Joanne Crevoiserat
Chief Executive Officer at Tapestry
Good morning. Thank you, Christina, and welcome, everyone. As noted in our press release, our first quarter results exceeded expectations, showcasing the brand magic and operational excellence that are the foundation of our strategic growth agenda. Importantly, our strong and consistent performance is a credit to our exceptional global teams who continue to navigate the dynamic backdrop with focus and agility, while positioning our brands and business for the future.
Touching on the highlights of the quarter. First, we achieved total revenue in-line with prior year on a constant currency basis, outpacing our outlook and reflecting the benefits of our globally diversified business model with continued solid growth at Coach. By geography, we achieved international revenue gains of 2% at constant currency, which included an increase of 27% in Europe, and a 2% decline in the total APAC region. In Greater China specifically, sales declined 5%, consistent with the top-end of our guidance range and ahead of the industry, which included a sequential trend improvement throughout the quarter. Importantly, we are delivering a high-level of innovation, relevance and value to consumers, while continuing to invest in our brands, teams and platforms to support long-term growth in the region and with this important consumer cohort. And in North America, revenue declined 1% compared to last year, including an anticipated decrease in wholesale, while profit rose, driven by gross and operating margin expansion.
Second, we remained focused on building new and lasting relationships with consumers across our portfolio. During the quarter, we acquired approximately 1.4 million new customers in North America alone, with increases across all brands. Over half of these customers were Gen Z and Millennials, consistent with our strategy to recruit younger consumers to our brands and they continue to transact at a higher AUR than the balance of our customer base. At the same time, we improved lapse customer reactivation in North America, which highlights our ability to successfully engage our existing customer base as we welcome new consumers to our brands.
Third, we delivered compelling omnichannel experiences, engaging our customers wherever they choose to shop our brands. To this end, we maintain strength in digital, which grew high single digits versus prior year and represented over 25% of revenue at accretive margins. Our digital business is underpinned by Tapestry's leading capabilities, which have enabled us to enhance the customer experience across their purchase journey.
Our global brick-and-mortar sales decreased at a low single-digit rate in the quarter as expected, though we maintain strong profitability.
Fourth, we fueled fashion innovation and product excellence as we remain focused on bringing creativity, quality and compelling value to consumers around the world. This is clearly on display at Coach, where we delivered continued growth in handbags with AUR gains, underscoring the vibrancy of the brand and product offering. Our success is also reflected in our strong gross margin as we achieved a record first quarter gross margin with further opportunity for expansion long-term. Importantly, underpinning our margin gains is our agile supply chain, a key competitive advantage, which enables us to deliver craftsmanship and value globally, while effectively adapting to the rapidly evolving landscape.
Overall, we generated record earnings per share, which exceeded our expectations, increasing at a double-digit pace compared to the prior year, while making strategic investments in our brands and business. Importantly, this outperformance enabled us to raise our guidance for the full-year, consistent with our commitment to driving growth and shareholder value.
Before turning to a discussion of our results in more detail, I'd like to briefly address the pending acquisition of Capri. Two weeks ago, the U.S. District Court granted the FTC's preliminary injunction, which we believe is incorrect on the law and facts. We appealed the decision consistent with our obligations under the merger agreement. While we await that outcome, it's important to reiterate that we are in a position of strength and continue to focus on our compelling organic growth plan, building powerful brands and delivering for our consumers.
Now moving to our results and strategies by brand. Coach continued to deliver standout results, highlighting the enduring power and relevance of the brand and its distinctive expressive luxury positioning. Importantly, our teams are driving strong consumer engagement through innovative product, storytelling and experiences, fueling our brand heat and growth. To this end, during the quarter, we achieved 2% constant currency revenue gains at exceptional margins, highlighted by 330 basis points of gross margin expansion and a 90 basis point lift in operating margin with meaningful runway for growth ahead.
Now touching on our progress in the first quarter, centered on our focus to deepen our connection with consumers to fuel continued desire for the brand. First, we grew our leather goods offering, led by our iconic handbag platforms and the success of new product introductions. The Tabby family once again outperformed, over-indexing with new and younger consumers and nearly doubling versus last year. The Tabby shoulder bag 26 continued to anchor the offering and we further expanded the family with the introduction of Times Square Tabby.
