our unique expressive luxury positioning is resonating around the world This is evident in our strong customer acquisition results, as we welcomed over 4.6 million new customers to Coach in North America this year, with over 1 million new customers in the fourth quarter, of which nearly 70% were Gen Z and Millennials. Importantly, these customers are transacting at higher AUR and have a higher retention rate than the balance of our client base, demonstrating that these relationships are healthy and sticky. Now, touching on our fourth quarter results in more detail. First, we drove double-digit gains in leather goods, with broad-based growth across our offering. The iconic Tabby family continues to outperform and resonate with new and younger consumers. Our core Tabby Shoulder Bag 26 continued to anchor the offering, while Chain Tabby and Quilted Tabby remain global successes. This is evident in our strong customer acquisition results, as we welcomed over 4.6 million new customers to Coach in North America this year, with over 1 million new customers in the fourth quarter, of which nearly 70% were Gen Z and Millennials. this is evident in our strong customer acquisition results as we welcomed over 4.6 million new customers to coach in north america this year with over 1 million new customers in the fourth quarter of which nearly 70% were gen z and millennials Importantly, these customers are transacting at higher AUR and have a higher retention rate than the balance of our client base, demonstrating that these relationships are healthy and sticky. importantly these customers are transacting at higher aur and have a higher retention rate than the balance of our client base demonstrating that these relationships are healthy and sticky Now, touching on our fourth quarter results in more detail. now touching on our fourth quarter results in more detail First, we drove double-digit gains in leather goods, with broad-based growth across our offering. first we drove double-digit gains in leather goods with broad-based growth across our offering The iconic Tabby family continues to outperform and resonate with new and younger consumers. the iconic tabby family continues to outperform and resonate with new and younger consumers Our core Tabby Shoulder Bag 26 continued to anchor the offering, while Chain Tabby and Quilted Tabby remain global successes. our core tabby shoulder bag 26 continued to anchor the offering while chain tabby and quilted tabby remain global successes Additionally, our New York family once again significantly exceeded expectations, proving to be a new and durable growth driver for the brand. Building on the strength of the New York platform in its first year post-launch, we're continuing to expand the Brooklyn and Empire collections while introducing new styles within the New York family, driving innovation and relevancy with our target consumer. Further, we grew our archival-inspired Coach Originals collection with a large Kiss Lock bag at $695, which in July once again sold out within minutes of launching online and within a day at stores, showcasing Coach's creativity and brand heat. Finally, our bag charms and straps also contributed to our momentum, providing consumers with further opportunities for personalization and customization, with the cherry bag charm remaining a particular Gen Z favorite as a way to enhance self-expression. Additionally, our New York family once again significantly exceeded expectations, proving to be a new and durable growth driver for the brand. additionally our new york family once again significantly exceeded expectations proving to be a new and durable growth driver for the brand Building on the strength of the New York platform in its first year post-launch, we're continuing to expand the Brooklyn and Empire collections while introducing new styles within the New York family, driving innovation and relevancy with our target consumer. building on the strength of the new york platform in its first year post-launch we're continuing to expand the brooklyn and empire collections while introducing new styles within the new york family driving innovation and relevancy with our target consumer Further, we grew our archival-inspired Coach Originals collection with a large Kiss Lock bag at $695, which in July once again sold out within minutes of launching online and within a day at stores, showcasing Coach's creativity and brand heat. further we grew our archival-inspired coach originals collection with a large kiss lock bag at $695 which in july once again sold out within minutes of launching online and within a day at stores showcasing coach's creativity and brand heat Finally, our bag charms and straps also contributed to our momentum, providing consumers with further opportunities for personalization and customization, with the cherry bag charm remaining a particular Gen Z favorite as a way to enhance self-expression. finally our bag charms and straps also contributed to our momentum providing consumers with further opportunities for personalization and customization with the cherry bag charm remaining a particular gen z favorite as a way to enhance self-expression Overall, Coach's growth in handbags and accessories continued to outperform the industry, demonstrating our innovation pipeline and the compelling value and craftsmanship we offer in the luxury market. With these advantages, we drove mid-teens handbag AUR growth for the quarter, led by North America. Further, handbag units also rose in the quarter globally and in North America, despite lower promotional activity at the brand. Looking forward, we expect gains in both AUR and units to drive our growth. Next, we grew our footwear business with a focus on sneakers, which drives lifetime value with our target Gen Z consumer. In the quarter, sneakers grew mid-single digits, led by the High Line and Soho sneaker families, which are driving momentum and selling at one compelling price point across all channels, another clear indicator that our One Coach strategy is working. Overall, Coach's growth in handbags and accessories continued to outperform the industry, demonstrating our innovation pipeline and the compelling value and craftsmanship we offer in the luxury market. overall coach's growth in handbags and accessories continued to outperform the industry demonstrating our innovation pipeline and the compelling value and craftsmanship we offer in the luxury market With these advantages, we drove mid-teens handbag AUR growth for the quarter, led by North America. with these advantages we drove mid-teens handbag aur growth for the quarter led by north america Further, handbag units also rose in the quarter globally and in North America, despite lower promotional activity at the brand. further handbag units also rose in the quarter globally and in north america despite lower promotional activity at the brand Looking forward, we expect gains in both AUR and units to drive our growth. looking forward we expect gains in both aur and units to drive our growth Next, we grew our footwear business with a focus on sneakers, which drives lifetime value with our target Gen Z consumer. next we grew our footwear business with a focus on sneakers which drives lifetime value with our target gen z consumer In the quarter, sneakers grew mid-single digits, led by the High Line and Soho sneaker families, which are driving momentum and selling at one compelling price point across all channels, another clear indicator that our One Coach strategy is working. in the quarter sneakers grew mid-single digits led by the high line and soho sneaker families which are driving momentum and selling at one compelling price point across all channels another clear indicator that our one coach strategy is working Turning to marketing, we continued to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering. Coach's On Your Own Time campaign, featuring the spring 2025 collection and starring global ambassadors Elle Fanning, Nazha, Kōki, and Youngji Lee, continued to drive brand momentum across markets. Our sustained investment behind this campaign is in keeping with our strategy to deliver cut-through and continuous brand and product stories to consumers. We also added a second purpose campaign during the quarter, Not Just for Walking, in support of our Soho sneaker launch. The campaign was inspired by our consumer insights, showcasing what consumers want from a sneaker today in the many facets of their lives. Finally, we cultivated desire for Coach through unique, authentic, and immersive retail experiences. This is another example of how our teams are successfully turning insights into action. Turning to marketing, we continued to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering. turning to marketing we continued to drive cultural relevance through emotional storytelling that highlights our brand purpose and product offering Coach's On Your Own Time campaign, featuring the spring 2025 collection and starring global ambassadors Elle Fanning, Nazha, Kōki, and Youngji Lee, continued to drive brand momentum across markets. coach's on your own time campaign featuring the spring 2025 collection and starring global ambassadors elle fanning nazha, kōki and youngji lee continued to drive brand momentum across markets Our sustained investment behind this campaign is in keeping with our strategy to deliver cut-through and continuous brand and product stories to consumers. our sustained investment behind this campaign is in keeping with our strategy to deliver cut-through and continuous brand and product stories to consumers We also added a second purpose campaign during the quarter, Not Just for Walking, in support of our Soho sneaker launch. we also added a second purpose campaign during the quarter not just for walking in support of our soho sneaker launch The campaign was inspired by our consumer insights, showcasing what consumers want from a sneaker today in the many facets of their lives. the campaign was inspired by our consumer insights showcasing what consumers want from a sneaker today in the many facets of their lives Finally, we cultivated desire for Coach through unique, authentic, and immersive retail experiences. finally we cultivated desire for coach through unique authentic and immersive retail experiences This is another example of how our teams are successfully turning insights into action. this is another example of how our teams are successfully turning insights into action Our data continues to highlight that Gen Z consumers like to shop in the real world and in person, with engaging experiences. As a result, we've brought new store concepts, pop-ups, and food and beverage to consumers across the globe, expanding into non-traditional formats and locations to delight consumers and build interest for the brand. In addition, the learnings from this work will enable us to move with greater impact as we expand our store footprint and deliver new brand experiences in the future. In closing, Coach is driving standout results, guided by a clear brand vision to be the world's most inclusive, genuine, and loved fashion brand. Our fiscal year 2025 results highlight that we are building strong brand and cultural relevance, fostering emotional connections driven by product innovation and the creativity of our talented global teams, who are operating with excellence, focus, and intention. Our data continues to highlight that Gen Z consumers like to shop in the real world and in person, with engaging experiences. our data continues to highlight that gen z consumers like to shop in the real world and in person with engaging experiences As a result, we've brought new store concepts, pop-ups, and food and beverage to consumers across the globe, expanding into non-traditional formats and locations to delight consumers and build interest for the brand. as a result we've brought new store concepts pop-ups and food and beverage to consumers across the globe expanding into non-traditional formats and locations to delight consumers and build interest for the brand In addition, the learnings from this work will enable us to move with greater impact as we expand our store footprint and deliver new brand experiences in the future. in addition the learnings from this work will enable us to move with greater impact as we expand our store footprint and deliver new brand experiences in the future In closing, Coach is driving standout results, guided by a clear brand vision to be the world's most inclusive, genuine, and loved fashion brand. in closing coach is driving standout results guided by a clear brand vision to be the world's most inclusive genuine and loved fashion brand Our fiscal year 2025 results highlight that we are building strong brand and cultural relevance, fostering emotional connections driven by product innovation and the creativity of our talented global teams, who are operating with excellence, focus, and intention. our fiscal year 2025 results highlight that we are building strong brand and cultural relevance fostering emotional connections driven by product innovation and the creativity of our talented global teams who are operating with excellence focus and intention From these exceptional results and this position of strength, we are confident in the future for this powerful, iconic brand. Now, moving to Kate Spade. Our actions to reset the brand for durable growth are underway. In the fourth quarter, performance was pressured, as expected. Revenue decreased 13%, while bottom-line results reflected continued gross margin expansion, as well as strategic reinvestment in brand marketing. As we've shared, we are in the early stages of this turnaround and will be focused on key leading indicators of progress, informed by our experience at Coach. These include 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. We are tracking these KPIs with consistency and rigor, leaning in where we see traction and pivoting, if necessary, to ensure our success. From these exceptional results and this position of strength, we are confident in the future for this powerful, iconic brand. from these exceptional results and this position of strength we are confident in the future for this powerful iconic brand Now, moving to Kate Spade. now moving to kate spade Our actions to reset the brand for durable growth are underway. our actions to reset the brand for durable growth are underway In the fourth quarter, performance was pressured, as expected. in the fourth quarter performance was pressured as expected Revenue decreased 13%, while bottom-line results reflected continued gross margin expansion, as well as strategic reinvestment in brand marketing. revenue decreased 13% while bottom-line results reflected continued gross margin expansion as well as strategic reinvestment in brand marketing As we've shared, we are in the early stages of this turnaround and will be focused on key leading indicators of progress, informed by our experience at Coach. as we've shared we are in the early stages of this turnaround and will be focused on key leading indicators of progress informed by our experience at coach These include 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. these include 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 We are tracking these KPIs with consistency and rigor, leaning in where we see traction and pivoting, if necessary, to ensure our success. we are tracking these kpis with consistency and rigor leaning in where we see traction and pivoting if necessary to ensure our success Overall, we are deliberately resetting the brand and backing it with disciplined investments. While these actions will pressure revenue and profitability in fiscal year 2026, they are essential to strengthening the brand's foundation and unlocking sustainable, profitable growth for the long term. Now, let's touch on the quarter. Our first strategic priority is to fuel brand heat and relevancy by investing in marketing focused on our target Gen Z consumer. We took a step forward in the quarter with the launch of our spring campaign, featuring influential Gen Z celebrities Ice Spice and Charli D’Amelio. Initial reads were positive, with strong organic engagement and a lift in consideration, consistent with our goal to reestablish Kate Spade as a top-of-mind brand for our target consumer. Our second key strategy is to strengthen our handbag offering, simplifying and elevating our assortment anchored in blockbuster families. Overall, we are deliberately resetting the brand and backing it with disciplined investments. overall we are deliberately resetting the brand and backing it with disciplined investments While these actions will pressure revenue and profitability in fiscal year 2026, they are essential to strengthening the brand's foundation and unlocking sustainable, profitable growth for the long term. while these actions will pressure revenue and profitability in fiscal year 2026 they are essential to strengthening the brand's foundation and unlocking sustainable profitable growth for the long term Now, let's touch on the quarter. now let's touch on the quarter Our first strategic priority is to fuel brand heat and relevancy by investing in marketing focused on our target Gen Z consumer. our first strategic priority is to fuel brand heat and relevancy by investing in marketing focused on our target gen z consumer We took a step forward in the quarter with the launch of our spring campaign, featuring influential Gen Z celebrities Ice Spice and Charli D’Amelio. we took a step forward in the quarter with the launch of our spring campaign featuring influential gen z celebrities ice spice and charli d’amelio Initial reads were positive, with strong organic engagement and a lift in consideration, consistent with our goal to reestablish Kate Spade as a top-of-mind brand for our target consumer. initial reads were positive with strong organic engagement and a lift in consideration consistent with our goal to reestablish kate spade as a top-of-mind brand for our target consumer Our second key strategy is to strengthen our handbag offering, simplifying and elevating our assortment anchored in blockbuster families. our second key strategy is to strengthen our handbag offering simplifying and elevating our assortment anchored in blockbuster families During the quarter, we amplified the Deco collection in retail and the Kayla in outlet, which were featured as the heroes of our marketing campaign. As a result, both families were the top-selling bags in their respective channels, over-indexing with new, younger consumers at strong AUR. We are bringing more innovation to the assortment while we streamline our offering, reducing handbag styles by over 30% by fall, allowing us to stand behind our big ideas with clarity and intention. Importantly, we are bringing deeper consumer insights and methodical consumer testing to all aspects of this work to ensure greater relevancy throughout our assortment. Next, we are focused on maximizing omnichannel cohesiveness with a compelling, consistent brand message across all consumer touchpoints. Alongside efforts to create a more compelling consumer journey, we remain focused on driving higher full-price selling, a building block to scale in a healthy way. During the quarter, we amplified the Deco collection in retail and the Kayla in outlet, which were featured as the heroes of our marketing campaign. during the quarter we amplified the deco collection in retail and the kayla in outlet which were featured as the heroes of our marketing campaign As a result, both families were the top-selling bags in their respective channels, over-indexing with new, younger consumers at strong AUR. as a result both families were the top-selling bags in their respective channels over-indexing with new younger consumers at strong aur We are bringing more innovation to the assortment while we streamline our offering, reducing handbag styles by over 30% by fall, allowing us to stand behind our big ideas with clarity and intention. we are bringing more innovation to the assortment while we streamline our offering reducing handbag styles by over 30% by fall allowing us to stand behind our big ideas with clarity and intention Importantly, we are bringing deeper consumer insights and methodical consumer testing to all aspects of this work to ensure greater relevancy throughout our assortment. importantly we are bringing deeper consumer insights and methodical consumer testing to all aspects of this work to ensure greater relevancy throughout our assortment Next, we are focused on maximizing omnichannel cohesiveness with a compelling, consistent brand message across all consumer touchpoints. next we are focused on maximizing omnichannel cohesiveness with a compelling consistent brand message across all consumer touchpoints Alongside efforts to create a more compelling consumer journey, we remain focused on driving higher full-price selling, a building block to scale in a healthy way. alongside efforts to create a more compelling consumer journey we remain focused on driving higher full-price selling a building block to scale in a healthy way In closing, fiscal year 2026 is a year of investment for Kate Spade. We are taking strategic and financial steps to reset Kate Spade for long-term growth, applying our brand-building learnings from Coach and aggressively leaning into action to turn around the brand. While a turnaround takes time, we are confident in our path forward and the brand's opportunity for healthy and profitable growth. Now, turning briefly to Stuart Weitzman. As previously announced, we completed the sale of the brand to Caleres on August 4th. This action was consistent with our commitment to be diligent stewards of our portfolio and disciplined allocators of capital. I want to thank the Stuart Weitzman teams for their work to support the brand and customers during this transition and wish them success as they build their next chapter of growth with Caleres. In closing, fiscal year 2026 is a year of investment for Kate Spade. in closing fiscal year 2026 is a year of investment for kate spade We are taking strategic and financial steps to reset Kate Spade for long-term growth, applying our brand-building learnings from Coach and aggressively leaning into action to turn around the brand. we are taking strategic and financial steps to reset kate spade for long-term growth applying our brand-building learnings from coach and aggressively leaning into action to turn around the brand While a turnaround takes time, we are confident in our path forward and the brand's opportunity for healthy and profitable growth. while a turnaround takes time we are confident in our path forward and the brand's opportunity for healthy and profitable growth Now, turning briefly to Stuart Weitzman. now turning briefly to stuart weitzman As previously announced, we completed the sale of the brand to Caleres on August 4th. as previously announced we completed the sale of the brand to caleres on august 4th This action was consistent with our commitment to be diligent stewards of our portfolio and disciplined allocators of capital. this action was consistent with our commitment to be diligent stewards of our portfolio and disciplined allocators of capital I want to thank the Stuart Weitzman teams for their work to support the brand and customers during this transition and wish them success as they build their next chapter of growth with Caleres. i want to thank the stuart weitzman teams for their work to support the brand and customers during this transition and wish them success as they build their next chapter of growth with caleres In closing, Tapestry achieved a record year as we are successfully connecting with a new generation of consumers around the world. Importantly, we capped our future speed agenda, exceeding earnings targets with our strongest growth year and momentum building in our business. While the external backdrop is increasingly complex, our growth proves that our competitive advantages enable us to adapt and thrive in any environment. Our foundation is strong and our focus is clear. Our performance underpins our confidence that we have the strategy, capabilities, and team in place to scale and win, with significant runway for growth and value creation. I look forward to sharing our roadmap for continued growth at our Investor Day next month. I'll now turn it over to Scott. In closing, Tapestry achieved a record year as we are successfully connecting with a new generation of consumers around the world. in closing tapestry achieved a record year as we are successfully connecting with a new generation of consumers around the world Importantly, we capped our future speed agenda, exceeding earnings targets with our strongest growth year and momentum building in our business. importantly we capped our future speed agenda exceeding earnings targets with our strongest growth year and momentum building in our business While the external backdrop is increasingly complex, our growth proves that our competitive advantages enable us to adapt and thrive in any environment. while the external backdrop is increasingly complex our growth proves that our competitive advantages enable us to adapt and thrive in any environment Our foundation is strong and our focus is clear. our foundation is strong and our focus is clear Our performance underpins our confidence that we have the strategy, capabilities, and team in place to scale and win, with significant runway for growth and value creation. our performance underpins our confidence that we have the strategy capabilities and team in place to scale and win with significant runway for growth and value creation I look forward to sharing our roadmap for continued growth at our Investor Day next month. i look forward to sharing our roadmap for continued growth at our investor day next month I'll now turn it over to Scott. i'll now turn it over to scott

