掛毯 (TPR) 2017 Q4 法說會逐字稿

Good day, and welcome to this Coach Conference Call. Today's call is being recorded. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Global Head of Investor Relations and Corporate Communications at Coach, Andrea Shaw Resnick. Please go ahead.

Good morning, and thank you for joining us. With me today to discuss our quarterly and annual results are Victor Luis, Coach, Inc.'s Chief Executive Officer; and Kevin Wills, Coach's CFO.

Before we begin, we must point out that this conference call will involve certain forward-looking statements, including projections for our business in the current or future quarters or fiscal years. These statements are based upon a number of continuing assumptions. Future results may differ materially from our current expectations based upon a number of important factors, including risks and uncertainties, such as our ability to achieve intended benefits, cost savings and synergies from the Stuart Weitzman and Kate Spade acquisitions; expected economic trends or our ability to anticipate consumer preferences, control costs, successfully execute our transformation and operational efficiency initiatives and growth strategies.

Please refer to our latest Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors. Please note that historical trends may not be indicative of future performance.

Also, certain financial information and metrics that will be discussed today will be presented on a non-GAAP basis. These non-GAAP measures exclude certain items related to our transformation plan, operational efficiency plan and Stuart Weitzman acquisition-related charges and Kate Spade acquisition-related charges as well as the impact of foreign currency fluctuations where noted.

The company's sales and earnings for diluted share comparisons for fiscal 2016 have also been presented both including and excluding the impact of the 53rd week in fiscal 2016. You may identify these non-GAAP measures by the terms non-GAAP, constant currency or excluding the additional week. The company believes that presenting these non-GAAP measures is useful to investors and others in evaluating the company's ongoing operations and financial results against historical performance, and in a manner that is consistent with management's evaluation of the business. You may find the corresponding GAAP financial information and metric as well as the related reconciliation on our website, www.coach.com/investors and then viewing the earnings release posted today.

Now let me outline the speakers and topics for this conference call. Victor Luis will provide an overall summary of our fourth fiscal quarter and full year 2017 results and will also discuss our progress on global initiatives across the market. Kevin Wills will continue the details on financial and operational results and our outlook for fiscal year 2018. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, President, Chief Administrative Officer and Secretary; and Josh Schulman, President and CEO of the Coach brand. This Q&A session will end shortly before 9:30 a.m. We will then conclude with some brief summary remarks.

I'd now like to introduce Victor Luis, Coach, Inc.'s CEO.

Good morning. Thank you, Andrea, and welcome, everyone. As noted in our press release, we are pleased with our solid fourth quarter performance in which we achieved positive North America Coach brand comparable store sales growth for the fifth consecutive quarter and drove double-digit growth on a comparable weeks' basis at Stuart Weitzman. These results capped an excellent year as we continue to make progress on our transformation plan; delivered strong Coach brand international growth, notably in Europe and Mainland China; while driving operating margin expansion and double-digit net income and EPS gains on a comparable 52-week basis. Importantly, the Coach brand continued to gain fashion relevance while our partnership with Selena Gomez brings our refreshed image and message to broader audiences.

We were also very pleased with the overall contribution of Stuart Weitzman as we invested in the brand, both in stores, and most significantly, in people. We now have the key leadership and design talent to drive long-term performance, both in growing the global footwear category and in Stuart Weitzman's nascent accessory business.

And as you know, we also took a major step in our corporate transformation with the acquisition of Kate Spade & Company, which closed in July, becoming the first New York-based house of modern luxury lifestyle brands. Kate Spade brings a unique brand attitude and additional consumer segment to the Coach, Inc., portfolio. We expect that this acquisition will enhance our position in the attractive and growing $80 billion global premium handbag and accessories footwear and outerwear market.

After the last 3 years of our transformation and acquisitions, the 3 brands of Coach, Inc., are today united in a common philosophy: first, driven by brand-led strategies that focus on the consumer and on an inclusive approach to luxury; second, a focus on innovation across products, marketing and experiences, both in our stores and in our digital channels; and lastly, the objective to drive sustainable revenue and earnings growth through strategies that are focused on long-term brand health.

Our strategic priority is to achieve this balance by making the appropriate investments while carefully managing our distribution channels to optimize growth. To this end, looking ahead to fiscal 2018, we will continue to drive innovation across all of our brands, focusing on creating long-term value for our customers and shareholders.

Specifically, our FY '18 strategies for our 3 brands are: for the Coach brand and under the leadership of CEO Josh Schulman, we will be writing the next chapter in Coach's transformation as we focus on building emotional connections with a broader audience. I am especially excited that Josh also brings a new perspective to our coach.com business, refocusing on the brand's digital opportunity globally, including how we can maximize the continuing shift to the online channel.

While we have created a compelling vision of the Coach man and woman, the brand is still primarily focused on women's leather goods. We have a significant opportunity to grow our business and lifestyle categories, notably in men's, through continued growth in bags and small leather goods as well as in our dual-gender offerings of footwear and outerwear.

We're particularly excited to launch the new Coach women's footwear assortment, both in our stores and in the wholesale channel following the take-back of our license at the end of FY '17. Even within our core category of women's leather goods, we have the potential to fulfill many more of our customers' functional and occasional needs across price points and attitudes.

A key element of this strategy will be adding renewed excitement and diversification in our product offering, notably in the $300 to $400 handbag price point in retail. We will also look to focus innovation in our customer experience by expanding our personalization on luxury leather services, both across our store and e-commerce platforms. We believe that we have an opportunity to build a relationship-focused sales culture, anchored by our modern luxury selling ceremony to deepen the bond between our associates and their customers, ultimately driving frequency of purchase of brand loyalists and new-customer acquisitions.

