Joanne Crevoiserat
Chief Executive Officer at Tapestry
Good morning. Thank you, Christina, and welcome, everyone. We delivered record sales and adjusted earnings in the holiday quarter, highlighted by an inflection at Kate Spade, ongoing momentum at Coach and a return to pre-pandemic revenue levels at Stuart Weitzman. Importantly, we realized the significant acceleration in sales trends, driving strong double-digit growth over pre-pandemic levels and well outpacing our expectations across brands.
We took bold and deliberate actions to deliver for our customers and effectively navigated industry-wide challenges to meet increasing demand for our brands. These results are a testament to the significant transformation of our business, the strong consumer backdrop and engagement with our categories and the ingenuity and agility of our teams across the globe. We are a different company than we were just 18 months ago, backed by the strength of our unique brands and the benefits of our multi-brand platform.
Now turning to the highlights from the second quarter. We continue to make meaningful progress against the acceleration program by sharpening our focus on the consumer, leveraging data to lead with a digital first mindset and working with speed and agility. First, we maintained a consumer-centric lens by utilizing our customer data and analytics capabilities to enhance engagement, resulting in improvements to key customer metrics. We acquired nearly 3 million new customers who transacted with our brands across channels in North America, a low double-digit increase compared to the prior year with growth in both stores and online.
This brings total new customer acquisition to over 11 million over the past 18 months. Importantly, in each brand, we're increasing retention rates and reactivating lapsed customers effectively as we continue to prioritize driving customer lifetime value to fuel sustained growth. Second, we advanced our digital capabilities through significant investments in the channel to improve the customer experience and drive conversion. We realized another quarter of outperformance with sales up approximately 30% versus last year, nearly 3 times pre-pandemic levels. Digital sales represented one-third of our total business as customers continued to shop online even as in-store traffic trends improved. Given strong consumer engagement in this channel and the power of our platform, we expect digital to reach $2 billion in revenue in this fiscal year with further runway ahead.
Third, we again increased global AUR at each of our brands, reflecting the power of our brand, the traction of our compelling product assortments and our innovative marketing. In addition, we've benefited from the infusion of data into our decision-making to streamline our offering and tailor messaging to consumers. This has resulted in lower promotions and higher SKU productivity, while also helping to identify opportunities to strategically raise prices to offset inflation. And fourth, we invested further in our China platform to foster distinctive connections and engagement with Chinese consumers. In the quarter, revenue on the Mainland rose mid-single digits, representing an increase of over 35% compared to fiscal year '20, despite disruption associated with COVID, including travel restrictions, traffic pressure and lockdowns in certain cities.
Greater China revenue rose high single digits in the quarter. Importantly, we continue to resonate with the Chinese consumer globally as sales for this cohort rose low single digits against pre-pandemic levels. In the quarter, sales growth in China was fueled by digital as we continue to innovate and meet consumers where they want to shop. As such, we've expanded our presence on social media platforms while maintaining leadership positions on Tmall and TikTok even as new brands have launched on the platform, highlighting our prominence in the market and strong brand engagement, specifically with younger consumers. In fact, we achieved record sales during 11/11 on Tmall's Luxury Pavilion with Coach as the Number 1 ranked brand in the handbags, luggage and leather goods category and Stuart Weitzman as the Number 1 ranked footwear brand.
Looking forward, while we anticipate volatility in the near term due to the pandemic, we remain confident that China represents a meaningful long-term opportunity across our brands. This was reinforced by our recent China brand tracking survey results, which showed handbags and small leather goods as a category where consumers intend to spend more over the next 12 months.
I will now touch on second quarter highlights for each of our brands, starting with Coach. We again outperformed expectations, delivering 24% sales growth compared to last year. Revenue trends accelerated on a 2-year basis, increasing 20% above pre-pandemic levels. This strong growth was enabled by the foundational changes we've made to ensure the consumer remains at the forefront of our strategy. As a result, Coach achieved its highest quarter revenue and profitability in nearly 10 years. The brand continues to gain traction with consumers globally across categories and genders, further increasing our confidence in the runway ahead.
During the quarter, Coach made progress against its strategic initiatives. First, we remain focused on building iconic families to create a foundation for our product pipeline in future seasons. Our core assortment, notably the TAVI, Willow and FIELDS continue to drive our performance. At the same time, newly launched styles, including the studio bag and reinvigorated icons, such as the Rogue resonated with our customer base.