As we shared last quarter, based on the power of Tabby and in keeping with our commitment to put the consumer at the heart of all we do, we launched a test that brought the Tabby 26 to our outlet channel at full price. This test continues to exceed plan. And as a result, we rolled it out to more locations, with Tabby now available in over 200 outlet stores globally, again, at full price. Importantly, the learnings from this test continue to inform our broader strategies for fiscal '25 and beyond as we explore additional opportunities to scale innovative products and marketing campaigns across channels.
In addition, during the quarter, we launched the New York family featuring the Brooklyn and Empire Bags, which surpassed our expectations globally and cemented their place as new pillars for the brand. The Brooklyn shoulder bag 20 at $295 was the top recruitment driver of Gen Z consumers, while the soft Empire Carryall 40 at an AUR of $695 was a viral sensation on TikTok. Importantly, the New York family is incremental and differentiated with new minimalist branding and soft leather that's clearly resonating with consumers globally. In fact, the early success of Brooklyn earned it a spot on the list, ranking second among the 10 hottest products. Overall, Coach's growth in handbags and accessories continued to outpace the industry, which included mid single-digit AUR gains globally led by North America, and we see further runway longer-term given our innovation pipeline and brand heat.
Next, we remain focused on fueling lifestyle, expanding the brand's reach in categories including footwear, ready-to-wear and men's, where we are underpenetrated and have a right to win by driving customer recruitment, purchase frequency and lifetime value. We have a strong pipeline of innovation, notably in footwear with the launch of the new high line sneaker in the current quarter.
Turning to marketing. We continue to have meaningful conversations with consumers through purpose-led marketing, driving cultural relevance and engagement with our brand. This fall, we launched a new campaign, Unlock Your Courage, featuring Coach ambassadors, Elle Fanning, Nazha, Youngji, and Charles Melton, in a series of short films designed to inspire authentic self expression, consistent with our brand mission. Importantly, because of our efforts, we've seen significant gains in unaided awareness, share of search and purchase intent among Gen Z consumers in the U.S. and globally, reinforcing brand momentum and that our strategies are working. In addition, our campaigns and brand building efforts are breaking through globally.
To this end, during the quarter, we made the strategic decision to increase our top of funnel marketing investments across international markets, notably in China. This reinforces the confidence we have in our brand and product offering, driving greater consumer engagement and helping to drive outperformance versus the industry in China specifically. In addition, we also drove brand desire through unique experiences. We connected with younger consumers in the world of gaming with a collaboration with Roblox and Zepeto. Since the launch, more than 12 million unique users interacted with our content, and we've seen an increase in brand consideration and purchase intent from consumers on the platform. Overall, our holistic brand building activities helped to drive increases in new customer acquisition as we welcomed approximately 930,000 new customers to Coach in North America, a strong increase versus prior year. Of these new customers, approximately 60% were Gen Z and millennials, consistent with our strategy to recruit younger customers.
Looking ahead to holiday, we will continue to focus on brand building through customer engagement, executing our strategies with discipline. We are confident in our product pipeline, building on the traction we're driving in the business through the continuing success of Tabby, expansion of the New York family, the launch of newness within our Coach originals collection and a compelling assortment of seasonal novelty, reinforced by emotional marketing campaigns that amplify our brand, purpose and product.
In closing, Coach is a storied brand driving modern relevance, fueled by a strong team methodically building sustainable growth. With customer understanding at the heart of our work, we continue to bring to life the brand's unique creativity, purpose and value to a new generation of consumers with significant runway ahead.
Now moving to Kate Spade. During the quarter, we continued to reinforce our foundation for the future. While revenue declined as expected, profit margins again expanded versus prior year, led by continued gross margin expansion and diligent expense management. Moving forward, we have a clear imperative for growth. Last month, we welcomed new brand CEO, Eva Erdmann, to the organization. Eva brings a strong track record of leading global consumer luxury brands and driving consistent profitable growth. Eva and I share confidence in the meaningful opportunities at Kate Spade by bringing a sharpened focus on brand building and enhanced execution. Importantly, under Eva's leadership, the team is working with intention to advance our long-term strategies while acting with urgency to address the things we can immediately improve in support of this vision.
Now touching on our results for the quarter. First, we remain focused on strengthening the brand's core handbag offering, key to our growth agenda. In September, we launched the Decor collection in specialty, which is over-indexing with new younger consumers at strong AUR and margins, while the Phoebe and Spade flower programs and outlet remain foundational. At the same time, we also recognize that we need to amplify this progress through more holistic brand building initiatives, ensuring that we are distorting our efforts to telling more focused, cohesive and relevant brand and product stories to drive consumer engagement, and that work remains underway.