Of course, we still have room to grow the Coach brand geographically, notably in Europe, which is largely untapped, and in China, which still has significant potential, both from a domestic and travel retail perspective as well as a new market such as Russia and India through distributor partners.

And finally, in Coach brand marketing, we are particularly excited about our work with Selena Gomez with the fall campaign hitting now and her namesake bag arriving in stores at the end of the month.

Moving to Stuart Weitzman. We expect that to drive double-digit growth as we evolve the brand identity across all consumer touch points under the leadership of CEO Wendy Kahn and Creative Director Giovanni Morelli. This includes defining unique brand codes, differentiating the brand from the competitive set. Giovanni and the team are focused on launching the new creative direction for Stuart Weitzman, including Giovanni's first footwear collection in April 2018 and a new handbag collection in fall/winter of 2018. These collections are about introducing innovation and capturing new occasions in wardrobing opportunities and footwear while building credibility in the leather goods category.

We're also looking at distribution opportunities globally, notably, in the key Asian markets where the brand is rapidly growing in awareness. You can also expect to see a new store concept for Stuart Weitzman later this year. And of course, all of these programs will be supported by 360-degree marketing strategies to align global initiatives.

And for Kate Spade, while early days, we know we have a lot of work ahead to integrate our teams and processes at the corporate level. At the brand level, our focus remains on delighting customers in a distinctly Kate Spade way, full of color and playful sophistication.

Since we announced the deal in May, I've enjoyed getting to know more about the Kate Spade brand, team and culture. We are excited that Kate has significant opportunity for global growth across channels and geographies while ensuring that we take the right brand-enhancing actions early on to manage discount impressions in the market. What we know today is that Kate Spade is a strong, unique brand with leadership in the attributes of fashionable, fun and feminine, bringing important attitude and customer diversification to the Coach portfolio.

Our research has shown very little overlap between our 3 brands with Kate having the most traction with millennials. It is a brand with highly productive retail and outlet stores and a strong top-tier department store presence in North America. Outside of the U.S., there is significant opportunity in Japan, the second-largest handbag and accessory market in the world and where the brand already has a strong presence, but it's still underpenetrated.

We're also really pleased with the initial response to Kate Spade in the U.K. market and excited about the long-term growth opportunities in China, where our initial brand tracker shows promising consumer traction for the brand. As we look ahead for Kate Spade in FY '18, we are taking several steps to position the brand, building a foundation for solid and sustainable growth and taking a page or two from Coach's own playbook.

We will significantly curtail promotional impressions by reducing surprise sales and pulling back on wholesale disposition. We will also accelerate innovation in the core handbag and accessories categories along with ready-to-wear and tech leveraging the Coach, Inc., supply chain and product development capabilities.

We will review the store fleet and leverage opportunities to maximize the brand's global footprint, notably in the outlet channel, where the brand is underpenetrated. We will wind down the Jack Spade brand, refocus the license portfolio and concentrate on the most significant women's opportunities: women's handbags; ready-to-wear; tech accessories; and footwear, both domestically and internationally. And we will tailor the brand's whimsical and fun marketing messages, ensuring that it resonates in all key global markets. I'm excited to partner with the terrific Kate Spade team as interim CEO as we look to both capture synergies, and more importantly, drive global resonance and growth.

Now as has been our practice, I'd like to share some of the actions we've taken to drive Coach brand performance. Starting with product, where I am pleased and proud to say that Coach has been recognized as a house of modern fashion design with Stuart Vevers winning the CFDA Accessories Designer of the Year award in June.

In retail, during Q4, we continued to drive brand elevation, increasing the penetration of 1941 as well as innovation across price points and attitudes. In Q4, outlet delivered our largest brand collaboration to-date with Mickey arriving in mid-May at twice the size of our successful Peanuts collaboration.

On stores. In the fourth quarter, we've continued to establish our modern luxury concept globally, ending the year with just over 720 locations in the new format across all channels and in line with our target. Consistent with the plan, these renovations have been driving comps which exceed the balance of the fleet in the vast majority of stores around the world.

As you know, one of our key strategic initiatives during FY '17 was elevating the Coach brand in North America wholesale channel. We've added new locations in top-tier specialty stores while also rationalizing our overall department store distribution, taking our door count down by about 25% to just over 750 at year-end. In addition, we reduced promotional events in the channel with our days on sale down by over 35% for the year.

On the marketing front, Selena Gomez' first global handbag advertising campaign for the Coach brand hit in July and will run through this fall/winter, followed by a second campaign in spring/summer 2018. Following a global PR burst around Selena and Coach in late June, our multitouch-point media and owned channel marketing launched on July 6, focused on driving awareness, engagement and recruitment. Through the end of July, we achieved 3.5 billion impressions, an uptick in recruitment across social channels and a significant increase in North America web traffic.

As a result of all these efforts, we have seen continued progress with consumers. Importantly, in our quarterly U.S. brand tracking survey fielded in June, we saw strength for the Coach brand with the broad premium market across key emotional and functional attributes while discount perceptions, an important measure of brand health, declined versus prior year once again this quarter. In addition, among category drivers, Coach's perception of having high-quality handbags increased. Moving forward with the addition of Kate Spade, we will have much more to share with you as a house of brands.