Speaker 11: Thanks, Joanne, and good morning, everyone. Looking back at our results for the fiscal year, we exceeded our outlook. Additionally, we delivered our earnings and capital return targets set at our last Investor Day three years ago. This is a testament to our disciplined execution and financial agility, reinforcing our strong foundation and commitment to durable long-term value creation. In the year, we delivered revenue growth of 5%, with 10% growth at Coach. We increased gross margins by 210 basis points, and we grew earnings per share by 19% versus last year, while accelerating investments into our brands. Turning to the details of the fourth quarter, I'll begin with a discussion of revenue trends on a constant currency basis. Sales increased 8% compared to the prior year and outperformed our expectations. These results reflect gains in North America and internationally. Thanks, Joanne, and good morning, everyone. thanks joanne and good morning everyone Looking back at our results for the fiscal year, we exceeded our outlook. looking back at our results for the fiscal year we exceeded our outlook Additionally, we delivered our earnings and capital return targets set at our last Investor Day three years ago. additionally we delivered our earnings and capital return targets set at our last investor day three years ago This is a testament to our disciplined execution and financial agility, reinforcing our strong foundation and commitment to durable long-term value creation. this is a testament to our disciplined execution and financial agility reinforcing our strong foundation and commitment to durable long-term value creation In the year, we delivered revenue growth of 5%, with 10% growth at Coach. in the year we delivered revenue growth of 5% with 10% growth at coach We increased gross margins by 210 basis points, and we grew earnings per share by 19% versus last year, while accelerating investments into our brands. we increased gross margins by 210 basis points and we grew earnings per share by 19% versus last year while accelerating investments into our brands Turning to the details of the fourth quarter, I'll begin with a discussion of revenue trends on a constant currency basis. turning to the details of the fourth quarter i'll begin with a discussion of revenue trends on a constant currency basis Sales increased 8% compared to the prior year and outperformed our expectations. sales increased 8% compared to the prior year and outperformed our expectations These results reflect gains in North America and internationally. these results reflect gains in north america and internationally By region, North America sales increased 8% compared to the prior year, led by 16% growth at Coach. Importantly, both gross and operating margin in the region rose versus last year. In Europe, revenue grew 10% above last year, driven by growth in our direct channels with increased local consumer spend and strong new customer acquisition, notably with Gen Z. We continue to see significant opportunities to grow in the region, given our positioning, momentum, and low penetration in this large market. In greater China, revenue growth accelerated ahead of our expectations, increasing 18% with growth across all channels, including notable strength in digital. Our strong performance in China underscores our strategic initiatives and investments are working, and our business remains well-positioned for long-term sustainable growth. By region, North America sales increased 8% compared to the prior year, led by 16% growth at Coach. by region north america sales increased 8% compared to the prior year led by 16% growth at coach Importantly, both gross and operating margin in the region rose versus last year. importantly both gross and operating margin in the region rose versus last year In Europe, revenue grew 10% above last year, driven by growth in our direct channels with increased local consumer spend and strong new customer acquisition, notably with Gen Z. in europe revenue grew 10% above last year driven by growth in our direct channels with increased local consumer spend and strong new customer acquisition notably with gen z We continue to see significant opportunities to grow in the region, given our positioning, momentum, and low penetration in this large market. we continue to see significant opportunities to grow in the region given our positioning momentum and low penetration in this large market In greater China, revenue growth accelerated ahead of our expectations, increasing 18% with growth across all channels, including notable strength in digital. in greater china revenue growth accelerated ahead of our expectations increasing 18% with growth across all channels including notable strength in digital Our strong performance in China underscores our strategic initiatives and investments are working, and our business remains well-positioned for long-term sustainable growth. our strong performance in china underscores our strategic initiatives and investments are working and our business remains well-positioned for long-term sustainable growth In Japan, sales declined 11% amid a challenging consumer backdrop, and in other Asia, revenue decreased 1% as growth in Australia, New Zealand, and South Korea was offset primarily by a decline in Malaysia. Now, touching on revenue by channel for the quarter, we grew in each channel while achieving strong and increasing profitability. Our direct-to-consumer business grew 6% compared to the prior year, which included a mid-teens percentage increase in digital revenue and a low single-digit increase in global brick-and-mortar sales. In wholesale, revenue grew in the quarter, in keeping with our expectations and strategy to find targeted opportunities to expand our brand's reach with consumers. Moving down the P&L, we delivered a record fourth-quarter gross margin of 76.3%, 140 basis points above prior year, driven by operational outperformance. In Japan, sales declined 11% amid a challenging consumer backdrop, and in other Asia, revenue decreased 1% as growth in Australia, New Zealand, and South Korea was offset primarily by a decline in Malaysia. in japan sales declined 11% amid a challenging consumer backdrop and in other asia revenue decreased 1% as growth in australia new zealand and south korea was offset primarily by a decline in malaysia Now, touching on revenue by channel for the quarter, we grew in each channel while achieving strong and increasing profitability. now touching on revenue by channel for the quarter we grew in each channel while achieving strong and increasing profitability Our direct-to-consumer business grew 6% compared to the prior year, which included a mid-teens percentage increase in digital revenue and a low single-digit increase in global brick-and-mortar sales. our direct-to-consumer business grew 6% compared to the prior year which included a mid-teens percentage increase in digital revenue and a low single-digit increase in global brick-and-mortar sales In wholesale, revenue grew in the quarter, in keeping with our expectations and strategy to find targeted opportunities to expand our brand's reach with consumers. in wholesale revenue grew in the quarter in keeping with our expectations and strategy to find targeted opportunities to expand our brand's reach with consumers Moving down the P&L, we delivered a record fourth-quarter gross margin of 76.3%, 140 basis points above prior year, driven by operational outperformance. moving down the p&l we delivered a record fourth-quarter gross margin of 76.3% 140 basis points above prior year driven by operational outperformance Our strong gross margin is a core element of our value creation model, providing us with flexibility and fuel to drive sustainable growth. As we've seen in the year, AUR growth is driving roughly 2/3 of our margin improvement, with the balance coming from AUC, and we see both levers contributing to operational gross margin gains and into the future. Turning to SG&A, expenses rose 10%, driven by an increase in marketing expense, which was 13% of sales in the quarter, while we drove 120 basis points of leverage in the balance of the business. Taken together, operating margin increased 30 basis points in the quarter, driving profit expansion of 10% over the prior year, which was ahead of expectations. Our fourth-quarter EPS of $1.40 grew 12% over the prior year and exceeded our guidance. Our strong gross margin is a core element of our value creation model, providing us with flexibility and fuel to drive sustainable growth. our strong gross margin is a core element of our value creation model providing us with flexibility and fuel to drive sustainable growth As we've seen in the year, AUR growth is driving roughly 2/3 of our margin improvement, with the balance coming from AUC, and we see both levers contributing to operational gross margin gains and into the future. as we've seen in the year aur growth is driving roughly 2/3 of our margin improvement with the balance coming from auc and we see both levers contributing to operational gross margin gains and into the future Turning to SG&A, expenses rose 10%, driven by an increase in marketing expense, which was 13% of sales in the quarter, while we drove 120 basis points of leverage in the balance of the business. turning to sg&a expenses rose 10% driven by an increase in marketing expense which was 13% of sales in the quarter while we drove 120 basis points of leverage in the balance of the business Taken together, operating margin increased 30 basis points in the quarter, driving profit expansion of 10% over the prior year, which was ahead of expectations. taken together operating margin increased 30 basis points in the quarter driving profit expansion of 10% over the prior year which was ahead of expectations Our fourth-quarter EPS of $1.40 grew 12% over the prior year and exceeded our guidance. our fourth-quarter eps of $1.40 grew 12% over the prior year and exceeded our guidance Now, turning to our shareholder return programs, in fiscal 2025, we returned $2.3 billion to shareholders, a testament to our strong organic business and robust cash flow generation. This includes $300 million in dividend payments and $2 billion in an accelerated share repurchase program. This program is expected to result in an average purchase price of about $78 per share. Before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities. We have two foundational commitments. 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. Consistent with this, the board authorized a 14% quarterly dividend increase for an anticipated annual rate in fiscal 2026 of $1.60 per share. Now, turning to our shareholder return programs, in fiscal 2025, we returned $2.3 billion to shareholders, a testament to our strong organic business and robust cash flow generation. now turning to our shareholder return programs in fiscal 2025 we returned $2.3 billion to shareholders a testament to our strong organic business and robust cash flow generation This includes $300 million in dividend payments and $2 billion in an accelerated share repurchase program. this includes $300 million in dividend payments and $2 billion in an accelerated share repurchase program This program is expected to result in an average purchase price of about $78 per share. this program is expected to result in an average purchase price of about $78 per share Before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities. before turning to the details of our balance sheet and cash flows i'd like to reiterate our capital allocation priorities We have two foundational commitments. we have two foundational commitments 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. 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 Consistent with this, the board authorized a 14% quarterly dividend increase for an anticipated annual rate in fiscal 2026 of $1.60 per share. consistent with this the board authorized a 14% quarterly dividend increase for an anticipated annual rate in fiscal 2026 of $1.60 per share 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 was on display in fiscal 2025 and remains a value creation driver going forward. Finally, utilizing our rigorous four 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. 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 2.5x. Now, turning to the details of our balance sheet and cash flows, we ended the quarter with $1.1 billion in cash and investments and total borrowings of $2.4 billion, representing net debt of $1.3 billion. Beyond these two foundational commitments, our robust cash flow generation provides us with balance sheet flexibility for value creation. 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 was on display in fiscal 2025 and remains a value creation driver going forward. this includes the opportunity for share repurchase activity which was on display in fiscal 2025 and remains a value creation driver going forward Finally, utilizing our rigorous four lens framework, we consistently evaluate opportunities for strategic portfolio management. finally utilizing our rigorous four 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. 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 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 2.5x . 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 2.5x Now, turning to the details of our balance sheet and cash flows, we ended the quarter with $1.1 billion in cash and investments and total borrowings of $2.4 billion, representing net debt of $1.3 billion. now turning to the details of our balance sheet and cash flows we ended the quarter with $1.1 billion in cash and investments and total borrowings of $2.4 billion representing net debt of $1.3 billion This incorporated the paydown of bonds totaling approximately $300 million in April. At year-end, our gross debt to adjusted EBITDA was a full turn below our leverage target at 1.4x. Adjusted free cash flow for the year was an inflow of $1.35 billion, and CapEx and cloud computing costs were $153 million. Inventory levels at year-end were 4% above prior year, excluding $92 million of Stuart Weitzman inventory reflected in assets held for sale on our balance sheet. This included the strategic pull forward of receipts in light of the current trade landscape. Our inventory continues to be current and well-positioned globally and by brand. For fiscal 2026, we expect inventory levels to be modestly down year-over-year on a reported basis. Now, before turning to our guidance, as you saw in our press release, we recorded a non-cash impairment charge of over $850 million related to Kate Spade. This incorporated the paydown of bonds totaling approximately $300 million in April. this incorporated the paydown of bonds totaling approximately $300 million in april At year-end, our gross debt to adjusted EBITDA was a full turn below our leverage target at 1.4 x. at year-end our gross debt to adjusted ebitda was a full turn below our leverage target at 1.4 x Adjusted free cash flow for the year was an inflow of $1.35 billion, and CapEx and cloud computing costs were $153 million. adjusted free cash flow for the year was an inflow of $1.35 billion and capex and cloud computing costs were $153 million Inventory levels at year-end were 4% above prior year, excluding $92 million of Stuart Weitzman inventory reflected in assets held for sale on our balance sheet. inventory levels at year-end were 4% above prior year excluding $92 million of stuart weitzman inventory reflected in assets held for sale on our balance sheet This included the strategic pull forward of receipts in light of the current trade landscape. this included the strategic pull forward of receipts in light of the current trade landscape Our inventory continues to be current and well-positioned globally and by brand. our inventory continues to be current and well-positioned globally and by brand For fiscal 2026, we expect inventory levels to be modestly down year-over-year on a reported basis. for fiscal 2026 we expect inventory levels to be modestly down year-over-year on a reported basis Now, before turning to our guidance, as you saw in our press release, we recorded a non-cash impairment charge of over $850 million related to Kate Spade. now before turning to our guidance as you saw in our press release we recorded a non-cash impairment charge of over $850 million related to kate spade This was based upon the current business trends, the outsized impact of tariffs, which disproportionately affects Kate Spade as the vast majority of its business is in the U.S., and the incremental investments we're making in support of profitable long-term growth. Now, moving to our guidance for fiscal 2026, which is provided on a non-GAAP basis. To start, I'd like to give some context by disaggregating the top-line momentum we're seeing in the business and our focus on supporting revenue growth from the current dynamics impacting our profitability in the fiscal year. First, on sales, our trends in the first quarter are strong, and in fact, we've accelerated into the new year, led by Coach, with stronger full-price selling. We are building the brand for continued healthy gains well into the future. This is our priority, and we're executing behind it. This was based upon the current business trends, the outsized impact of tariffs, which disproportionately affects Kate Spade as the vast majority of its business is in the U.S., and the incremental investments we're making in support of profitable long-term growth. this was based upon the current business trends the outsized impact of tariffs which disproportionately affects kate spade as the vast majority of its business is in the u.s and the incremental investments we're making in support of profitable long-term growth Now, moving to our guidance for fiscal 2026, which is provided on a non-GAAP basis. now moving to our guidance for fiscal 2026 which is provided on a non-gaap basis To start, I'd like to give some context by disaggregating the top-line momentum we're seeing in the business and our focus on supporting revenue growth from the current dynamics impacting our profitability in the fiscal year. to start i'd like to give some context by disaggregating the top-line momentum we're seeing in the business and our focus on supporting revenue growth from the current dynamics impacting our profitability in the fiscal year First, on sales, our trends in the first quarter are strong, and in fact, we've accelerated into the new year, led by Coach, with stronger full-price selling. first on sales our trends in the first quarter are strong and in fact we've accelerated into the new year led by coach with stronger full-price selling We are building the brand for continued healthy gains well into the future. we are building the brand for continued healthy gains well into the future This is our priority, and we're executing behind it. this is our priority and we're executing behind it Having said that, we are facing greater than previously expected profit headwinds from tariffs and duties, with the earlier-than-expected ending of de minimis exemptions being a meaningful factor. In aggregate, the total expected impact on profitability this year from tariffs is $160 million, representing approximately 230 basis points of margin headwind. We're taking thoughtful actions to mitigate these impacts while continuing to deliver the compelling value, quality, and innovation that is foundational to our brands. We're leveraging our agile supply chain to optimize our global manufacturing footprint, minimizing our