Joanne Crevoiserat
Chief Executive Officer at Tapestry
Good morning. Thank you, Christina, and welcome everyone. As noted in our press release, we achieved record EPS this fiscal year, reinforcing the power of brand-building, consumer-centric strategies and disciplined execution. Importantly, we meaningfully advanced our strategic priorities, engaging with consumers around the world through product excellence, unique storytelling, and distinctive omnichannel experiences. At the same time, we continue to invest in our brands and our data-rich consumer engagement platform which underpin our growth agenda. I want to thank our talented global teams for continuing to drive our strong results.
Touching on the strategic and financial highlights for the year. First, we powered global growth, achieving 3% constant currency revenue gains, consistent with our outlook and underscoring the benefits of our globally diversified business model. These top-line results were led by our international businesses, which grew 13% excluding FX. This included a 5% increase in Greater China despite facing incremental COVID-related pressures in the first-half of the year.
Importantly, our business in China rebounded in the second half, achieving 50% growth in the fourth quarter, supported by a strong improvement in traffic and representing an increase compared to the region's peak fiscal '21 levels. Our international results were also fueled by strong momentum in other Asia, with sales growth of 36%, as well as in Japan where revenue rose 15%. In Europe, sales increased 7% for the year. In North America, sales for the year declined low-single digits against the challenging consumer backdrop.
In the fourth quarter, our business decreased 8% versus last year, though we delivered significant gross margin improvement and handbag AUR growth, consistent with our commitments to prioritize long-term brand health. Importantly, our business in North America has improved meaningfully on a sequential basis quarter-to-date in Q1, with revenue trending in-line with prior year on continued higher margins as we began to anniversary easier comparisons.
Second, we continue to focus on building new and lasting customer relationships. To this end, we acquired approximately 6.5 million new customers in North America alone during the fiscal year. Importantly, these new customers transacted at higher AURs than the balance of our customer base and approximately half were Millennial and Gen Z, consistent with our strategy to attract younger consumers to our brands.
Third, we delivered seamless omnichannel experiences, harnessing the power of our direct-to-consumer business model and highlighting our ability to meet consumers where they are shopping. We drove 3% growth in direct-to-consumer sales on a constant currency basis. This was led by mid-single digit growth in brick-and-mortar sales as we welcome an increasing number of consumers to our stores. In addition, we maintained our strong positioning in digital. While sales were down slightly compared to the prior year, revenues still represented nearly 30% of sales, approximately 3 times pre-pandemic levels. Importantly, we enhanced our capabilities this year, bringing all of our brands on a unified digital enterprise platform.
Fourth, we fueled fashion innovation and product excellence informed by data analytics and consumer research. To this end, we drove handbag AUR growth globally and in North America for both the quarter and the year. We also delivered outsized top-line gains in our small leather goods and lifestyle offerings, key to enhancing brand relevance and fueling customer value over time.
Taken together, we generated record fiscal year earnings per share, increasing at a double-digit rate compared to the prior year, which we accomplished despite a volatile demand backdrop and currency headwinds. This included a strong finish to our year with EPS growth of over 20% in the fourth quarter. Overall, our fiscal '23 results reinforce the meaningful progress we've made in differentiating our brands and our business. Further, our performance highlights our agility and the advantages of our model, underscoring our confidence and our ability to drive sustainable, profitable growth.
Now turning to the highlights across each of our brands, starting with Coach. At the start of the year, we introduced our brand positioning of expressive luxury, laying the groundwork for deeper customer connections. Our team has brought this concept to life through impactful marketing campaigns, unique retail experiences, and relevant and innovative product designs. As a result, the brand delivered revenue of nearly $5 billion on stronger operating margin, fueled by a material improvement in gross margin.
Now, touching on some of the details of the fourth quarter. We built on the momentum of our leather goods offering, reinforcing our icons to drive consumer engagement. We innovated across our key families, Tabby, Willow, Field, and Rogue by introducing new iterations and launching strong go-to-market activations. Tabby outperformed expectations with notable success in our shoulder bag. Additionally, we have seen strong results from extensions of the family into small leather goods, including a wristlet and chain clutch, both of which over-indexed among younger customers. Willow continued to be a volume-driving style, while the Rogue family fueled stronger AUR, aided by animations, including our Tea Rose. The introduction of Field Tote in washed signature denim was a success, which bodes well for our various denim introductions in the year ahead.
Our innovative products, supported by data and consumer insights throughout the creation process fueled a low-double digit gain in global handbag AUR at constant currency, including an increase in North America. Importantly, we see continued runway for pricing increases into fiscal year '24, given our commitment to expanding gross margin as well as benefits from outsized growth and higher AUR international markets.
Next, we focused our marketing investments on brand-building activities, connecting emotionally with customers through the unique purpose of the brand. This spring in North America, we supported the important Mother's Day holiday with a two-pronged marketing approach. First, we led with content from Gen Z creators, highlighting Coach as a gifting destination. We followed this with an iconic Mother's Day campaign, featuring Jennifer Lopez. Overall, our marketing activities helped to support the acquisition of over 900,000 new customers in North America in the fourth quarter, or approximately 3.9 million for the fiscal year.