Turning now to a discussion of category trends. As we look ahead to FY '18, we expect that the channel, consumer and macrodynamics that exist today affecting the category in specific and consumer spending in general, will persist. Channel shifts continue to impact traffic. The macroeconomic environment is uncertain. Currency crosswinds are affecting tourist flows and geopolitical events are negatively impacting sentiment. As a result, visibility of the category growth is limited as the landscape continues to rapidly shift.

Overall, we estimate that the North American premium women's and men's handbag and accessories market was essentially flat in the June quarter and for the year, which we believe has continued to be impacted by negative trends seen in the U.S. department store space as brands, including our own, have pulled back from the channel. As in FY '16, we saw men's grow faster than women's in North America.

Globally, the premium handbag and accessory category accelerated in FY '17, both on a U.S. dollar and local currency basis, up mid-single digits. While Kevin will provide additional details on sales and distribution by geography, we wanted to touch on some current trends and strategies by market. All the compares are against last year's 13-week period, thereby, excluding the 14th or 53rd week.

Starting with North America. As you read in our release, for the quarter, our total Coach brand sales rose 4%, including the negative impact of our deliberate department store pullback while our direct business rose 5% on a dollar basis and 6% in constant currency. Both aggregate and bricks-and-mortar comp store sales rose slightly over 4% in the quarter.

Higher conversion drove the overall comp with in-store traffic trends significantly improving from the third quarter, reflecting the Easter shift though still slightly negative. Most importantly, in the fourth quarter, we comped the comp, given that the fourth quarter of FY '16 was the first positive quarterly comp we achieved post the implementation of our transformation plan.

Finally, our business with international tourists in North American stores was slightly lower during Q4, negatively impacted by under 1 point with declines in Chinese tourist traffic, once again, mostly offset by other nationalities, notably, Japanese and Korean visitors.

Now turning to our retail performance and the metrics we traditionally share on products. The above-$400 price bracket rose in penetration, saw another positive comp on the sales and unit basis, and represented over 45% of handbag sales, up from about 40% in last year's fourth quarter.

We also experienced strength in small bags and accessories, driven by crossbodies, clutches and wristlets, which offer a high level of versatility and functionality at compelling price points. Therefore, our below-$300 penetration was similar to prior year with the biggest shift out of the $300 to $400 handbag price bracket, an area of focused innovation in the quarters ahead.

Men's was very strong in the fourth quarter at almost 20% of total Coach brand sales. For the fiscal year, at POS, our men's sales totaled over $840 million, and we now believe men's is well over a $1 billion opportunity for the Coach brand. To this end, I am very pleased to welcome Cristiano Quieti, previously President of Jack Spade, to the Coach brand as SVP, Head of Men's. In this newly created role, he will be responsible for men's global merchandising and bringing together the teams from design, product development, wholesale sales and marketing to amplify our investment in this tremendous business opportunity.

As we look ahead to fall for the Coach brand, in retail, our goal is to continue to elevate and differentiate the brand by offering innovation and emotion through our product assortment, marketing and in-store experience. We will expand 1941 Rogue family through the introduction of additional size offerings and further refresh our leather craft assortment across price points and functions.

Looking ahead to fall in outlet, we are excited to launch Coach Varsity, just in time for back-to-school shopping. Overall, for FY '18 in outlet, while we continue to update and elevate our leather good assortment with new silhouettes every season, we are excited to grow our women's and men's lifestyle categories with more frequent deliveries of ready-to-wear [nunits] and an expanded footwear collection.

In men's, we plan on continued growth through expansion across all categories, capitalizing on the strong momentum from our men's growth seen in FY '17. Most generally and across all channels globally, we are very excited about the introduction of Coach own-branded women's footwear after taking back the license at the end of FY '17. For perspective, the global women's and men's premium footwear market is approximately $28 billion and growing with women's representing about 2/3 of the total.

We are starting with a focused and curated offering of about 100 SKUs for prefall with limited wholesale distribution of about 120 wholesale doors. We're building to prespring and spring for about 100 to about 175 SKUs with a more dressy assortment and look to grow distribution from there. We will be using key Coach codes, such as (inaudible), charms, metal horse and carriage branding. In addition, we will incorporate proprietary craftsmanship details, such as the Tea Rose and studding, which we've become known for, and building on styles and classifications where we already have seen some traction. We are focused on 3 key areas: introducing proprietary design elements, establishing brand codes in the category, and perfecting fit and comfort by leveraging our learning from Stuart Weitzman.

And now, moving onto international. In the fourth quarter, international Coach brand sales rose 6% on a reported basis and 9% on a constant-currency basis, benefiting from wholesale shipment timing as projected.

For the year, Coach brand international sales increased 3% in dollars and 2% in constant currency. Greater China sales increased 3% versus prior year in dollars and 7% in constant currency on a 13-week basis, driven by double-digit growth and positive comparable store sales on the mainland, offset in part by softness in Hong Kong and Macau.

For the year, Greater China sales were about even with prior year in dollars, while sales rose 5% on a constant-currency basis in 2017. Importantly and despite a rapidly evolving retail landscape, we remain optimistic on the prospects for this market over the long term as the drivers we have consistently mentioned remain relevant and our China team continues to do an excellent job of building our brand equity in mass market.

In Japan, sales declined 3% in dollars and approximately 1% in constant currency in the fourth quarter. For the year, sales increased 4% in dollars and decreased 2% on a constant-currency basis, impacted by a decline in Chinese tourist spend, lapping last year's dramatic increase as well as an overall decrease in square footage as we optimized our retail footprint.