tariff exposure where possible. We're also working closely with our longstanding service providers to drive efficiencies. I remain confident in our ability to address these headwinds fully over time, given the strength of our business and the agility of our supply chain. Overall, we view our guidance as prudent and achievable. Having said that, we are facing greater than previously expected profit headwinds from tariffs and duties, with the earlier-than-expected ending of de minimis exemptions being a meaningful factor. having said that we are facing greater than previously expected profit headwinds from tariffs and duties with the earlier-than-expected ending of de minimis exemptions being a meaningful factor In aggregate, the total expected impact on profitability this year from tariffs is $160 million, representing approximately 230 basis points of margin headwind. in aggregate the total expected impact on profitability this year from tariffs is $160 million representing approximately 230 basis points of margin headwind We're taking thoughtful actions to mitigate these impacts while continuing to deliver the compelling value, quality, and innovation that is foundational to our brands. we're taking thoughtful actions to mitigate these impacts while continuing to deliver the compelling value quality and innovation that is foundational to our brands We're leveraging our agile supply chain to optimize our global manufacturing footprint, minimizing our tariff exposure where possible. we're leveraging our agile supply chain to optimize our global manufacturing footprint minimizing our tariff exposure where possible We're also working closely with our longstanding service providers to drive efficiencies. we're also working closely with our longstanding service providers to drive efficiencies I remain confident in our ability to address these headwinds fully over time, given the strength of our business and the agility of our supply chain. i remain confident in our ability to address these headwinds fully over time given the strength of our business and the agility of our supply chain Overall, we view our guidance as prudent and achievable. overall we view our guidance as prudent and achievable All in, we expect to drive continued mid-single-digit revenue growth on a pro forma basis, deliver strong operating margins above prior year, and return over $1 billion in capital to shareholders in the fiscal year. As we action our mitigation strategies on tariffs, we believe our longer-term earnings growth delivery will accelerate. Now, turning to the details, this guidance excludes Stuart Weitzman from fiscal 2026 expectations. For the fiscal year, we expect revenue to approach $7.2 billion. This represents pro forma revenue to grow at a mid-single-digit rate on both a nominal and constant currency basis, with FX planned to be an 80 basis point tailwind. Touching on sales details by region at constant currency on a pro forma basis, in North America, we expect revenue to increase mid-single digits. In addition, we expect growth in Europe in the area of 20%. All in, we expect to drive continued mid-single-digit revenue growth on a pro forma basis, deliver strong operating margins above prior year, and return over $1 billion in capital to shareholders in the fiscal year. all in we expect to drive continued mid-single-digit revenue growth on a pro forma basis deliver strong operating margins above prior year and return over $1 billion in capital to shareholders in the fiscal year As we action our mitigation strategies on tariffs, we believe our longer-term earnings growth delivery will accelerate. as we action our mitigation strategies on tariffs we believe our longer-term earnings growth delivery will accelerate Now, turning to the details, this guidance excludes Stuart Weitzman from fiscal 2026 expectations. now turning to the details this guidance excludes stuart weitzman from fiscal 2026 expectations For the fiscal year, we expect revenue to approach $7.2 billion. for the fiscal year we expect revenue to approach $7.2 billion This represents pro forma revenue to grow at a mid-single-digit rate on both a nominal and constant currency basis, with FX planned to be an 80 basis point tailwind. this represents pro forma revenue to grow at a mid-single-digit rate on both a nominal and constant currency basis with fx planned to be an 80 basis point tailwind Touching on sales details by region at constant currency on a pro forma basis, in North America, we expect revenue to increase mid-single digits. touching on sales details by region at constant currency on a pro forma basis in north america we expect revenue to increase mid-single digits In addition, we expect growth in Europe in the area of 20%. in addition we expect growth in europe in the area of 20% In greater China, we expect to achieve high single-digit growth over the prior year. In Japan, we're forecasting a high single-digit decline, and in other Asia, we anticipate high single-digit gains. By brand, this guidance incorporates high single-digit growth at Coach at constant currency. At Kate Spade, we're embedding a high single-digit decline in revenue with sequential improvement planned in the second half of the year. In addition, our outlook assumes operating margin expansion. We anticipate gross margin to decline in the area of 70 basis points. This assumes operational gross margin expansion of 120 basis points, due primarily to improvements in AUR, slightly offset by an FX headwind of 20 basis points. Further, we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman. In greater China, we expect to achieve high single-digit growth over the prior year. in greater china we expect to achieve high single-digit growth over the prior year In Japan, we're forecasting a high single-digit decline, and in other Asia, we anticipate high single-digit gains. in japan we're forecasting a high single-digit decline and in other asia we anticipate high single-digit gains By brand, this guidance incorporates high single-digit growth at Coach at constant currency. by brand this guidance incorporates high single-digit growth at coach at constant currency At Kate Spade, we're embedding a high single-digit decline in revenue with sequential improvement planned in the second half of the year. at kate spade we're embedding a high single-digit decline in revenue with sequential improvement planned in the second half of the year In addition, our outlook assumes operating margin expansion. in addition our outlook assumes operating margin expansion We anticipate gross margin to decline in the area of 70 basis points. we anticipate gross margin to decline in the area of 70 basis points This assumes operational gross margin expansion of 120 basis points, due primarily to improvements in AUR, slightly offset by an FX headwind of 20 basis points. this assumes operational gross margin expansion of 120 basis points due primarily to improvements in aur slightly offset by an fx headwind of 20 basis points Further, we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman. further we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of stuart weitzman Offsetting these planned margin drivers is a 230 basis points headwind from incremental tariffs and duties, which incorporates the timing of policy implementation, product sell-through, and mitigating actions underway. For context, this is a headwind of $160 million in the fiscal year, which assumes we mitigate 30% of the annualized run rate of $235 million. On SG&A, we expect expenses to be approximately even with prior year, resulting in at least 100 basis points of expense leverage. This reflects our diligent expense control, partially offset by ongoing growth-focused investments in our strategic priorities. To this end, we expect marketing as a percentage of sales to increase around 80 basis points versus last year, reaching over 11% of revenue. We also realize a 20 basis point benefit to expenses from the sale of Stuart Weitzman. All in, this means operational SG&A leverage is expected to be at least 160 basis points. Offsetting these planned margin drivers is a 230 basis points headwind from incremental tariffs and duties, which incorporates the timing of policy implementation, product sell-through, and mitigating actions underway. offsetting these planned margin drivers is a 230 basis points headwind from incremental tariffs and duties which incorporates the timing of policy implementation product sell-through and mitigating actions underway For context, this is a headwind of $160 million in the fiscal year, which assumes we mitigate 30% of the annualized run rate of $235 million. for context this is a headwind of $160 million in the fiscal year which assumes we mitigate 30% of the annualized run rate of $235 million On SG&A, we expect expenses to be approximately even with prior year, resulting in at least 100 basis points of expense leverage. on sg&a we expect expenses to be approximately even with prior year resulting in at least 100 basis points of expense leverage This reflects our diligent expense control, partially offset by ongoing growth-focused investments in our strategic priorities. this reflects our diligent expense control partially offset by ongoing growth-focused investments in our strategic priorities To this end, we expect marketing as a percentage of sales to increase around 80 basis points versus last year, reaching over 11% of revenue. to this end we expect marketing as a percentage of sales to increase around 80 basis points versus last year reaching over 11% of revenue We also realize a 20 basis point benefit to expenses from the sale of Stuart Weitzman. we also realize a 20 basis point benefit to expenses from the sale of stuart weitzman All in, this means operational SG&A leverage is expected to be at least 160 basis points. all in this means operational sg&a leverage is expected to be at least 160 basis points For some texture on operating profit by brand, we anticipate Coach will maintain its operating margin even with tariff pressure and continued brand investments. At Kate Spade, we expect a modest profit loss given the outsized tariff impacts and brand investments, as mentioned. Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $65 million. The tax rate is expected to be approximately 18%, and our weighted average diluted share count for the year is forecasted to be approximately 213 million shares, which includes the expectation for $800 million in share repurchases. Taken together, we expect EPS to be $5.30-$5.45, representing 4%-7% growth compared to last year, including over $0.60 of tariff and duty headwinds. For some texture on operating profit by brand, we anticipate Coach will maintain its operating margin even with tariff pressure and continued brand investments. for some texture on operating profit by brand we anticipate coach will maintain its operating margin even with tariff pressure and continued brand investments At Kate Spade, we expect a modest profit loss given the outsized tariff impacts and brand investments, as mentioned. at kate spade we expect a modest profit loss given the outsized tariff impacts and brand investments as mentioned Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $65 million. moving to below-the-line expectations for the year net interest expense is expected to be approximately $65 million The tax rate is expected to be approximately 18%, and our weighted average diluted share count for the year is forecasted to be approximately 213 million shares, which includes the expectation for $800 million in share repurchases. the tax rate is expected to be approximately 18% and our weighted average diluted share count for the year is forecasted to be approximately 213 million shares which includes the expectation for $800 million in share repurchases Taken together, we expect EPS to be $5.30- $5.45, representing 4%- 7% growth compared to last year, including over $0.60 of tariff and duty headwinds. taken together we expect eps to be $5.30- $5.45 representing 4%- 7% growth compared to last year including over $0.60 of tariff and duty headwinds Moving on, we anticipate adjusted free cash flow to approach $1.3 billion, and finally, we expect CapEx and cloud computing costs to be in the area of $200 million. We anticipate about 60% of the spend to be related to store openings, renovations, and relocations, with the balance primarily related to our ongoing IT and digital investments. Touching on the shaping for the year, to start, given the dynamic nature of the rapidly shifting market, it's important to note we could experience volatility by quarter, notably within profit, as tariff and duty impacts work their way through the P&L. Now, to our current assumptions, we expect pro forma constant currency revenue to increase high single digits in the first half and low single digits in the back half. For Q1 specifically, as mentioned, we've started the year strong with revenue trends accelerating at Coach. Moving on, we anticipate adjusted free cash flow to approach $1.3 billion, and finally, we expect CapEx and cloud computing costs to be in the area of $200 million. moving on we anticipate adjusted free cash flow to approach $1.3 billion and finally we expect capex and cloud computing costs to be in the area of $200 million We anticipate about 60% of the spend to be related to store openings, renovations, and relocations, with the balance primarily related to our ongoing IT and digital investments. we anticipate about 60% of the spend to be related to store openings renovations and relocations with the balance primarily related to our ongoing it and digital investments Touching on the shaping for the year, to start, given the dynamic nature of the rapidly shifting market, it's important to note we could experience volatility by quarter, notably within profit, as tariff and duty impacts work their way through the P&L. touching on the shaping for the year to start given the dynamic nature of the rapidly shifting market it's important to note we could experience volatility by quarter notably within profit as tariff and duty impacts work their way through the p&l Now, to our current assumptions, we expect pro forma constant currency revenue to increase high single digits in the first half and low single digits in the back half. now to our current assumptions we expect pro forma constant currency revenue to increase high single digits in the first half and low single digits in the back half For Q1 specifically, as mentioned, we've started the year strong with revenue trends accelerating at Coach. for q1 specifically as mentioned we've started the year strong with revenue trends accelerating at coach As a result, we're anticipating a low double-digit total sales gain in the quarter. This includes a 70 basis point tailwind from FX. Turning to margin, as we mentioned, we expect gross margin pressure for the year due entirely to tariff and duty headwinds, primarily in the second half. In Q1, we anticipate reported gross margins to increase by approximately 100 basis points. SG&A is expected to leverage both in the first and second halves, while in Q1 specifically, we expect slight deleverage on higher marketing expense. We expect operating margin expansion in the first half, driven by a Q1 increase of roughly 80 basis points. In the second half, operating margins are planned in line with prior year, despite tariff and duty pressure. As a result, we're anticipating a low double-digit total sales gain in the quarter. as a result we're anticipating a low double-digit total sales gain in the quarter This includes a 70 basis point tailwind from FX. this includes a 70 basis point tailwind from fx Turning to margin, as we mentioned, we expect gross margin pressure for the year due entirely to tariff and duty headwinds, primarily in the second half. turning to margin as we mentioned we expect gross margin pressure for the year due entirely to tariff and duty headwinds primarily in the second half In Q1, we anticipate reported gross margins to increase by approximately 100 basis points. in q1 we anticipate reported gross margins to increase by approximately 100 basis points SG&A is expected to leverage both in the first and second halves, while in Q1 specifically, we expect slight deleverage on higher marketing expense. sg&a is expected to leverage both in the first and second halves while in q1 specifically we expect slight deleverage on higher marketing expense We expect operating margin expansion in the first half, driven by a Q1 increase of roughly 80 basis points. we expect operating margin expansion in the first half driven by a q1 increase of roughly 80 basis points In the second half, operating margins are planned in line with prior year, despite tariff and duty pressure. in the second half operating margins are planned in line with prior year despite tariff and duty pressure Taking a prudent approach to our guidance, we expect EPS growth for the year to be led by the first half, with Q1 forecasted to grow by more than 20% to approximately $1.25. In closing, we delivered another record-breaking quarter and year, highlighted by strong top and bottom-line growth. We achieved over $5 in EPS and returned more than $3 billion to shareholders over the last three years, consistent with the targets we outlined at our last Investor Day. This showcases our differentiated and highly cash-generative business model that has proven agile, resilient, and adaptive to change. Moving forward, we are confident in our brands, our people, and our strategy. Our fundamentals are strong, and we have competitive and structural advantages that position us to drive durable growth and shareholder value in both the year ahead and for years to come. Taking a prudent approach to our guidance, we expect EPS growth for the year to be led by the first half, with Q1 forecasted to grow by more than 20% to approximately $1.25. taking a prudent approach to our guidance we expect eps growth for the year to be led by the first half with q1 forecasted to grow by more than 20% to approximately $1.25 In closing, we delivered another record-breaking quarter and year, highlighted by strong top and bottom-line growth. in closing we delivered another record-breaking quarter and year highlighted by strong top and bottom-line growth We achieved over $5 in EPS and returned more than $3 billion to shareholders over the last three years, consistent with the targets we outlined at our last Investor Day. we achieved over $5 in eps and returned more than $3 billion to shareholders over the last three years consistent with the targets we outlined at our last investor day This showcases our differentiated and highly cash-generative business model that has proven agile, resilient, and adaptive to change. this showcases our differentiated and highly cash-generative business model that has proven agile resilient and adaptive to change Moving forward, we are confident in our brands, our people, and our strategy. moving forward we are confident in our brands our people and our strategy Our fundamentals are strong, and we have competitive and structural advantages that position us to drive durable growth and shareholder value in both the year ahead and for years to come. our fundamentals are strong and we have competitive and structural advantages that position us to drive durable growth and shareholder value in both the year ahead and for years to come I'd now like to open it up and take your questions. I'd now like to open it up and take your questions. i'd now like to open it up and take your questions