Second, we further infused data into our decision-making to more effectively address the functional and emotional needs of our clients. This enabled a significant pullback in promotions and drove full-price selling, resulting in an increase in global handbag AUR. In North America, handbag AUR rose low double digits, marking the region's 11th consecutive quarter of gains. Our momentum and the customers' response to the style and craftsmanship of our product reinforces Coach's pricing power and the further opportunity to increase prices to offset inflationary cost pressures.
Third, we emphasize the brand's values through approachable messaging, highlighted by our inclusive holiday campaign. In addition, we connected with all audiences through the authentic recreation of Jennifer Lopez's iconic "All I Have" music video, which resulted in strong social engagement. Our marketing initiatives were rounded out by the unique storytelling moments created by our successful Ski capsule including pop-up cabins at Rockefeller Center, a custom-branded virtual game and our first foray into the NFT world featuring characters from the collection, which were claimed in seconds. Overall, these actions helped to drive strong customer metrics, including the acquisition of over 1.5 million new customers transacting in North America. At the same time, purchase frequency again rose, and we reactivated lapsed customers at an increasing rate.
Fourth, we again drove strong revenue growth in the digital channel, which rose over 30% compared to last year and has nearly quadrupled since fiscal year '20. We maintained this momentum even as store trends improved, underscoring the long-term opportunity for our online business.
Fifth, we delivered mid-single-digit sales growth in China or an increase of nearly 45% against pre-pandemic level. This improvement was led by outperformance in digital. At the same time, we continued to invest in our physical presence. In keeping with our focus on growing the brand with the emerging middle class, we're adding approximately 10 new Coach stores in the region this year on a net basis, primarily in Tier 3 and 4 cities. We're also renovating key storefronts and expanding our footprints in nontraditional locations to build awareness particularly with younger consumers.
Sixth and finally, we drove double-digit growth in our men's business with notable success in our Horse & Carriage pattern. We believe men has runway in bags and small leather goods as well as in broader lifestyle categories, increasing our conviction in reaching $1 billion in revenue at high margins over the planning horizon.
In summary, we're combining Coach's iconic history of quality and craftsmanship with new and innovative initiatives to engage with consumers. The continued outperformance of the brand is a direct reflection of the advantages of the Tapestry platform, the benefits of the strategic investments we're making in marketing and our ability to meet the consumer where they want to shop. We're driving sustainable [Technical Issues] Coach approaching $5 billion in sales in fiscal year '22, while maintaining exceptional margins.
Now moving to Kate Spade. Before I turn to the details of the second quarter, I'd like to take a step back to acknowledge the significant transformation and tangible improvements the team has made through the acceleration program. Over the last 18 months, we've returned Kate Spade to the brand our customers know and love. We've rebuilt our product foundation through the introduction and amplification of brand codes, which will serve as the platform for future icons. At the same time, we're maintaining a consumer-centric lens and infusing data into assortment planning and marketing.
In North America, we acquired nearly 5 million new customers and have improved brand awareness. We've also reactivated over 2 million customers during this time frame. In addition, we increased overall digital sales penetration to over 35% as of the most recent quarter as we focus on meeting the customer where they want to shop. And in keeping with the progress we've made to deliver great products, we've grown the brand's global handbag AUR highlighting pricing power for the future. Our work has fueled increasing momentum, giving us further confidence in the long-term opportunity for meaningful sales and market share growth.
Moving to our second quarter. Kate Spade sales grew 33% compared to last year. Importantly, we drove a significant inflection against pre-pandemic level and realized an 18-point sequential acceleration. At the same time, the brand delivered operating margin expansion ahead of both prior year and pre-pandemic level. These results were fueled by the successful execution of our strategic priorities. First, we maintained a consumer-centric approach, resulting in approximately 1.3 million new customers purchasing with the brand across North America direct channel. At the same time, we continue to drive strong double-digit growth in both existing and reactivated customers by utilizing data to gain a deeper understanding of customer preferences and purchase drivers.
Second, we amplified key platforms as we continue to build and innovate our core product offering, notably our Knott and Spade Flower jacquard again outperformed expectations. In addition, newly introduced core styles resonated with the consumer, including our Carlyle family in a Houndstooth pattern, which brought in a new and younger customer. Importantly, the strong performance of the core offering as well as deliberate actions to decrease promotional activity resulted in low double-digit global handbag AUR growth.