In our other directly operated Asian markets outside of China and Japan, namely South Korea, Taiwan, Singapore and Malaysia, sales decreased mid-single digits in dollars and declined similarly in constant currency for both the quarter and the year due primarily to weakness in Korea where macroeconomic and geopolitical headwinds continued to pressure spending from domestic consumers and tourists.

In Europe, we experienced a strong increase in sales during the quarter, driven by double-digit growth in the directly operated channels and benefiting from the planned shift in wholesale shipment timing as previously announced. For the year, sales rose approximately 15% in dollars and 20% in constant currency.

Finally, I would point out that we're continuing to see volatile results in our international wholesale business, which increased on a net sales basis in the quarter due to shipment timing as expected while POS sales declined. For the year, net sales increased modestly and sales at POS decreased as weaker tourist location results offset domestic growth.

In closing, we are encouraged with the momentum of our business and proud of the progress we've made along our transformation journey, elevating the perception of the Coach brand globally. Of course, we're also very pleased with the integration and performance of Stuart Weitzman as we strengthen the leadership team and position the company for long-term growth across geographies and categories. And for Kate Spade, we look forward to unlocking the brand's potential and updating you on our progress in the quarters ahead.

Now I'll turn it over to our CFO, Kevin Wills, for details on our financial results and guidance for fiscal 2018. Kevin?

Thanks, Victor. Victor has just taken you through the highlights and strategies. Let me now take you through some of the important financial details of our fourth quarter results as well as our outlook for fiscal year 2018.

Please note, the comments I'm about to make are based on non-GAAP results. Corresponding GAAP results as well as the related reconciliation can be found in the earnings release posted on our website today.

Now turning to the details and focusing on Coach, Inc. Net sales totaled $1.13 billion for the fourth fiscal quarter as compared to $1.15 billion in the prior year. Excluding the additional week included in fiscal 2016 results, net sales increased 6% on a reported basis and 7% on a constant-currency basis. For the year, net sales totaled $4.49 billion, even with the prior year.

Excluding the additional week included in fiscal 2016 results, net sales increased 2% from both our reported and constant-currency basis. As planned, the company's strategic decision to elevate the Coach brand's positioning in the North American wholesale channel through a reduction in promotional events and door closures negatively impacted sales growth by approximately 60 basis points and 150 basis points in the fourth quarter in fiscal year 2017, respectively.

Gross profit in the fourth quarter totaled $757 million while the gross margin rate for the quarter was 66.8% compared to 67.8% last year. As expected, we experienced a year-over-year decline in gross margin in the quarter. Specifically, channel mix, which was a benefit in the first 9 months of the year, negatively impacted gross margin in the quarter. In addition, as we now anniversary lower product cost, this benefit would not fully offset the ongoing negative impact resulting from promotional activities, notably, the North America outlet channel where the environment remains very competitive.

Coach, Inc., gross profit for the year totaled $3.08 billion while gross margin was 68.7% compared to 68% in the prior year. SG&A expenses totaled $577 million in Q4 or 50.9% of sales as compared to 52.7% in the year-ago period. For the year, SG&A expenses were $2.27 billion and represented 50.6% of sales as compared to 50.7% a year ago.

As noted in our press release, SG&A expense for both Q4 and full year 2017 included $20 million in noncash charges relating to the impairment of select stores and a negotiated reduction in prior purchase commitment for certain store fixtures that we deem no longer appropriate.

Operating income for the quarter was $180 million while operating margin was 15.8%, including approximately 180 basis point of noncash impairment charges as mentioned previously. This compared to operating margins of 15.1% in last year's fourth quarter. For the year, operating income is $813 million while operating margin was 18.1%, including 50 basis points in noncash impairment charges versus 17.3% a year ago.

Net interest expense was $4 million in the quarter as compared to $7 million in the year-ago period. Net interest expense was $19 million in fiscal year '17 as compared to $27 million in fiscal year '16. Their effective tax rate for the quarter was 19.2% as compared to 24.7% in the prior year quarter. For the year, our effective tax rate was 23.2% versus 26.4% in fiscal 2016.

Our tax rate will vary throughout the year given the anniversary of our sales date and the resolution of various tax issues. To this end, our fourth quarter tax rate benefited from a geographic mix of earnings.

Net income for the quarter totaled $142 million compared to $126 million a year ago with earnings per diluted share of $0.50. Net income for the year totaled $609 million compared to $552 million last year with earnings per diluted share of $2.15. Excluding the additional week in fiscal 2016, earnings per diluted share increased 32% and 13% for the quarter and full year, respectively.

Now moving to global distribution of the brand. For the Coach brand, we opened 7 net locations globally in the fourth quarter and 8 net locations during the year, finishing fiscal year '17 with 962 directly operated locations worldwide. Overall and consistent with plan, our global Coach brand directly operated square footage rose low single digits in fiscal year '17 with North America square footage down slightly versus the prior year with net store closures in both retail and outlet offset by a higher single-digit square footage increase in international, led by growth in Europe and Mainland China. For Stuart Weitzman, consistent with our plan, we closed 1 location in the fourth quarter while opening at 6 net locations for the year, ending fiscal year '17 with 81 directly operated stores globally.

Now turning to our cash flows. Net cash from operating activities in the fourth quarter was $324 million compared to $249 million last year. Free cash flow in the quarter was an inflow of $233 million versus $129 million in the same period last year. Our CapEx spending was $91 million versus $129 million. For the full fiscal year 2017, net cash from operating activities was $854 million compared to $759 million a year ago. Free cash flow in fiscal '17 was an inflow of $571 million versus $362 million in the fiscal year '16. CapEx spending totaled $283 million for the year compared to total CapEx of $396 million in fiscal year '16, which included $146 million associated with our new corporate headquarters rollback.