Speaker 9: Thank you. At this time, if you would like to ask a question, please press star one now on your telephone keypad. To withdraw yourself from the queue, you may press star two. Our first question is from Brooke Roach of Goldman Sachs. Please go ahead. Thank you. thank you At this time, if you would like to ask a question, please press star one now on your telephone keypad. at this time if you would like to ask a question please press star one now on your telephone keypad To withdraw yourself from the queue, you may press star two. to withdraw yourself from the queue you may press star two Our first question is from Brooke Roach of Goldman Sachs. our first question is from brooke roach of goldman sachs Please go ahead. please go ahead

Speaker 2: Good morning, Joanne, Scott, and Todd. Thank you for taking our question. Can you help us unpack your outlook for fiscal 2026 and what you're seeing in the business right now? Specifically, can you talk about the strength at Coach and your strategies to mitigate the impacts of tariffs over time? Thank you. Good morning, Joanne, Scott, and Todd. good morning joanne scott and todd Thank you for taking our question. thank you for taking our question Can you help us unpack your outlook for fiscal 2026 and what you're seeing in the business right now? can you help us unpack your outlook for fiscal 2026 and what you're seeing in the business right now Specifically, can you talk about the strength at Coach and your strategies to mitigate the impacts of tariffs over time? specifically can you talk about the strength at coach and your strategies to mitigate the impacts of tariffs over time Thank you. thank you

Speaker 7: Thank you, Brooke, and good morning. I'll kick us off and start with the breakout year we just delivered, which I think illustrates the power of our business model and our strategies. Just to recap, this year we delivered strong top-line results with an inflection to mid-single-digit growth well ahead of the industry, and we capped the year with an even stronger fourth quarter. Importantly, we did this at increasing margins, meaning that we're growing in a healthy way and in a durable way. We delivered earnings per share above $5, which was our commitment three years ago, amid an incredibly complex environment, which showcases the agility of our teams. Importantly, our momentum continued. The Coach business accelerated into the first quarter. This all points to the fact that we're driving durable growth. This is our focus, and we are executing. In terms of fiscal 2026, we expect continued growth. Thank you, Brooke, and good morning. thank you brooke and good morning I'll kick us off and start with the breakout year we just delivered, which I think illustrates the power of our business model and our strategies. i'll kick us off and start with the breakout year we just delivered which i think illustrates the power of our business model and our strategies Just to recap, this year we delivered strong top-line results with an inflection to mid-single-digit growth well ahead of the industry, and we capped the year with an even stronger fourth quarter. just to recap this year we delivered strong top-line results with an inflection to mid-single-digit growth well ahead of the industry and we capped the year with an even stronger fourth quarter Importantly, we did this at increasing margins, meaning that we're growing in a healthy way and in a durable way. importantly we did this at increasing margins meaning that we're growing in a healthy way and in a durable way We delivered earnings per share above $5, which was our commitment three years ago, amid an incredibly complex environment, which showcases the agility of our teams. we delivered earnings per share above $5 which was our commitment three years ago amid an incredibly complex environment which showcases the agility of our teams Importantly, our momentum continued. importantly our momentum continued The Coach business accelerated into the first quarter. the coach business accelerated into the first quarter This all points to the fact that we're driving durable growth. this all points to the fact that we're driving durable growth This is our focus, and we are executing. this is our focus and we are executing In terms of fiscal 2026, we expect continued growth. in terms of fiscal 2026 we expect continued growth Our guidance calls for mid-single-digit top-line growth and mid to high single-digit earnings growth, inclusive of tariffs. We're clear-eyed about the environment. We're incorporating the latest news on tariffs, both in how it could pressure consumers as well as the impact on our business. Even with tariffs, we're continuing to expand our operating margin this year, and we're well-positioned to fully offset the impact of tariffs over time. We have momentum, and we see tremendous runway ahead. I'll turn it to Todd to talk about the strength he's seeing at Coach. Our guidance calls for mid-single-digit top-line growth and mid to high single-digit earnings growth, inclusive of tariffs. our guidance calls for mid-single-digit top-line growth and mid to high single-digit earnings growth inclusive of tariffs We're clear-eyed about the environment. we're clear-eyed about the environment We're incorporating the latest news on tariffs, both in how it could pressure consumers as well as the impact on our business. we're incorporating the latest news on tariffs both in how it could pressure consumers as well as the impact on our business Even with tariffs, we're continuing to expand our operating margin this year, and we're well-positioned to fully offset the impact of tariffs over time. even with tariffs we're continuing to expand our operating margin this year and we're well-positioned to fully offset the impact of tariffs over time We have momentum, and we see tremendous runway ahead. we have momentum and we see tremendous runway ahead I'll turn it to Todd to talk about the strength he's seeing at Coach. i'll turn it to todd to talk about the strength he's seeing at coach