Third, we drove brand heat through activity centered around increasing engagement with the consumer, while reinforcing our brand values to surprise and delight customers. This included new and exciting experiential initiatives such as opening a Disco truck in downtown, Manhattan, offering an exclusive jacquard handbag at a pop-up in Tokyo and wrapping some of London's cabs in our signature Spade Flower. Further, in keeping with the brand's heritage, we continue to invest in novelty platforms to maximize our emotional connection with shoppers. The Sequin embellished Slice Pizza bag at an AUR of over $300 was a top novelty performer and a hit across our social media accounts. Overall, these activities to increase brand heat are paying off with growing brand awareness per our most recent US brand tracking survey.
Fourth, we maximized our lifestyle positioning through a focused assortment, including occasion options across ready-to-wear footwear and jewelry that were embellished with emotional details such as pearls and rhinestone bows. Overall, these categories outperformed expectations and helped to boost customer acquisition and engagement as lifestyle remains an important driver of purchase frequency.
Finally, we're building on the brand's already strong digital presence. We've continued to test and learn new ways to foster consumer engagement, such as the infusion of shoppable content through key social media platforms. Our innovative online approach backed by the passionate Kate Spade community helped to drive approximately 30% revenue growth in the channel compared to last year or double pre-pandemic level.
Over the past year, we've rebuilt the brand's foundation. These fundamental adjustments are taking hold and unlocking the next phase of growth for Kate Spade. We're continuing to lean into our iconic roots infusing our recently introduced brand codes and delivering strong marketing aligned with our product and values. We are incredibly excited for the opportunity ahead and remain confident in our ability to achieve $2 billion in revenue and high-teens operating margins over the planning horizon.
Turning to Stuart Weitzman. The brand drove significant trend improvements in the holiday quarter, highlighted by 37% revenue growth compared to last year and a return to pre-pandemic sales level. In addition, we delivered improving operating profit with operating margin expanding over 250 basis points. We continue to advance our overall growth strategies in the second quarter. First and importantly, the Stuart Weitzman team delivered the brand's highest quarter of operating income since fiscal year '18. This progress was fueled by the strategic actions we've taken through the acceleration program, notably optimizing our fleet globally, improving our digital foundation and reestablishing our presence with wholesale partners.
Second, we remain focused on digital and China, areas that represent significant long-term growth opportunities. In the quarter, digital sales rose over 35%, representing an increase of approximately 70% compared to 2 years ago at attractive margins. For Mainland China, we delivered growth on both a 1 and 2-year basis.
Third, we maintained a consumer-centric strategy by infusing data analytics into assortment planning and capitalizing on market shifts to 'buy now, wear now' styles and dress and occasion wear. This drove the recruitment of new customers in an increasing rate, while continuing to reengage and reactivate clients.
Fourth, we drove brand heat by sparking desire through our product assortment backed by engaging marketing, which featured Kate Hudson for the holiday campaign. We built upon our authority in boots and booties with outperformance in the Nora and Stuart. We also infused newness into our icons, including updated constructions of the LISC[Phonetic] and the introduction of our Nudistcurve. Our compelling assortment coupled with higher full price sell-throughs and a reduction in promotional activity drove our second consecutive quarter of AUR growth. Going forward, we see continued opportunity to increase prices while maintaining our positioning within the overall market.
And fifth, the brand continued to regain momentum in the wholesale channel, notably with key domestic full-price partners. Overall, we're making continued progress at Stuart Weitzman and remain on track to drive strong revenue growth with a return to profitability this fiscal year.
In closing, our strong holiday results across each of our brands, support the higher revenue and earnings outlook provided today. Importantly, the outperformance we've delivered is a direct reflection of our consumer-centric strategy as we continue to grow our data and consumer insights capabilities to enable increasingly powerful customer engagement. Our momentum also highlights the incredible execution of our team and the agility of our platform as we've successfully navigated the volatile backdrop.
We're continuing to offer compelling and innovative products, underscored by the increased traction and pricing power of each of our brands. I'm confident in the long-term potential of our multi-brand portfolio and look forward to sharing our continued progress as we move forward.
With that, I'll turn it over to Scott, who will discuss our financial results, capital deployment priorities and fiscal '22 outlook. Scott?