In addition, through fiscal 2017, as previously announced, we received approximately $680 million in net proceeds associated with the sale-leaseback of the Hudson Yards building as well as approximately $125 million in net proceeds related to the sale of our previous headquarters building.

Inventory levels at quarter-end were $470 million compared to inventory of $459 million a year ago, an increase of 2%. At the end of the fiscal year, cash and short-term investments were $3.1 billion as compared to $1.3 billion a year ago. The year-over-year increase was due to our net cash flow generated during the year and the issuance of approximately $1 billion of senior unsecured notes in June as part of the financing for the Kate Spade acquisition.

Our total borrowings outstanding at year-end were $1.6 billion, consisting of senior unsecured notes as compared to approximately $900 million a year ago. Subsequent to the close of the fiscal year, we borrowed $1.1 billion in term loans, which combined with cash on hand, allowed us to fully fund the acquisition of Kate Spade, which closed on July 11.

Now turning to our capital allocation policy. Our long-term priorities remained unchanged. First, we will continue to invest in our brands in order to drive sustainable growth and value creation; secondly, we will seek strategic acquisitions, looking for great brands with opportunities for expansion; and finally, returning capital to shareholders with a focus on dividend.

Since outlining these priorities some years ago, our strong balance sheet has provided flexibility to invest in the Coach brand transformation, successfully acquire 2 great brands in Stuart Weitzman and Kate Spade with only modest leverage while continuing to return capital to our shareholders.

Moving forward, we remain committed to a conservative balance sheet management. To that end, we expect to reduce our outstanding borrowings to $1.9 billion by the end of fiscal 2018 with the repayment of an $800 million, 6-month term loan with excess cash. At the same time, we're maintaining our dividend at an annual rate of $1.35.

Now turning to fiscal 2018. As we look to fiscal 2018, it will clearly be a year of change as we integrate the Kate Spade business. One of those changes will be our reportable segments. Given the acquisition of Kate Spade and our move to brand present reporting structure, we are shifting to reportable segments by brand. This is consistent with how we have organized the company and how we will operate our business. With this change, beginning in fiscal 2018, we plan to provide global brand comps.

In addition, given the significant evolution of the company from the model brands specialty retailer when we announced our transformation plan in 2014 to a house of brands today, the guidance provided over 3 years ago is no longer applicable to our current business and structure. Going forward, we will provide annual guidance during our fourth quarter earnings call for the year ahead. As always, we remain committed to transparency in providing you information to track our progress against our plans.

In fiscal 2018, we will naturally incur a number of integration and onetime charges associated with the Kate Spade acquisition. I will provide more details on these expected charges in a few moments but note that these charges will be excluded from our non-GAAP results. Additionally, the Kate Spade results will be included in the Coach, Inc., results starting on July 12, 2017, the date subsequent to closing.

Now turning to our outlook on a non-GAAP basis. We expect total revenues for Coach, Inc., in fiscal 2018 to increase about 30% versus fiscal 2017 to $5.8 billion to $5.9 billion with low single-digit organic growth. This includes the expectation for low single-digit Coach brand global comps and a low double-digit increase in Stuart Weitzman brand sales. In addition, we expect the acquisition of Kate Spade to add over $1.2 billion in revenue. The Kate Spade revenue projection includes the impact of a planned strategic pullback in wholesale disposition in online cross channels and assumes a high single-digit decrease in comps for the fiscal year.

In addition, we are projecting operating income growth of 22% to 25% versus fiscal 2017, driven by mid-single-digit organic growth, the acquisition of Kate Spade and estimated synergies of $30 million to $35 million. These synergies are expected to offset in part the reduction in profitability from a strategic and deliberate pullback on the Kate Spade wholesale disposition and online cross sales channels. Taken together, the Kate Spade business and the resulting synergies are expected to add approximately $130 million to $140 million to operating income.

We have owned Kate Spade for just over 1 month and have been working diligently to identify synergy opportunities. To-date, we are very pleased with our findings as we expect to realize approximately $30 million to $35 million of fiscal year 2018 synergies, which annualize to run rate synergies of approximately $50 million. This compares with our original expectation of annualized run rate synergies of $50 million by the third year postacquisition. Much work remains on the synergy front, and we look forward to updating you on our longer-term opportunities in the quarters ahead.

Interest expense is expected to be about $90 million for the year. The full year fiscal 2018 tax rate is projected at about 25% to 26%. As noted in our press release, in fiscal year '18, the company is adopting Accounting Standards Update ASU 2016-09 for the accounting of employee share-based payments. This will influence our effective tax rate to have certain tax impacts that were previously recorded to equity will now be included in income tax expense. Further, because the tax impacts were defined by the company's stock price, restricted stock units or RSUs and performance-restricted stock units, or PRSUs, vesting and when employees exercise their stock options, the timing and amount of the impact cannot be estimated and are, therefore, excluded from this data. That said, the majority of RSUs and PRSUs vest in the first quarter and the fiscal year, and accordingly, it is likely that the first quarter fiscal rate could be most impacted.

We expect our weighted average diluted shares outstanding for the year to be approximately 289 million. Overall, we're projecting earnings per diluted share for the year in the range of $2.35 to $2.40, an increase of about 10% to 12%, including low to mid-single-digit accretion from the acquisition of Kate Spade consistent with our previously communicated forecast.