Speaker 12: Thanks, Joanne. Good morning. As we noted, in the fourth quarter, we grew 13%. What was important about our growth was it was broad-based in leather goods. We grew in the key markets that we focused on: North America, China, and Europe. We delivered a 10% total year-to-year growth, well ahead of the industry. What is even more impressive, I think, is where we're at right now. Our quarter to date, as Joanne mentioned, we've seen an acceleration from our exit rate in Q4. That acceleration is coming with lower promotions year-on-year. In the quarter, last quarter, we added 1 million new customers in North America. 70% were Gen Z and Millennials. Additionally, we added 1.7 million customers globally. This strong traction with younger consumers is our future. We then turn to innovation and the value we offer our customers. Thanks, Joanne. thanks joanne Good morning. good morning As we noted, in the fourth quarter, we grew 13%. as we noted in the fourth quarter we grew 13% What was important about our growth was it was broad-based in leather goods. what was important about our growth was it was broad-based in leather goods We grew in the key markets that we focused on: North America, China, and Europe. we grew in the key markets that we focused on north america china and europe We delivered a 10% total year-to-year growth, well ahead of the industry. we delivered a 10% total year-to-year growth well ahead of the industry What is even more impressive, I think, is where we're at right now. what is even more impressive i think is where we're at right now Our quarter to date, as Joanne mentioned, we've seen an acceleration from our exit rate in Q4. our quarter to date as joanne mentioned we've seen an acceleration from our exit rate in q4 That acceleration is coming with lower promotions year-on-year. that acceleration is coming with lower promotions year-on-year In the quarter, last quarter, we added 1 million new customers in North America. 70% were Gen Z and Millennials. in the quarter last quarter we added 1 million new customers in north america 70% were gen z and millennials Additionally, we added 1.7 million customers globally. additionally we added 1.7 million customers globally This strong traction with younger consumers is our future. this strong traction with younger consumers is our future We then turn to innovation and the value we offer our customers. we then turn to innovation and the value we offer our customers Let me talk about one specific bag that was mentioned in our prepared remarks, our Kiss Lock bag. That bag was launched by our Creative Director at last September's runway show. We've done two drops of that bag, and the last one sold out within hours. Since that last drop, we have 81,000 customers just in the United States who have registered to be notified when we're going to do another drop. In fact, last week, we added another 4,000 customers when Sarah Jessica Parker was featured carrying the bag in Just Like That. That's an example of the brand heat we're talking about. That's an example of the momentum that Coach has. When I look at that, I look at our investment in the brand, particularly over the last three years, and the resulting brand heat. Let me talk about one specific bag that was mentioned in our prepared remarks, our Kiss Lock bag. let me talk about one specific bag that was mentioned in our prepared remarks, our kiss lock bag That bag was launched by our Creative Director at last September's runway show. that bag was launched by our creative director at last september's runway show We've done two drops of that bag, and the last one sold out within hours. we've done two drops of that bag and the last one sold out within hours Since that last drop, we have 81,000 customers just in the United States who have registered to be notified when we're going to do another drop. since that last drop we have 81,000 customers just in the united states who have registered to be notified when we're going to do another drop In fact, last week, we added another 4,000 customers when Sarah Jessica Parker was featured carrying the bag in Just Like That. in fact last week we added another 4,000 customers when sarah jessica parker was featured carrying the bag in just like that That's an example of the brand heat we're talking about. that's an example of the brand heat we're talking about That's an example of the momentum that Coach has. that's an example of the momentum that coach has When I look at that, I look at our investment in the brand, particularly over the last three years, and the resulting brand heat. when i look at that i look at our investment in the brand particularly over the last three years and the resulting brand heat This places us in the best position to continue to grow AURs and mitigate duties and tariffs. Thank you. This places us in the best position to continue to grow AURs and mitigate duties and tariffs. this places us in the best position to continue to grow aurs and mitigate duties and tariffs Thank you. thank you

Speaker 2: Thank you both. I'll pass it on. Thank you both. thank you both I'll pass it on. i'll pass it on

Speaker 9: Our next question is from Ike Boruchow of Wells Fargo. Please go ahead. Our next question is from Ike Boruchow of Wells Fargo. our next question is from ike boruchow of wells fargo Please go ahead. please go ahead

Speaker 8: Hey everyone, let me add my congrats. One for Joanne, one for Scott, I believe. Just again, back to the accelerate. I mean, clearly there's an acceleration in the business. You're guiding 1Q above what you reported for 4Q. Todd gave some helpful comments, but maybe Joanne, can you help us with the data or the new customer growth? Anything you look at that gives you confidence in an ability to kind of lap the robust comps that really began during the last holiday? Just curious how you kind of frame that. Then Scott, I just wanted to ask about tariffs. I think three months ago you gave some confidence in maintaining margin when you had about $90 million of headwind. Now it sounds like you've got more like $160 million with the new tariffs, but you're also kind of not guiding to mitigate any of that in your guide. Hey everyone, let me add my congrats. hey everyone let me add my congrats One for Joanne, one for Scott, I believe. one for joanne one for scott i believe Just again, back to the accelerate. just again back to the accelerate I mean, clearly there's an acceleration in the business. i mean clearly there's an acceleration in the business You're guiding 1Q above what you reported for 4Q. you're guiding 1q above what you reported for 4q Todd gave some helpful comments, but maybe Joanne, can you help us with the data or the new customer growth? todd gave some helpful comments but maybe joanne can you help us with the data or the new customer growth Anything you look at that gives you confidence in an ability to kind of lap the robust comps that really began during the last holiday? anything you look at that gives you confidence in an ability to kind of lap the robust comps that really began during the last holiday Just curious how you kind of frame that. just curious how you kind of frame that Then Scott, I just wanted to ask about tariffs. then scott i just wanted to ask about tariffs I think three months ago you gave some confidence in maintaining margin when you had about $90 million of headwind. i think three months ago you gave some confidence in maintaining margin when you had about $90 million of headwind Now it sounds like you've got more like $160 million with the new tariffs, but you're also kind of not guiding to mitigate any of that in your guide. now it sounds like you've got more like $160 million with the new tariffs but you're also kind of not guiding to mitigate any of that in your guide I guess the question is, is that highly conservative? Do you still view an ability to maintain the margins as on the table? Has anything changed? Just curious your thoughts. Thank you. I guess the question is, is that highly conservative? i guess the question is is that highly conservative Do you still view an ability to maintain the margins as on the table? do you still view an ability to maintain the margins as on the table Has anything changed? has anything changed Just curious your thoughts. just curious your thoughts Thank you. thank you

Speaker 7: Thank you, Ike. Let me kick it off with your question around the consumer and new customer acquisition, which is a really important question. It is the foundation of our growth. It is the focus of our brands, to make sure that we're continually acquiring new customers to our brands. That focus and those brand-building capabilities, we've been building those for years. We're investing behind those capabilities, both in our technology infrastructure, but most importantly, the marketing investments that we're making. You see us continue to grow those investments. We expect to continue to acquire new customers to our brands. That is our focus. What is important is that we're seeing this young consumer gravitate to our brand so that the execution, particularly at Coach, is at a very high level, that the young consumer sees Coach as a brand for them in everything we do at every touchpoint. Thank you, Ike. thank you ike Let me kick it off with your question around the consumer and new customer acquisition, which is a really important question. let me kick it off with your question around the consumer and new customer acquisition which is a really important question It is the foundation of our growth. it is the foundation of our growth It is the focus of our brands, to make sure that we're continually acquiring new customers to our brands. it is the focus of our brands to make sure that we're continually acquiring new customers to our brands That focus and those brand-building capabilities, we've been building those for years. that focus and those brand-building capabilities we've been building those for years We're investing behind those capabilities, both in our technology infrastructure, but most importantly, the marketing investments that we're making. we're investing behind those capabilities both in our technology infrastructure but most importantly the marketing investments that we're making You see us continue to grow those investments. you see us continue to grow those investments We expect to continue to acquire new customers to our brands. we expect to continue to acquire new customers to our brands That is our focus. that is our focus What is important is that we're seeing this young consumer gravitate to our brand so that the execution, particularly at Coach, is at a very high level, that the young consumer sees Coach as a brand for them in everything we do at every touchpoint. what is important is that we're seeing this young consumer gravitate to our brand so that the execution particularly at coach is at a very high level that the young consumer sees coach as a brand for them in everything we do at every touchpoint That is what's driving the customer acquisition. Importantly, we're seeing these customers come back with more frequency. Our retention rates on these young customers are actually higher than our other cohorts, which I think bodes well for the durability of our growth. We're going to capture these young customers at the point of market entry, and we're going to keep them and drive lifetime value. That is fuel for our future growth. It's a foundation that we will continue to build on with more new customer acquisition. That's how we're thinking about comping the comp. We're just building a foundation and getting stronger from here. That is what's driving the customer acquisition. that is what's driving the customer acquisition Importantly, we're seeing these customers come back with more frequency. importantly we're seeing these customers come back with more frequency Our retention rates on these young customers are actually higher than our other cohorts, which I think bodes well for the durability of our growth. our retention rates on these young customers are actually higher than our other cohorts which i think bodes well for the durability of our growth We're going to capture these young customers at the point of market entry, and we're going to keep them and drive lifetime value. we're going to capture these young customers at the point of market entry and we're going to keep them and drive lifetime value That is fuel for our future growth. that is fuel for our future growth It's a foundation that we will continue to build on with more new customer acquisition. it's a foundation that we will continue to build on with more new customer acquisition That's how we're thinking about comping the comp. that's how we're thinking about comping the comp We're just building a foundation and getting stronger from here. we're just building a foundation and getting stronger from here

Speaker 12: Just before Scott answers, sorry, I just want to give you one little tidbit that maybe helps demonstrate this. We are killing it with bag charms. One of my questions was, I haven't seen a material move in UPT. What we found out when we dug and looked at the data is they're coming back more frequently. A young customer may buy the bag and then come back a week or two weeks later to actually buy a bag charm. That gives us two opportunities to interact with them. As Joanne and I have talked about in many calls, we have the best sales team in the world. Their ability to get them back in the store and sell them is so powerful in terms of our special sauce. I just want to throw that tidbit. Just before Scott answers, sorry, I just want to give you one little tidbit that maybe helps demonstrate this. just before scott answers sorry i just want to give you one little tidbit that maybe helps demonstrate this We are killing it with bag charms. we are killing it with bag charms One of my questions was, I haven't seen a material move in UPT. one of my questions was i haven't seen a material move in upt What we found out when we dug and looked at the data is they're coming back more frequently. what we found out when we dug and looked at the data is they're coming back more frequently A young customer may buy the bag and then come back a week or two weeks later to actually buy a bag charm. a young customer may buy the bag and then come back a week or two weeks later to actually buy a bag charm That gives us two opportunities to interact with them. that gives us two opportunities to interact with them As Joanne and I have talked about in many calls, we have the best sales team in the world. as joanne and i have talked about in many calls we have the best sales team in the world Their ability to get them back in the store and sell them is so powerful in terms of our special sauce. their ability to get them back in the store and sell them is so powerful in terms of our special sauce I just want to throw that tidbit. i just want to throw that tidbit I know Scott, you want to talk about tariffs and what we're going to do about them. I know Scott, you want to talk about tariffs and what we're going to do about them. i know scott you want to talk about tariffs and what we're going to do about them