Turning to Greater China, we saw strong growth in brand momentum, delivering a 50% top-line gain versus last year, excluding FX. In the quarter, we continued to recruit new customers with our product offering resonating with younger consumers. This further supports our optimism for the future of this market.
Moving to lifestyle, we drove a strong top-line increase in the offering, an area of long-term opportunity for the brand. In ready-to-wear, we continued to see success, delivering mid-single digit constant currency growth, fueled by success in our branded denim options and T-shirt assortment. In men's, we delivered outsized growth, driven by leather goods including the successful launch of a cross grain leather program. At the same time, our Gotham, Charter, and League families remained top sellers.
And finally, we created omnichannel experiences that resonate with consumers by communicating our brand purpose, the courage to be real through self-expression. As such, we continue to roll out multi-sensory immersive concepts. This included the extension of In My Tabby activations with bespoke events and pop-ups across the globe. And in Malaysia, we launched Coach Airways, a full takeover of a retired airplane featuring our brand codes, a Coach Cafe, and content creation opportunities throughout.
Looking ahead to fiscal year '24, we're building on our success, focused on; first, deepening our connection with consumers, utilizing data to drive experiences that enrich our customers' life, building a stronger long-term connection. Second, growing leather goods by animating our icons and hero families, including the introduction of new sizes and hardware, while continuing to focus on maintaining a productive assortment. Third, fueling gains across lifestyle by establishing more evergreen wardrobe essentials that align with the younger timeless Coach esthetic. Fourth, leading with purpose-led storytelling through high-impact and sustained brand-building campaigns, including the distortion of investments towards the younger generation, notably through digital innovation. And fifth, building momentum in our sub-brand Coachtopia, with a focus on attracting a new Gen Z consumer. Coachtopia is off to a strong start, garnering significant consumer attention. While still a small portion of the assortment, it is tracking a year ahead of our original projections.
In closing, Coach is just getting started. Our success is rooted in a blend of magic and logic and we're building on our strong foundation with a clear strategy to deliver another year of growth in fiscal year '24. We are confident in the opportunity to deliver continued healthy growth for years to come.
Now moving to Kate Spade. During the year, we advanced our strategic initiatives, navigating near-term external headwinds while keeping a sharp focus on our long-term objectives. We delivered revenue of $1.4 billion, in line with the prior year on a constant currency basis despite a more challenging backdrop in North America. To this end, we drove strong international growth, underscoring opportunity for the brand. Further, we expanded gross margin, a key element of our strategic and financial strategy and have delivered over two years of handbag AUR gains in keeping with our focus on elevating the brand. At the same time, we also made foundational investments in the brand that position us for the future.
Having said that, we are clear-eyed about our path forward and the higher aspirations we have for the brand. We entered the current fiscal year front-footed with focus and actions that build upon our progress and leverage the investments we've made to drive accelerated top-line and bottom line growth in fiscal year '24 and beyond.
Turning to the details of the fourth quarter. First, we remain focused on delivering an innovative and distinctive handbag offering. The Knott remained the top global handbag group, followed by the recently expanded Hudson family, which now includes options in whipstitch and straw. In addition, the iconic sandbag which was a pillar of the brand's 30th anniversary celebration continued to deliver growth and resonated with both new and existing customers. As we move forward, we will further strengthen the brand's core handbag foundation. I'll touch on these strategies in a moment.
Turning to Novelty, which outperformed expectations as we bring heightened emotion to the brand. The Shell collection was a highlight of the fourth quarter, significantly outpacing expectations across categories. It drove engagement with younger consumers, resulting in strong full-price sell-throughs and high margins. Overall, our product initiatives coupled with our use of data to deepen our understanding of consumer preferences supported low-single digit handbag AUR growth both globally and in North America, demonstrating our commitment to brand-building for the long-term.
Importantly, we achieved this against the North America backdrop that was more challenging than expected, resulting in conversion in traffic headwinds, notably in the brand's value channels. To navigate the external challenges, we moved quickly. We successfully accelerated new product launches, helping to drive a material improvement in Q1 revenue trends, which are now roughly in line with last year. Next, we advanced our strategy to become more lifestyle with momentum in jewelry and footwear. We continue to see that customers who shop across categories are our highest value customers, demonstrating the importance of the brand's lifestyle offering as a long-term growth driver. In keeping with this strategy, we delivered an increase in average spend per customer in the quarter and the year.
Now touching on marketing. We expressed the world of Kate Spade through unique storytelling and messaging connected to the brand's purpose and values, creating authentic consumer engagement. We invested in our brand codes globally, creating activations behind our Kate Spade Green and iconic Dots & Stripes, which are distinctive and key to driving brand awareness and global consistency. At the same time, we remained focused on women's empowerment through the lens of mental health, highlighted by our partnership with the Boris Lawrence Henson Foundation, which provides mental health services to women at HBCUs. Overall, our marketing helped to support the recruitment of approximately 500,000 new customers in North America for the quarter or approximately 2.4 million customers for the year.