We also expect our CapEx for Coach, Inc., to be approximately $325 million in fiscal '18. As previously noted, we'll be incurring a number of integration and onetime charges associated with the Kate Spade acquisition and integration. These charges will include such items as transaction fee and integration costs, which includes severance, store closure cost and import valuation adjustments.

We expect $40 million to $45 million related to acquisition transaction costs. This estimate for integration charges remains a work in process at this time, but we currently anticipate pretax charges to be in the $150 million to $200 million range in fiscal 2018 with approximately $35 million being noncash. Additionally, we expect to incur approximately $2 million in operational efficiency charges.

Now turning to our debt and capital structure. Post the Kate Spade acquisition, our total debt was approximately $2.7 billion. As previously noted, we intend to repay our $800 million 6-month term loan with cash on hand and end 2018 with $1.9 billion of debt. We remain committed to a conservative capital structure and moderate leverage, and based on free cash flow and cash on hand, we may elect to suddenly reduce indebtedness by prepaying long-term bank debt.

Finally, our fiscal year '18 directly operated distribution plan by brand is as follows: We expect 15 net closures globally for the Coach brand with net closures in North America and Japan partially offset by net openings in Europe and Mainland China. We expect approximately 5 net Stuart Weitzman openings in fiscal year '18. And for Kate Spade, we expect 20 to 25 net openings globally and across channels with the majority of the new-door growth coming in the outlet channel. As you know, these net openings will partially offset the reduction in the online flash and wholesale disposition as we build a foundation for long-term brand health.

It is important to note that due to the Kate Spade acquisition, we expect significant variability between quarters throughout the year and across all financial metrics based on the implementation of strategic initiatives and the realization of synergies as well as the variability in brand and channel mix as well as currency. Taken together, we expect these factors to have the most significant negative impact on the first quarter, resulting in mid- to high single-digit decline in operating income versus fiscal 2017.

We expect to deliver double-digit operating income growth in quarters 2, 3 and 4. While we anticipate our earnings pattern to be uneven in fiscal 2018, we expect to derive annual operating income growth of 22% to 25% as previously mentioned. Similarly, we would expect a higher inventory to sales ratio than has been our recent history due to elevated inventory levels at Kate Spade. We will protect the brand by not moving excess inventory into the disposition market but rather [commented] flow into your own network into the second half of the year. Therefore, we would expect our inventory-to-sales ratio to improve as we move through fiscal 2018.

In closing, we will grow both our Coach and Stuart Weitzman brands in the year ahead while successfully integrating Kate Spade, which we expect to be accretive to our fiscal 2018 results. Overall, we remain optimistic about global opportunities, and we're committed to driving long-term sustainable growth across our portfolio of brands.

I'd now like to open it up to Q&A. Operator?

(Operator Instructions) Our first question comes from Christian Buss with Credit Suisse.

I was wondering if you could talk a little bit about your expectation for Kate Spade and international markets in the near term? How much are you going to push that business going forward?

Thank you. Thank you, Christian. We're very excited about the Kate Spade brand and its international opportunity. Look, just comparing with Coach and where we are in the 4 key global markets. First and foremost, of course, there's tremendous opportunity still here in the U.S. We've got a brand that basically is in 178 locations relative to our 400 as you heard on our speaker's notes. We definitely see opportunity to manage the outlet channel more proactively here in North America. So that's one. And then in the 3 key international markets -- Japan, China and Europe -- we see tremendous opportunity. The brand is more mature in the Japanese market, where there's 88 locations relative to where Coach is, for example, with 180, 184 -- 185 locations. We definitely see an opportunity in that market. And then in Europe and in China, we're especially excited because we're in our infancy in Europe. There's 7 locations. Kate is doing really well in the U.K., where it's just getting its footing, if you will, with the first 7 locations in the U.K. and Ireland and then 1 location -- 6 in the U.K. and Ireland, 1 location in Paris but especially excited by the initial results there. And then in China, we are, today, in approximately, with a distributor partner, 33 locations relative to 175 to 180 for the Coach brand. And we see an opportunity, of course, to grow our awareness in all these markets. As an example, here in the U.S., Kate's unaided awareness is 31% relative to Coach's 71%. And in Japan, which is the second-largest market in the world, for us and, indeed, for Kate and for the category, Kate's awareness is 15% unaided relative to Coach's 51%. So we're very focused on the international opportunity, and I think you'll hear a lot about that in the quarters ahead.

Our next question comes from Bob Drbul with Guggenheim Securities.

I guess the question I was -- could you elaborate a little bit more on the traffic results for the Coach business in both full line and outlet and how the quarter progressed and how do you see the fall progressing?

Sure, I'll let Josh jump in -- I'll take that question. Overall, Bob, we've been seeing very consistent traffic trends over the last few quarters. More or less, I would say in the negative single digits range. Obviously, we've been driving the business through conversion, great product and pretty consistent across both channels with maybe the full-price stores suffering a little bit more from the traffic perspective than the outlet channel.

Our next question comes from Erinn Murphy with Piper Jaffray.

Great. I was hoping you could unpack a little bit more about the reversal of gross margin in the fourth quarter. I think you highlighted channel mix and then you talked about commercial and could be at outlet. Could you speak a little bit more about what -- how much those impacted the margin in the quarter? And then was there any impact from the [gen lar] license kickback in Q4? Is that going to weigh on gross margin in fiscal '18?