Speaker 11: I can't wait, Todd. Thanks for the pass-off. And Ike, I appreciate the way you asked the question, by the way, because you're exactly right. I mean, of the $0.60 that impacted or is impacting our guidance, 2/3 of that, if we just went back one quarter, were not in effect, right? In fact, just a couple of weeks ago, the early termination of the de minimis exemptions came into vision. You think about that $0.60, that's a one-time increase in cost, which is impacting our gross margins, but we have massive underlying strength even in our gross margins. I'll just remind you, our operating margins are guided to expand even with this $0.60. I guess you could say if not for tariffs, add $0.60 to this guide. That's not the reality, though, right? The tariffs are real and we're going to fight our way through it. I can't wait, Todd. i can't wait todd Thanks for the pass-off. thanks for the pass-off And Ike, I appreciate the way you asked the question, by the way, because you're exactly right. and ike i appreciate the way you asked the question by the way because you're exactly right I mean, of the $0.60 that impacted or is impacting our guidance, 2/3 of that, if we just went back one quarter, were not in effect, right? i mean of the $0.60 that impacted or is impacting our guidance 2/3 of that if we just went back one quarter were not in effect right In fact, just a couple of weeks ago, the early termination of the de minimis exemptions came into vision. in fact just a couple of weeks ago the early termination of the de minimis exemptions came into vision You think about that $0.60, that's a one-time increase in cost, which is impacting our gross margins, but we have massive underlying strength even in our gross margins. you think about that $0.60 that's a one-time increase in cost which is impacting our gross margins but we have massive underlying strength even in our gross margins I'll just remind you, our operating margins are guided to expand even with this $0.60. i'll just remind you our operating margins are guided to expand even with this $0.60 I guess you could say if not for tariffs, add $0.60 to this guide. i guess you could say if not for tariffs add $0.60 to this guide That's not the reality, though, right? that's not the reality though right The tariffs are real and we're going to fight our way through it. the tariffs are real and we're going to fight our way through it One other perspective I would give you is, listen, we have momentum and the first word in supply chain is supply. We're not going to sacrifice service to our business. We have great momentum. We're taking share. We want to feed that momentum and we don't want to take any knee-jerk reactions based on a frankly dynamic and ever-changing environment here as it relates to tariffs and duties and the landscape. As we start to understand the rules of the game, I've never seen an organization that's better at playing that game and getting after it. I have every bit of confidence that our gross margins and operating margins will continue to expand as we move into next year and beyond. I can't wait to hopefully you'll come and see the model and get a muffin at our Investor Day in about three weeks or so. One other perspective I would give you is, listen, we have momentum and the first word in supply chain is supply. one other perspective i would give you is listen we have momentum and the first word in supply chain is supply We're not going to sacrifice service to our business. we're not going to sacrifice service to our business We have great momentum. we have great momentum We're taking share. we're taking share We want to feed that momentum and we don't want to take any knee-jerk reactions based on a frankly dynamic and ever-changing environment here as it relates to tariffs and duties and the landscape. we want to feed that momentum and we don't want to take any knee-jerk reactions based on a frankly dynamic and ever-changing environment here as it relates to tariffs and duties and the landscape As we start to understand the rules of the game, I've never seen an organization that's better at playing that game and getting after it. as we start to understand the rules of the game i've never seen an organization that's better at playing that game and getting after it I have every bit of confidence that our gross margins and operating margins will continue to expand as we move into next year and beyond. i have every bit of confidence that our gross margins and operating margins will continue to expand as we move into next year and beyond I can't wait to hopefully you'll come and see the model and get a muffin at our Investor Day in about three weeks or so. i can't wait to hopefully you'll come and see the model and get a muffin at our investor day in about three weeks or so We'll give you more illumination into what that long-term guide path looks like. We'll give you more illumination into what that long-term guide path looks like. we'll give you more illumination into what that long-term guide path looks like

Speaker 8: Thanks, guys. Thanks, guys. thanks guys

Speaker 9: Our next question is from Matthew Boss of JPMorgan. Please go ahead. Our next question is from Matthew Boss of JP Morgan. our next question is from matthew boss of jp morgan Please go ahead. please go ahead

Speaker 6: Great, thanks. Joanne, at the Coach brand and the continued strength of the business, how best to think about the inflection in units that you're seeing despite the impact of lower promotions? How do you see the go-forward interplay between AUR and units as both contributors to the revenue build? Scott, just on gross margin, could you give any elaboration on the phasing of gross margin for fiscal 2026 or any front half versus back half assumptions to consider? Great, thanks. great thanks Joanne, at the Coach brand and the continued strength of the business, how best to think about the inflection in units that you're seeing despite the impact of lower promotions? joanne at the coach brand and the continued strength of the business how best to think about the inflection in units that you're seeing despite the impact of lower promotions How do you see the go-forward interplay between AUR and units as both contributors to the revenue build? how do you see the go-forward interplay between aur and units as both contributors to the revenue build Scott, just on gross margin, could you give any elaboration on the phasing of gross margin for fiscal 2026 or any front half versus back half assumptions to consider? scott just on gross margin could you give any elaboration on the phasing of gross margin for fiscal 2026 or any front half versus back half assumptions to consider

Speaker 7: Thanks, Matt. I'm going to kick it off briefly, but then turn it to Todd because I'd like him to talk about the Coach brand and our unit growth. We have effectively reached the tipping point at Coach where we've done the work to build the brand and we're acquiring new and younger customers who are transacting at high AUR. We've cut the tail, the long tail of SKUs, and stepped away from promotional activity that had a drain on units over the last few years. Our business is incredibly healthy. Maybe with that, Todd, I'll let you finish the sentence. Thanks, Matt. thanks matt I'm going to kick it off briefly, but then turn it to Todd because I'd like him to talk about the Coach brand and our unit growth. i'm going to kick it off briefly but then turn it to todd because i'd like him to talk about the coach brand and our unit growth We have effectively reached the tipping point at Coach where we've done the work to build the brand and we're acquiring new and younger customers who are transacting at high AUR. we have effectively reached the tipping point at coach where we've done the work to build the brand and we're acquiring new and younger customers who are transacting at high aur We've cut the tail, the long tail of SKUs, and stepped away from promotional activity that had a drain on units over the last few years. we've cut the tail the long tail of skus and stepped away from promotional activity that had a drain on units over the last few years Our business is incredibly healthy. our business is incredibly healthy Maybe with that, Todd, I'll let you finish the sentence. maybe with that todd i'll let you finish the sentence

Speaker 12: Thanks, Joanne. Yeah, I mean, not only did we cut the tail, but we're constantly improving it. It wasn't a one-and-done exercise that we did four years ago or five years ago. No, actually a little bit longer. We're constantly looking at our product offering, focusing and focusing. One of the things about telling deeper and richer stories is doing it on fewer big ideas. That's what's cutting through. Our guidance for the year has most of our growth coming through AUR growth. We believe units will continue to grow as well. It's very powerful for us. I am not interested in churn. We are interested in building long-term sustainable growth over the many years to come. That's how we're doing it. We're going to continue to do it that way. Thanks, Joanne. thanks joanne Yeah, I mean, not only did we cut the tail, but we're constantly improving it. yeah i mean not only did we cut the tail but we're constantly improving it It wasn't a one-and-done exercise that we did four years ago or five years ago. it wasn't a one-and-done exercise that we did four years ago or five years ago No, actually a little bit longer. no actually a little bit longer We're constantly looking at our product offering, focusing and focusing. we're constantly looking at our product offering focusing and focusing One of the things about telling deeper and richer stories is doing it on fewer big ideas. one of the things about telling deeper and richer stories is doing it on fewer big ideas That's what's cutting through. that's what's cutting through Our guidance for the year has most of our growth coming through AUR growth. our guidance for the year has most of our growth coming through aur growth We believe units will continue to grow as well. we believe units will continue to grow as well It's very powerful for us. it's very powerful for us I am not interested in churn. i am not interested in churn We are interested in building long-term sustainable growth over the many years to come. we are interested in building long-term sustainable growth over the many years to come That's how we're doing it. that's how we're doing it We're going to continue to do it that way. we're going to continue to do it that way One thing you'll hear us talk about at our Investor Day, we're going to see we're back in the business of growing stores. Particularly in North America, you're going to see us talk about a growth in physical locations because one of the things our data points to is this younger consumer, they like being in the real world. They like shopping. They like interacting. That's how we can win. I'm excited by you'll see us grow, continue to grow AUR. We're far from done, but you'll start seeing us grow units as well. One thing you'll hear us talk about at our Investor Day, we're going to see we're back in the business of growing stores. one thing you'll hear us talk about at our investor day we're going to see we're back in the business of growing stores Particularly in North America, you're going to see us talk about a growth in physical locations because one of the things our data points to is this younger consumer, they like being in the real world. particularly in north america you're going to see us talk about a growth in physical locations because one of the things our data points to is this younger consumer they like being in the real world They like shopping. they like shopping They like interacting. they like interacting That's how we can win. that's how we can win I'm excited by you'll see us grow, continue to grow AUR. i'm excited by you'll see us grow continue to grow aur We're far from done, but you'll start seeing us grow units as well. we're far from done but you'll start seeing us grow units as well

Speaker 11: Yeah, and a nice tie-in as I give you a little illumination on the gross margin phasing. Just picking up where Todd left, you know, the advantage of our structurally high gross margins and the fact that we have a history of and a confidence in continuing to grow them is one of the things that makes that D2C work, right? The profitability of our stores continues to increase. That's really what's unlocking the opportunity for expansion and yet another growth factor as we look forward. I think we said a little bit of this in terms of the phasing, but think again about the impact of tariffs. We've got underlying operational gross margin strength led by the AUR that Todd just talked about. That happens throughout the year. Remember, I also said in the prepared remarks that we brought a little inventory in ahead. Yeah, and a nice tie-in as I give you a little illumination on the gross margin phasing. yeah and a nice tie-in as i give you a little illumination on the gross margin phasing Just picking up where Todd left, you know, the advantage of our structurally high gross margins and the fact that we have a history of and a confidence in continuing to grow them is one of the things that makes that D2C work, right? just picking up where todd left you know the advantage of our structurally high gross margins and the fact that we have a history of and a confidence in continuing to grow them is one of the things that makes that d2c work right The profitability of our stores continues to increase. the profitability of our stores continues to increase That's really what's unlocking the opportunity for expansion and yet another growth factor as we look forward. that's really what's unlocking the opportunity for expansion and yet another growth factor as we look forward I think we said a little bit of this in terms of the phasing, but think again about the impact of tariffs. i think we said a little bit of this in terms of the phasing but think again about the impact of tariffs We've got underlying operational gross margin strength led by the AUR that Todd just talked about. we've got underlying operational gross margin strength led by the aur that todd just talked about That happens throughout the year. that happens throughout the year Remember, I also said in the prepared remarks that we brought a little inventory in ahead. remember i also said in the prepared remarks that we brought a little inventory in ahead It'll take a while for that rabbit to work through the snake, right? As the tariffs become effective and we sell through the lower tariff goods in the first half, then in the second half, you'll start to see those higher tariff goods start to hit the P&L. You're going to see stronger gross margins in the first half. I think we guided to a little over 100 basis points in Q1, for example. That's really driven by the operational strength that's structural and ongoing. Then you'll see some of those tariffs start to hit in the second half. Your gross margins will be a little lower in the second half. The other thing I would say is as it relates to mitigation, as I said in my earlier comment to Ike, we've got a lot of plans in place. It'll take a while for that rabbit to work through the snake, right? it'll take a while for that rabbit to work through the snake right As the tariffs become effective and we sell through the lower tariff goods in the first half, then in the second half, you'll start to see those higher tariff goods start to hit the P&L. as the tariffs become effective and we sell through the lower tariff goods in the first half then in the second half you'll start to see those higher tariff goods start to hit the p&l You're going to see stronger gross margins in the first half. you're going to see stronger gross margins in the first half I think we guided to a little over 100 basis points in Q1, for example. i think we guided to a little over 100 basis points in q1 for example That's really driven by the operational strength that's structural and ongoing. that's really driven by the operational strength that's structural and ongoing Then you'll see some of those tariffs start to hit in the second half. then you'll see some of those tariffs start to hit in the second half Your gross margins will be a little lower in the second half. your gross margins will be a little lower in the second half The other thing I would say is as it relates to mitigation, as I said in my earlier comment to Ike, we've got a lot of plans in place. the other thing i would say is as it relates to mitigation as i said in my earlier comment to ike we've got a lot of plans in place Now that we understand better the game board and what we're shooting for, those mitigation plans are well underway. Some of those are quick. A lot of them take a little longer. As we get into next year and beyond, you'll start to see more of those mitigations coming into effect in the gross margin line in 2027 and 2028. Now that we understand better the game board and what we're shooting for, those mitigation plans are well underway. now that we understand better the game board and what we're shooting for those mitigation plans are well underway Some of those are quick. some of those are quick A lot of them take a little longer. a lot of them take a little longer As we get into next year and beyond, you'll start to see more of those mitigations coming into effect in the gross margin line in 2027 and 2028. as we get into next year and beyond you'll start to see more of those mitigations coming into effect in the gross margin line in 2027 and 2028

Speaker 6: Great color. Best of luck. Great color. great color Best of luck. best of luck

Speaker 11: Yeah, thanks. Yeah, thanks. yeah thanks

Speaker 9: Our next question is from Adrienne Yih of Barclays. Please go ahead. Our next question is from Adrienne Yih of Barclays. our next question is from adrienne yih of barclays Please go ahead. please go ahead

Speaker 5: Great. Good morning. Let me add my congratulations. I guess I'll start with kind of from just a structural modeling question. The last time that Coach brand was at these types of gross margins and north of 30% operating margins was sort of about 2005, 2006. I know that the wholesale was a bigger portion of the business, but Joanne and Scott, can you talk about, and Todd, can you talk about structurally what is different today and what enables Coach to continue to kind of expand on both those line items? Can you also, Todd, talk about kind of pricing as a mechanism to mitigate the tariffs? I haven't heard a lot of discussion about that. I know you did take some pricing earlier in the year. Is there a plan for the fall season? Is there another plan perhaps for spring of next year? Thank you very much. Great. great Good morning. good morning Let me add my congratulations. let me add my congratulations I guess I'll start with kind of from just a structural modeling question. i guess i'll start with kind of from just a structural modeling question The last time that Coach brand was at these types of gross margins and north of 30% operating margins was sort of about 2005, 2006. the last time that coach brand was at these types of gross margins and north of 30% operating margins was sort of about 2005 2006 I know that the wholesale was a bigger portion of the business, but Joanne and Scott, can you talk about, and Todd, can you talk about structurally what is different today and what enables Coach to continue to kind of expand on both those line items? i know that the wholesale was a bigger portion of the business but joanne and scott can you talk about and todd can you talk about structurally what is different today and what enables coach to continue to kind of expand on both those line items Can you also, Todd, talk about kind of pricing as a mechanism to mitigate the tariffs? can you also todd talk about kind of pricing as a mechanism to mitigate the tariffs I haven't heard a lot of discussion about that. i haven't heard a lot of discussion about that I know you did take some pricing earlier in the year. i know you did take some pricing earlier in the year Is there a plan for the fall season? is there a plan for the fall season Is there another plan perhaps for spring of next year? is there another plan perhaps for spring of next year Thank you very much. thank you very much