And finally, in keeping with our priority is becoming more global, we drove double-digit international gains at constant currency, underscoring the growth potential of the brand. Importantly, we fueled strong growth in China where the brand had significant runway based on its relatively low awareness and small distribution footprint. At the same time, we launched marketing activations internationally, including pop-ups in Japan and Thailand, as well as at Grand Gateway in Shanghai, which led us to securing a permanent location in that mall.
We also continued the rollout of our new-store concept, which began earlier in the year with the Marina Bay Sands store in Singapore, where we continue to outperform. Since then, we have expanded the concept further to more than 20 doors across the globe, creating a compelling brand experience.
Now turning to our priorities at Kate Spade for fiscal '24 and keeping with our long-term strategies. First, we are focused on strengthening our core handbag foundation with a goal of developing more global key items, building a strong branded signature platform and continuing to provide innovation that supports ongoing AUR growth. We're excited to launch our new Dakota handbag collection this fall, which features new hardware and will be the hero product story in our marketing campaigns. And this quarter, as mentioned, we accelerated the introduction of a new core collection and outlet, the Madison, which is driving an improvement in top-line trends at accretive margins.
Second, we'll continue to fuel the lifestyle offering, led by growth in jewelry, which represents both a revenue and margin driver for the brand. Third, we will invest in marketing to drive both acquisition and retention, continuing to build relationships with younger customers. Fourth, we will focus on the omnichannel opportunity by driving in-store productivity, including accelerating lifestyle and small leather goods. At the same time, we will leverage our recent investments in our digital platform with a focus on enhancing our online experiences. Finally, we will grow in China where the business is small though seeing rapid increases. During the fiscal year, we expect to open a net of approximately 10 locations on the Mainland. We will also invest in marketing to drive awareness, including through KOL partnerships.
In closing, we remain focused on cultivating what makes the Kate Spade brand unique and special. To do this, we will continue to prioritize brand building and forging strong emotional bonds with our customers, while executing on high return initiatives that underpin our profitability goals. Importantly, we have a clear strategy and remain confident in the long-term opportunities for the brand.
Turning to Stuart Weitzman. In the fiscal year, the brand was significantly impacted by the difficult external backdrop in China and North America. Improvement in the back half did not fully offset the impact of a slower China business in the first half. Despite these pressures, we focused on our long-term potential, maintaining brand health, which was underscored by gross margin expansion.
Moving to the details of the fourth quarter. First, we curated a relevant offering of emotional product to spark desire. Our loafers, pumps, and booties continued to perform in keeping with the broader consumer shift to casual and wear-to-work styles. Soho remained a top collection, while we saw continued strength in the Stuart family of pumps. And our handbag collection, while still a small portion of the assortment, drove engagement with both new and existing clients at high AUR and accretive margins, and we fueled brand heat by leveraging new marketing tactics to increase awareness. We focused on creating relevant marketing, including partnerships with influential social media creators to deliver our spring campaign. Importantly, this helped to drive a favorable brand impression among millennials in the U.S. relative to last year per YouGov.
Looking ahead to fiscal '24, we will increase marketing relevancy and drive brand consideration as we emotionally engage with our target consumers. Second, we will focus on driving growth in our core and iconic categories while adding depth to under penetrated classifications that represent significant opportunity. This includes the launch of our extended sneaker assortment planned in the second quarter, as well as expanded offering of flats, specifically trend-right ballet styles.
Third, we will accelerate growth in China, leveraging deep customer affinity to maximize the impact of our brands through product and marketing investments. Importantly, we expect to benefit from the recovery of this highly profitable region this fiscal year, which represented nearly 40% of the brand's sales in fiscal year '21. And finally, we will fuel digital by leveraging Tapestry's platform to improve the online shopping experience and better engage with consumers. Overall, we are sharpening our focus on the consumer and are committed to driving top and bottom line growth in fiscal '24 and beyond.
In closing, building on our strong foundation, we are focused on the future. We remain steadfast in our commitment to deliver revenue and profit gains across our current portfolio where our runway is significant. Further, last week we were excited to announce the planned acquisition of Capri Holdings, establishing a new powerful global house of luxury and fashion brands that expands our portfolio reach across consumer segments, geographies, and product categories.
By bringing together six iconic brands with a heritage in design and craftsmanship and leveraging our modern consumer engagement platform, we will drive greater innovation, consumer connectivity and cultural relevance, creating superior value for our consumers, employees, communities and shareholders around the world. We look forward to closing the transaction and sharing more detailed strategies for the future at the appropriate time.
With that, I will turn it over to Scott, who will discuss our financial results, capital priorities and fiscal '24 outlook. Scott?