Sure, Erinn. I'll let Kevin take that.

A few components, I guess, on the gross margin chain. As we said on our Q3 call in May, we did expect the fourth quarter gross margin to contract given that we began anniversary-ing some of the product cost benefits that drove the gross margin expansion in quarters 1 and 3. We did achieve some cost reductions in Q4 but at a lower level as compared to the prior quarters, and it was not sufficient enough to offset the promotional activity, which basically stayed approximately the same as in prior quarters. We also had expected to reduce the outlet promotion based on some innovation in the product that we put in the channel. However, due to the competitive landscape and some of the products not fully resonating with consumers expecting, we did not -- been able to develop that promotion as planned. We also felt like that we missed a little bit on logo product. And as we observed during the fourth quarter, a broad emerging trend towards more logo product, which we're going to be getting into as we move into the second quarter of this year. And as you noted, we did have some FX impact in channel mix. And while we're speaking gross margin, I'll just go ahead and also note that as we move into fiscal '18, we do expect a year-over-year decrease in margin rate with more pressure in the first half with the significant majority of this year-over-year decline being attributable to the Kate Spade business, which runs at a lower gross margin rate. As it relates to the [gen lar] question, that will be a negative impact to the gross margin rate as we move into '18. As we commented earlier, that was a loss on this business previously that was effectively 100% gross margin rate and so that'll provide a little bit of head room -- or excuse me, headwinds as we move into fiscal '18. But we certainly think it's the right strategic long-term decision for us.

Our next question comes from Ike Boruchow with Wells Fargo.

I guess, Kevin, just -- I was wondering if you could give just a little bit more color on the Q1 op income decline you talked about, just what exactly the drivers are that are negatively impacting you so much to start the year? And then as you talked about Kate Spade comps down high single digits for the year. Again, just any color first half versus back half. Should we expect that to be much worse than high single digits to start and then ease throughout the year? Just any color would be really helpful.

Sure. I'll let Kevin speak to the first quarter, Ike, and then I'll take the comp question on Kate.

Sure. (inaudible) there's a number of factors that are weighing in on the first quarter -- and I'll kind try to unpack those for you. First, on the sales. We do have some calendar shifts in the first quarter where we see some sales probably going to be moving from Q1 into Q2. We also expect probably some more FX headwinds on both sales and margin in the first quarter. Also, keep in mind, as we said earlier, we did not own the Kate Spade business until July 12. So there's about $33 million to $35 million thereabouts of sales that occurred on the July period that we do not get credit for because that was prior to us acquiring them. On the gross margin side, we do expect some continued pressure in the first quarter, although at a lesser degree than we experienced in the fourth quarter. And as I said earlier, as we move into the second quarter, we believe we're going to be in a better inventory position to be able to capitalize on some emerging trends. And then on the (inaudible) thinking about from a pro forma from a Kate Spade perspective, again, we're going to see some pressure there on the gross margin. On the SG&A side, we've got some puts and takes there. But as the top line is seeing a little bit of pressure, it's creating some difficulty on the leverage perspective. And I would also note that, if you think about it on a pro forma basis with the Kate business, they did have some good news in their last year September quarter ended relative to reversing some incentive compensation benefits that they have been accruing for in their first half, so we're up against that. And then finally, I would note that, you add all that together, we're not expecting a meaningful operating profit contribution from Kate in Q1 due to the actions that we're taking combined with the fact that their fiscal -- or our fiscal Q1 has not traditionally been a large profit contribution for the Kate business.

And Ike, in relation to comp and its progress throughout the year, as you know in the speaker's notes and it's been very much something that we've talked about since we announced the acquisition, it's our desire to manage and drive the brand for long-term health and growth. We are taking 2 very important decisions towards that end, which is reducing a lot of the promotional impressions that we believe are more harmful to long-term brand health, specifically through the online surprise or flash sales as well as through the more urban discounts or wholesale disposition channel, specifically, of course, the pullback on the surprise business will have a negative impact, of course, on comp throughout the year, given that, currently, their brick-and-mortar comp has been consistent with the first quarter in their second quarter or what is now, of course -- or what was our fourth quarter, as I would say, around negative 8. You would assume that the pullback in online will mean that brick-and-mortar comp will improve as the year progresses. That is our plan today.

Our next question comes from Oliver Chen with Cowen and Company.

Our question was about your comments related to coach.com and your digital priorities. We're just curious about what you're focused on in terms of stores in mobile and website integration and also how you'll continue to stand your own in the face of Amazon making so many competitive strides as it relates to retail in general. And our second question was just about synergies with Kate Spade. What's the framework for easier-to-achieve synergies versus longer-term synergies? And then it looks like you had nice findings initially. Just what drove some of the differences in terms of what you've been seeing very recently since you've had Kate Spade for just a month?

Sure. First, I'll let Josh talk a little bit about his views and strategies on the web. We're very excited about his passion and experience there. And then I will jump in with Kevin on everything related to synergies and comps.

This is Josh. So as Victor said, I am passionate about really building the coach.com business, both from a business perspective and as our global digital flagship. We see opportunities to immediately impact the business by evolving our targeting strategies and the way we look at the spend allocated for performance marketing. And then as we revision coach.com as the global digital flagship, really looking at it regionally on a global basis and seeing how we can tie that more holistically into the omnichannel experience that our customer has. From a product point of view online, too, we have an opportunity to distinguish the channel and leverage an exclusivity message that can tie into some content creation as well as amplifying the volume at some lower price points as well. In terms of Amazon, for the time being, we don't see that as a true luxury play and where many of our core competitors play. And we're more excited about engaging directly with our customers through our own digital channels and those of our premium wholesale customers.