Speaker 12: Yeah. I'll go ahead. I think since it was mostly all Coach. While I wasn't here in 2005, I was here just shortly thereafter. We are a different company. We are more direct-to-consumer than in 2005. We have more geographic diversification than 2005. Back in that era, if you go pre-2010 through 2012, we really had, we were Japan and the U.S. Today, we have giant pillars of growth in China, in Asia, and now most recently you see us do tremendous growth in Europe. I think structurally we're in a far better place to deal with that. It's a different kind of company. Second, the innovation that we're bringing to the table in terms of product offering, Stuart has been with us for about 11+ years. Yeah. yeah I'll go ahead. i'll go ahead I think since it was mostly all Coach. i think since it was mostly all coach While I wasn't here in 2005, I was here just shortly thereafter. while i wasn't here in 2005 i was here just shortly thereafter We are a different company. we are a different company We are more direct-to-consumer than in 2005. we are more direct-to-consumer than in 2005 We have more geographic diversification than 2005. we have more geographic diversification than 2005 Back in that era, if you go pre-2010 through 2012, we really had, we were Japan and the U.S. back in that era if you go pre-2010 through 2012 we really had we were japan and the u.s Today, we have giant pillars of growth in China, in Asia, and now most recently you see us do tremendous growth in Europe. today we have giant pillars of growth in china in asia and now most recently you see us do tremendous growth in europe I think structurally we're in a far better place to deal with that. i think structurally we're in a far better place to deal with that It's a different kind of company. it's a different kind of company Second, the innovation that we're bringing to the table in terms of product offering, Stuart has been with us for about 11 + years. second the innovation that we're bringing to the table in terms of product offering stuart has been with us for about 11 + years I feel in some ways, and he and I just walked through the showroom, I get the benefit of seeing the showroom many seasons ahead of what you get to see. We both left there and saying, this is the best we've seen the brand ever. The consumer will vote. Hopefully, they'll be as enthusiastic, but we feel very good about that. In our history, in our DNA at Coach, we always talked about blending magic and logic. Today, under the Tapestry engine, we took that and put it on steroids. We are more data-driven. We have more insight. We don't lose sight of the magic, but the magic is informed magic. I feel very good. On price overall, we're going to continue to use our data to inform our pricing. That's important. Those opportunities, geography, channel, product mix is all working in our favor. I feel in some ways, and he and I just walked through the showroom, I get the benefit of seeing the showroom many seasons ahead of what you get to see. i feel in some ways and he and i just walked through the showroom i get the benefit of seeing the showroom many seasons ahead of what you get to see We both left there and saying, this is the best we've seen the brand ever. we both left there and saying this is the best we've seen the brand ever The consumer will vote. the consumer will vote Hopefully, they'll be as enthusiastic, but we feel very good about that. hopefully they'll be as enthusiastic but we feel very good about that In our history, in our DNA at Coach, we always talked about blending magic and logic. in our history in our dna at coach we always talked about blending magic and logic Today, under the Tapestry engine, we took that and put it on steroids. today under the tapestry engine we took that and put it on steroids We are more data-driven. we are more data-driven We have more insight. we have more insight We don't lose sight of the magic, but the magic is informed magic. we don't lose sight of the magic but the magic is informed magic I feel very good. i feel very good On price overall, we're going to continue to use our data to inform our pricing. on price overall we're going to continue to use our data to inform our pricing That's important. that's important Those opportunities, geography, channel, product mix is all working in our favor. those opportunities geography channel product mix is all working in our favor Examples of the One Coach strategy, where we're bringing our collection product, Brooklyn, Tabby, other products like that into outlet stores, selling at full price. That gives you natural AUR growth. It enhances what's already in the outlets because at the end of the day, the consumer sees brands, not channels. We're winning across a multitude of dimensions that will continue to allow us to take price, focus on the customer, and grow from here. Examples of the One Coach strategy, where we're bringing our collection product, Brooklyn, Tabby, other products like that into outlet stores, selling at full price. examples of the one coach strategy where we're bringing our collection product brooklyn tabby other products like that into outlet stores selling at full price That gives you natural AUR growth. that gives you natural aur growth It enhances what's already in the outlets because at the end of the day, the consumer sees brands, not channels. it enhances what's already in the outlets because at the end of the day the consumer sees brands not channels We're winning across a multitude of dimensions that will continue to allow us to take price, focus on the customer, and grow from here. we're winning across a multitude of dimensions that will continue to allow us to take price focus on the customer and grow from here

Speaker 5: Great. Fantastic. Scott, one quick question. The $800 million that you're now targeting for our share repurchase activity, should we assume or think about that as this sort of new repo run rate? I know in the 2022 analyst day, there was this notion of a consistent $700 million annually. Thank you. Great. great Fantastic. fantastic Scott, one quick question. scott one quick question The $800 million that you're now targeting for our share repurchase activity, should we assume or think about that as this sort of new repo run rate? the $800 million that you're now targeting for our share repurchase activity should we assume or think about that as this sort of new repo run rate I know in the 2022 analyst day, there was this notion of a consistent $700 million annually. i know in the 2022 analyst day there was this notion of a consistent $700 million annually Thank you. thank you

Speaker 11: Yeah, so you know, I can't really go beyond what we've said right now, which is $800 million is this year. Here's what I'd ask you to take away. We got a really strong profitability and cash flow profile. We're a full turn below our leverage target. We got a lot of firepower, right? We know that our repurchases have been and will continue to be part of the value creation equation. You know, $800 million is this year, and we'll be happy to give you an update in a few weeks at our Investor Day about a longer-term perspective. I hope you take away, Adrienne, that we're in a strong position, and we've got what I would argue is a shareholder-friendly capital allocation positioning here in a history of returning that cash to shareholders. Yeah, so you know, I can't really go beyond what we've said right now, which is $800 million is this year. yeah so you know i can't really go beyond what we've said right now which is $800 million is this year Here's what I'd ask you to take away. here's what i'd ask you to take away We got a really strong profitability and cash flow profile. we got a really strong profitability and cash flow profile We're a full turn below our leverage target. we're a full turn below our leverage target We got a lot of firepower, right? we got a lot of firepower right We know that our repurchases have been and will continue to be part of the value creation equation. we know that our repurchases have been and will continue to be part of the value creation equation You know, $800 million is this year, and we'll be happy to give you an update in a few weeks at our Investor Day about a longer-term perspective. you know $800 million is this year and we'll be happy to give you an update in a few weeks at our investor day about a longer-term perspective I hope you take away, Adrienne, that we're in a strong position, and we've got what I would argue is a shareholder-friendly capital allocation positioning here in a history of returning that cash to shareholders. i hope you take away adrienne that we're in a strong position and we've got what i would argue is a shareholder-friendly capital allocation positioning here in a history of returning that cash to shareholders

Speaker 5: Absolutely. Congratulations. See you in a month. Absolutely. absolutely Congratulations. congratulations See you in a month. see you in a month

Speaker 11: Yeah, thanks, Adrienne. Yeah, thanks, Adrienne. yeah thanks adrienne

Speaker 9: Due to the interest of time, callers need to limit themselves to one question. Our next question is from Lorraine Hutchinson of Bank of America. Please go ahead. Due to the interest of time, callers need to limit themselves to one question. due to the interest of time callers need to limit themselves to one question Our next question is from Lorraine Hutchinson of Bank of America. our next question is from lorraine hutchinson of bank of america Please go ahead. please go ahead

Speaker 4: Thanks. Good morning. I was hoping to ask for more details on the drivers of the 160 basis points of operating SG&A leverage this year, and then your thoughts on the longer-term opportunities to maintain that leverage, or if the store rollout might offset some of this in the out years. Thanks. thanks Good morning. good morning I was hoping to ask for more details on the drivers of the 160 basis points of operating SG&A leverage this year, and then your thoughts on the longer-term opportunities to maintain that leverage, or if the store rollout might offset some of this in the out years. i was hoping to ask for more details on the drivers of the 160 basis points of operating sg&a leverage this year and then your thoughts on the longer-term opportunities to maintain that leverage or if the store rollout might offset some of this in the out years

Speaker 11: Yeah, that sounds like a me question. A couple of things. We did get a small benefit just foundationally from the Stuart Weitzman disposition, so, you know, roughly 20 basis points. I'll also tell you, we are increasing our investment in MAP spending or marketing, right? Off an already record high base, we're continuing to invest, and even with that, we're finding leverage across the SG&A line, and that's one of the reasons why we can talk about margin expansion for the year. A lot of it has to do with, you know, the productivity of the fleet that Todd just mentioned, right? As we sell through and we're increasing our full-price sales, we're increasing sales across all D2C channels, and when you do that, you get leverage in your four-wall cost. The profitability is up, as we said, and that's a great driver of cost. Yeah, that sounds like a me question. yeah that sounds like a me question A couple of things. a couple of things We did get a small benefit just foundationally from the Stuart Weitzman disposition, so, you know, roughly 20 basis points. we did get a small benefit just foundationally from the stuart weitzman disposition so you know roughly 20 basis points I'll also tell you, we are increasing our investment in MAP spending or marketing, right? i'll also tell you we are increasing our investment in map spending or marketing right Off an already record high base, we're continuing to invest, and even with that, we're finding leverage across the SG&A line, and that's one of the reasons why we can talk about margin expansion for the year. off an already record high base we're continuing to invest and even with that we're finding leverage across the sg&a line and that's one of the reasons why we can talk about margin expansion for the year A lot of it has to do with, you know, the productivity of the fleet that Todd just mentioned, right? a lot of it has to do with you know the productivity of the fleet that todd just mentioned right As we sell through and we're increasing our full-price sales, we're increasing sales across all D2C channels, and when you do that, you get leverage in your four-wall cost. as we sell through and we're increasing our full-price sales we're increasing sales across all d2c channels and when you do that you get leverage in your four-wall cost The profitability is up, as we said, and that's a great driver of cost. the profitability is up as we said and that's a great driver of cost I would say on the, if you want to say, you know, air quotes, corporate costs, we're also being very diligent, and we're investing in those things we think that matter, and those would be things like understanding the consumer on a deeper level, things like, you know, our customer data, our data fabric, our AI initiatives, some of the things we're doing around data and analytics, and everything else, we're taking a pretty hard view and looking for efficiencies. That's the model, right? Invest in things that are difference-making, and we'll set up growth in the future, find efficiencies across the rest of the P&L, and that coupled with a nice acceleration in gross, top-line growth to mid-single digits, that sets up that flywheel that we've been talking about. I would say on the, if you want to say, you know, air quotes, corporate costs, we're also being very diligent, and we're investing in those things we think that matter, and those would be things like understanding the consumer on a deeper level, things like, you know, our customer data, our data fabric, our AI initiatives, some of the things we're doing around data and analytics, and everything else, we're taking a pretty hard view and looking for efficiencies. i would say on the if you want to say you know air quotes corporate costs we're also being very diligent and we're investing in those things we think that matter and those would be things like understanding the consumer on a deeper level things like you know our customer data our data fabric our ai initiatives some of the things we're doing around data and analytics and everything else we're taking a pretty hard view and looking for efficiencies That's the model, right? that's the model right Invest in things that are difference-making, and we'll set up growth in the future, find efficiencies across the rest of the P&L, and that coupled with a nice acceleration in gross, top-line growth to mid-single digits, that sets up that flywheel that we've been talking about. invest in things that are difference-making and we'll set up growth in the future find efficiencies across the rest of the p&l and that coupled with a nice acceleration in gross top-line growth to mid-single digits that sets up that flywheel that we've been talking about

Speaker 4: Thank you. Thank you. thank you

Speaker 9: Thank you. Our next question is from Michael Binetti of Evercore. Your line is open. Thank you. thank you Our next question is from Michael Binetti of Evercore. our next question is from michael binetti of evercore Your line is open. your line is open