Turning to Kate Spade's lifestyle offering. During the quarter, we delivered strong growth in jewelry in keeping with our strategic intent. This growth was driven by millennial and Gen Z recruitment, and we see continued opportunity ahead. Next, we remain focused on maximizing the omnichannel opportunity to drive customer engagement and grow the brand. In keeping with this focus, in October, we launched a trial on Amazon with a range of products, including an emphasis on gifting. The initial learnings are promising and we see an opportunity to leverage the platform's broad consumer reach, specifically with younger cohorts as we've successfully done with Coach over the last year.
Turning to marketing, we are committed to fueling brand heat to drive consideration and accelerate customer acquisition. During the quarter, we acquired approximately 445,000 new customers to the brand, representing an increase versus prior year. That said, we need to drive stronger outcomes, particularly in our core category to achieve our growth ambition. To that end, over the last quarter, our team launched new consumer Insights ethnographic work to sharpen our focus and breakthrough with the brand's target audience. And we've immediately implemented action plans for the holiday and into spring, which will bring more focus to our execution from our assortment to our styling as well as our storytelling efforts. Importantly, we will distort our marketing investment into upper funnel campaigns with more relevant messages for our target customer, capitalizing on the brand's strong unaided awareness in the U.S. to build greater brand desire and purchase consideration. Finally, we also continue to operate with discipline and a focus on maintaining a healthy brand and business, which is foundational to our ways of working and highlighted by our continued gross and operating margin expansion in the quarter.
Touching on holiday, our goal is to drive customer acquisition through focus and relevancy. To do this, we will lead with gifting, a hallmark of the brand, while launching a social first campaign that will celebrate the joy of the holiday season in new and unexpected ways. Overall, while results for Kate Spade met our expectations in the quarter, we're not satisfied with the performance and we're sharpening our roadmap for long-term growth. This is a unique purpose-driven brand with significant potential with consumers on a global scale, and we're leaning in with intention to deliver sustainable profitable growth.
Now turning to Stuart Weitzman. We drove revenue gains for the quarter, with growth in North America offsetting continued softness in Greater China. Importantly, though financial results remain challenged, we made progress in keeping with our strategic focus on brand building and delivering higher profitability long-term.
Touching briefly on our focus areas across product and marketing. During the quarter, new styles, including the Vinnie Pump and Naomi Boot families resonated with consumers, while growth in flats continued. In addition, we refreshed our iconic styles, which remain the bedrock of the brand. We launched new constructions to modernize and enhance the fit of key families, including Nudist and Stuart. Product innovation drove traction at wholesale with the business growing double digits on both a POS and net sales basis in North America in the first quarter. Further, order bookings year-to-date are up nearly 30% to last year. This will support an improvement in revenue and profitability trends this year and beyond, consistent with our strategy to drive growth in this important channel for the brand and category.
Turning to marketing. During the quarter, we drove brand desire through emotional storytelling in keeping with the brand's purpose of inspiring strength and confidence. Following the brand's How Lovely to Be a Woman campaign launch featuring new talented and multifaceted brand ambassadors, we saw an increase in customer acquisition, Google search and organic digital traffic in North America, which reinforce brand health and represent leading indicators of stronger business results in the future.
For holiday, the key boot selling season, we are focused on delivering innovation across our icons and building on the early success of new introductions, while driving sustained wholesale growth where there's momentum. In addition, we will continue to deliver purpose-driven marketing with the rollout of additional chapters of our How Lovely to Be a Woman campaign. Overall, we continue to see long-term potential for the brand with an empowered team focused on driving customer engagement and improved financial results.
In closing, Tapestry delivered strong earnings growth in the first quarter, outperforming expectations. Our results continue to demonstrate the power of brand building, customer-centricity and operational excellence. I want to reiterate my appreciation to our exceptional global teams who continue to drive our success. From this position of strength, we raised our outlook for the full-year. We remain focused and confident in the bold ambition we have for our existing brands and business. I believe the best is yet to come for Tapestry.
Before turning the call over to Scott, I want to take a moment to recognize Andrea Resnick. This marks Andrea's 97th and final earnings call with Tapestry, ahead of her retirement later this year. Andrea joined the company to take it public and has had a truly amazing career. She is an institution at Tapestry, and a legend in the IR and corporate communication worlds. Andrea created a gold standard for thoughtful and transparent communications, which have become a bedrock at our company. On behalf of everyone at Tapestry, we are grateful for her many contributions and wish her all the best in her next chapter.
With that, I'll now turn it over to Scott.