Speaker 10: Hey guys, thanks for taking our question here and for all the details today. I'm guessing this one will go to you, Scott. Could you just unpack the commentary on de minimis as I think about our conversations through the quarter? I know you guys are doing some scenario planning around tariffs rates changing, but how are you guys leveraging de minimis in the past, and how does that change? Maybe how much of the 230 basis points is from de minimis? I think that's kind of the surprise here. I'm guessing that means perhaps that some warehousing capacity needs to move back into the U.S., or maybe just a thought on what that means operationally. I'll follow it just by saying maybe just Europe, the growth rate a little slower in fourth quarter relative to the first nine months. Hey guys, thanks for taking our question here and for all the details today. hey guys thanks for taking our question here and for all the details today I'm guessing this one will go to you, Scott. i'm guessing this one will go to you scott Could you just unpack the commentary on de minimis as I think about our conversations through the quarter? could you just unpack the commentary on de minimis as i think about our conversations through the quarter I know you guys are doing some scenario planning around tariffs rates changing, but how are you guys leveraging de minimis in the past, and how does that change? i know you guys are doing some scenario planning around tariffs rates changing but how are you guys leveraging de minimis in the past and how does that change Maybe how much of the 230 basis points is from de minimis? maybe how much of the 230 basis points is from de minimis I think that's kind of the surprise here. i think that's kind of the surprise here I'm guessing that means perhaps that some warehousing capacity needs to move back into the U.S., or maybe just a thought on what that means operationally. i'm guessing that means perhaps that some warehousing capacity needs to move back into the u.s or maybe just a thought on what that means operationally I'll follow it just by saying maybe just Europe, the growth rate a little slower in fourth quarter relative to the first nine months. i'll follow it just by saying maybe just europe the growth rate a little slower in fourth quarter relative to the first nine months Maybe just context on that and then the reacceleration to 20%. Maybe just context on that and then the reacceleration to 20%. maybe just context on that and then the reacceleration to 20%

Speaker 11: Okay, without going too much in a rabbit hole, de minimis, as probably you're well aware, is really the ability to ship duty-free on e-commerce from outside of the U.S. and into the U.S. market. With the recent tax bill that was passed, it was scheduled to expire in 2027, which was our expectation until a couple of weeks ago when there was an executive order which accelerated the removal of de minimis. That was about a third of the $0.60 that we talked about. What does that mean? That $900 million that we talked about before now is bigger, right? You had goods coming into the U.S. that were duty-free, now they're subject to duty, and they get the full impact of that, the reciprocal tariffs that are now in effect, at least as we understand them at this point in time. That probably is a surprise to many. Okay, without going too much in a rabbit hole, de minimis, as probably you're well aware, is really the ability to ship duty-free on e-commerce from outside of the U.S. and into the U.S. market. okay without going too much in a rabbit hole de minimis as probably you're well aware is really the ability to ship duty-free on e-commerce from outside of the u.s and into the u.s market With the recent tax bill that was passed, it was scheduled to expire in 2027, which was our expectation until a couple of weeks ago when there was an executive order which accelerated the removal of de minimis. with the recent tax bill that was passed it was scheduled to expire in 2027 which was our expectation until a couple of weeks ago when there was an executive order which accelerated the removal of de minimis That was about a third of the $0.60 that we talked about. that was about a third of the $0.60 that we talked about What does that mean? what does that mean That $900 million that we talked about before now is bigger, right? that $900 million that we talked about before now is bigger right You had goods coming into the U.S. that were duty-free, now they're subject to duty, and they get the full impact of that, the reciprocal tariffs that are now in effect, at least as we understand them at this point in time. you had goods coming into the u.s that were duty-free now they're subject to duty and they get the full impact of that the reciprocal tariffs that are now in effect at least as we understand them at this point in time That probably is a surprise to many. that probably is a surprise to many I don't know how many people are paying attention to de minimis, but that was an opportunity that we had taken advantage of. It was the law at the time, and now the law has changed. We have to address that. The good news is, as it relates to capacity and whatnot, as we think about our network, it's pretty agile and a combination of owned and 3PL. I'm not saying it's nothing, but our ability to manage within that is not a significant disruptor, and we have plans underway to take advantage of that. That's not going to be a significant cost or interruption of service issue as we go forward. It's just more work for our supply chain team. I don't know how many people are paying attention to de minimis, but that was an opportunity that we had taken advantage of. i don't know how many people are paying attention to de minimis but that was an opportunity that we had taken advantage of It was the law at the time, and now the law has changed. it was the law at the time and now the law has changed We have to address that. we have to address that The good news is, as it relates to capacity and whatnot, as we think about our network, it's pretty agile and a combination of owned and 3PL. the good news is as it relates to capacity and whatnot as we think about our network it's pretty agile and a combination of owned and 3pl I'm not saying it's nothing, but our ability to manage within that is not a significant disruptor, and we have plans underway to take advantage of that. i'm not saying it's nothing but our ability to manage within that is not a significant disruptor and we have plans underway to take advantage of that That's not going to be a significant cost or interruption of service issue as we go forward. that's not going to be a significant cost or interruption of service issue as we go forward It's just more work for our supply chain team. it's just more work for our supply chain team As it relates to the guide, this is a little different than we have typically guided in terms of philosophy, because usually what we do is we just say we're going to take the rates that we see and simply project those forward. We feel like as we're entering a new year and we have great momentum, as evidenced by our Q1 guide, we think it's prudent at this point in the year with the real estate of the entire year ahead of us and the full impact of tariffs and the dynamic environment out there to be prudent in our second half assumptions. We have done that, right? We've been a little conservative in the second half in light of the overall consumer backdrop. I want to be clear, it has nothing to do with the trajectory of our business. We're not seeing any change in the consumer reaction. As it relates to the guide, this is a little different than we have typically guided in terms of philosophy, because usually what we do is we just say we're going to take the rates that we see and simply project those forward. as it relates to the guide this is a little different than we have typically guided in terms of philosophy because usually what we do is we just say we're going to take the rates that we see and simply project those forward We feel like as we're entering a new year and we have great momentum, as evidenced by our Q1 guide, we think it's prudent at this point in the year with the real estate of the entire year ahead of us and the full impact of tariffs and the dynamic environment out there to be prudent in our second half assumptions. we feel like as we're entering a new year and we have great momentum as evidenced by our q1 guide we think it's prudent at this point in the year with the real estate of the entire year ahead of us and the full impact of tariffs and the dynamic environment out there to be prudent in our second half assumptions We have done that, right? we have done that right We've been a little conservative in the second half in light of the overall consumer backdrop. we've been a little conservative in the second half in light of the overall consumer backdrop I want to be clear, it has nothing to do with the trajectory of our business. i want to be clear it has nothing to do with the trajectory of our business We're not seeing any change in the consumer reaction. we're not seeing any change in the consumer reaction In fact, we've seen an acceleration in Q1. Could we do better in the second half? Let's see. We feel like being prudent at this early stage in our full-year guidance is the right position. In fact, we've seen an acceleration in Q1. in fact we've seen an acceleration in q1 Could we do better in the second half? could we do better in the second half Let's see. let's see We feel like being prudent at this early stage in our full-year guidance is the right position. we feel like being prudent at this early stage in our full-year guidance is the right position

Speaker 12: Yeah, just to jump in, the specific question on Europe, a slight reduction in Q4 versus what we were achieving before that is all intentional on our part. That is making sure that the wholesale accounts that we deal with are appropriate for the brand. That's us being very intentional. It doesn't indicate any kind of slowdown in consumer demand. Yeah, just to jump in, the specific question on Europe, a slight reduction in Q4 versus what we were achieving before that is all intentional on our part. yeah just to jump in the specific question on europe a slight reduction in q4 versus what we were achieving before that is all intentional on our part That is making sure that the wholesale accounts that we deal with are appropriate for the brand. that is making sure that the wholesale accounts that we deal with are appropriate for the brand That's us being very intentional. that's us being very intentional It doesn't indicate any kind of slowdown in consumer demand. it doesn't indicate any kind of slowdown in consumer demand

Speaker 10: Okay, thanks for the help. Okay, thanks for the help. okay thanks for the help

Speaker 11: Yep. Yep. yep

Speaker 9: Our next question is from Paul Lejuez of Citigroup. Your line is open. Our next question is from Paul Lejuez of Citigroup. our next question is from paul lejuez of citigroup Your line is open. your line is open

Speaker 1: Hey, thanks. It's Tracy Kogan filling in for Paul. As far as the acceleration you mentioned that's happening in 1Q, I was wondering if you could give a little more detail by region on that. Secondly, what is your guidance with Zoom in terms of the magnitude of price increases at the Coach brand? Thank you. Hey, thanks. hey thanks It's Tracy Kogan filling in for Paul. it's tracy kogan filling in for paul As far as the acceleration you mentioned that's happening in 1Q, I was wondering if you could give a little more detail by region on that. as far as the acceleration you mentioned that's happening in 1q i was wondering if you could give a little more detail by region on that Secondly, what is your guidance with Zoom in terms of the magnitude of price increases at the Coach brand? secondly what is your guidance with zoom in terms of the magnitude of price increases at the coach brand Thank you. thank you

Speaker 11: Maybe I'll just comment on. Maybe I'll just comment on. maybe i'll just comment on

Speaker 7: The acceleration, yeah, go ahead. Go ahead, Scott. The acceleration, yeah, go ahead. the acceleration yeah go ahead Go ahead, Scott. go ahead scott

Speaker 11: Yeah, go ahead. No, I was just going to say. Yeah, go ahead. yeah go ahead No, I was just going to say. no i was just going to say

Speaker 7: The acceleration we're seeing is widespread, as Scott was saying. We both want to jump in on this because it's a fun party. The acceleration we are seeing is widespread. The Coach strategies are working globally, and we're driving our business globally. We're seeing nice customer response, and it's been very, very consistent in terms of acceleration. In terms of price increase, maybe Todd, I'll let you talk about what you're assuming for AUR growth in the year. The acceleration we're seeing is widespread, as Scott was saying. the acceleration we're seeing is widespread as scott was saying We both want to jump in on this because it's a fun party. we both want to jump in on this because it's a fun party The acceleration we are seeing is widespread. the acceleration we are seeing is widespread The Coach strategies are working globally, and we're driving our business globally. the coach strategies are working globally and we're driving our business globally We're seeing nice customer response, and it's been very, very consistent in terms of acceleration. we're seeing nice customer response and it's been very very consistent in terms of acceleration In terms of price increase, maybe Todd, I'll let you talk about what you're assuming for AUR growth in the year. in terms of price increase maybe todd i'll let you talk about what you're assuming for aur growth in the year

Speaker 12: Yeah, again, our AUR growth is projected to be mid to high single digit throughout the year. We feel very good about that growth when we really look at buy the bag, buy the style, buy the silhouette. Again, putting more first full-price product into outlet automatically lifts our AUR as well. We feel very good about the mix and where we can take AUR. Yeah, again, our AUR growth is projected to be mid to high single digit throughout the year. yeah again our aur growth is projected to be mid to high single digit throughout the year We feel very good about that growth when we really look at buy the bag, buy the style, buy the silhouette. we feel very good about that growth when we really look at buy the bag buy the style buy the silhouette Again, putting more first full-price product into outlet automatically lifts our AUR as well. again putting more first full-price product into outlet automatically lifts our aur as well We feel very good about the mix and where we can take AUR. we feel very good about the mix and where we can take aur

Speaker 1: Great, thank you. Great, thank you. great thank you

Speaker 9: Thank you. That concludes our Q&A. I will now turn it over to Joanne Crevoiserat for some concluding remarks. Thank you. thank you That concludes our Q&A. that concludes our q&a I will now turn it over to Joanne Crevoiserat for some concluding remarks. i will now turn it over to joanne crevoiserat for some concluding remarks

Speaker 7: Thank you, Leo. I want to close by thanking our exceptional teams for delivering another record year and share three important takeaways from our results. First, we deliver on our commitments. This is on display with our fiscal 2025 EPS of over $5, which we outlined three years ago. Our strategies are working, our business is agile and poised for growth, and we know this is key as we continue to build connections with consumers and execute with discipline in a dynamic landscape. Second, we have strong fundamentals and momentum highlighted by the double-digit growth we're seeing at Coach, which accelerated at the start of this year. Third, we have unique competitive and structural advantages to drive durable growth and shareholder value into the future. I want to thank everyone who joined us today for your interest in our story. Thanks and have a great day. Thank you, Leo. thank you leo I want to close by thanking our exceptional teams for delivering another record year and share three important takeaways from our results. i want to close by thanking our exceptional teams for delivering another record year and share three important takeaways from our results First, we deliver on our commitments. first we deliver on our commitments This is on display with our fiscal 2025 EPS of over $5, which we outlined three years ago. this is on display with our fiscal 2025 eps of over $5 which we outlined three years ago Our strategies are working, our business is agile and poised for growth, and we know this is key as we continue to build connections with consumers and execute with discipline in a dynamic landscape. our strategies are working our business is agile and poised for growth and we know this is key as we continue to build connections with consumers and execute with discipline in a dynamic landscape Second, we have strong fundamentals and momentum highlighted by the double-digit growth we're seeing at Coach, which accelerated at the start of this year. second we have strong fundamentals and momentum highlighted by the double-digit growth we're seeing at coach which accelerated at the start of this year Third, we have unique competitive and structural advantages to drive durable growth and shareholder value into the future. third we have unique competitive and structural advantages to drive durable growth and shareholder value into the future I want to thank everyone who joined us today for your interest in our story. i want to thank everyone who joined us today for your interest in our story Thanks and have a great day. thanks and have a great day

Speaker 9: This concludes Tapestry's conference call. We thank you for your participation. This concludes Tapestry's conference call. this concludes tapestry's conference call We thank you for your participation. we thank you for your participation