Thank you. And on to synergies, Kevin?

On the synergies that we noted earlier today, we are anticipating to realize $30 million to $35 million on '18, which annualizes to a run rate of about $50 million. And I think we've been working very diligently over the last several weeks. Just a reminder, we've only owned this business a little bit over a month. And so we've been pleased. We have dedicated teams across the company in specific areas. And if you think about kind of what's easier the longer term, I believe you asked about, what I would put in an easier bucket, think about lack of public company expenses, our ability to make some personnel changes early, our ability to get procurement savings. So those are in the more easier bucket. If you think about more the longer term, that's generally in the systems area as well as the cost of goods sold as it takes longer to effect changes there. But overall, I think we feel good about the process that's underway. We feel good about the teamwork at across the organization. As we noted earlier, we will be updating you on the earnings quarters -- earnings call.

(Operator Instructions) Our next question comes from Anna Andreeva with Oppenheimer.

We had a follow-up on gross margin. What's the negative impact we should expect from Kate for the year? And should we expect underlying Coach gross margin up for '18? And then looking out, Coach brand operating margins just under 19% this year. You had previously talked about reaching low 20s. Maybe talk about the puts and takes for '18 and beyond?

There's several questions there. First, on the gross margin and our negative impact, I think, on a consolidated basis for Kate. Did I get that right?

Yes.

Yes, I think we've not given specific gross margin rate. But it will be, call it, probably in the 170 to 200 million -- 200 basis points range net for the year. As I said earlier, it will be uneven by quarter as we do some of the actions but you would expect it to have that kind of level. Your gross profit is lower than traditional legacy Coach and Stuart business. And the other question I know was the gross margin for the year for the Coach brands? Again, we've not given specific, but you should think about the Coach brand legacy business as having modest gross margin rate expansion for the year. And then -- okay, and then anything else?

The operating margins, maybe talk about reaching the low 20s and the puts and takes there for the Coach brands.

What we said earlier, the operating guidance that we had previously provided is no longer operable as we've moved into a house of brands. And we'll be providing our annual operating guidance in fourth quarter each year as we're looking at it on the total business.

Our next question comes from Lindsay Drucker Mann with Goldman Sachs.

I wanted to ask about the comment on Kate and outlet stores. Could you talk about -- well, first of all, the split of where you expect to be opening outlet stores? And maybe even just a little more detail on the overall Kate store expectation for next year, where and what kind of stores are those? And second, as you think about the potential competition with Coach brand in outlet stores with more competition from Kate and maybe customers cross shopping, how you plan to mitigate any potential pressure on the legacy Coach brand business?

Yes. First -- I'll take the first -- the second half of your question first in terms of potential competition or overlap. I couldn't be more excited with the results that we just got back. In fact, no more than 1 month ago in postpurchase and combining our databases. As you know, we have a very large Coach database. We actually combined Coach, Stuart Weitzman and Kate Spade databases and did a little bit of cross-shopping analysis, and the results came back at less than 10%. In fact, it was slightly above 10% between Stuart Weitzman and Kate, which was really the highest crossover that we saw. And that was just above 10%. So very exciting news. And I think it speaks to our initial views and assumptions going into this, which is, of course, that we're adding an incremental business given the very unique brand attitude that Kate has, a much stronger leaning in towards a millennial consumer at over 60%, which compares to basically just over 30 for the Coach brand and a very differentiated brand attitude and positioning globally not just here in the U.S., although nascent in international markets. In terms of -- so in conclusion, we're not worried at all about crossover or competition, if you will. In terms -- and we see ourselves, obviously, growing total market share with the combined house of brands. In terms of distribution, very excited about the opportunities globally as I talked earlier. I believe it was the first question in terms of just the number of opportunities ahead of us, both in the digital and brick-and-mortar perspective. I think on the outlet side, the opportunities are really 2. One is definitely distribution. The outlet channel provides great opportunity for those more value-conscious consumers that we see globally and visit probably up the brick-and-mortar channels, the one that we're still seeing developments in a rather global aggressive pace compared to full price. And then secondly, if the opportunity for just us to support that team, there's a great team in place that we believe we can support them in managing it much more efficiently and better whether that be, of course, through innovation and product and handbag, leveraging our supply chain, increasing and improving quality and gross margin overall. All opportunities are ahead of us in differentiating between the channels as well. So exciting work still very much ahead of us on that front. We look forward to keeping you updated on it.

Great. And then just the outlet openings, U.S. versus Japan or overall store openings, the net store openings, where we should expect that to be for Kate?

I think you'll see it globally. We're still very much in the process of -- obviously, look, we've owned the business for a month. We have plans to really drive the business globally. We're still in the process of negotiating with our partners and landlord partners globally. I think you'll see some growth in our opening of -- here in the U.S. as well as internationally with the focus especially on Japan and China. Of course, China remains a business which is a joint venture with a third-party distributor. But we will certainly fill you in on that and are very excited about the opportunity across all markets.

Our next question comes from Mark Altschawager with Robert W. Baird.

Just wanted to follow up regarding the new reporting. I think you mentioned plans for low single-digit percent increase in Coach brand global comps. Could you just give us a sense of how the comp growth has been tracking in the international segment just to add some context to that guide? And then just directionally in North America, how are you thinking about the comp growth in fiscal '18 versus fiscal '17 for Coach brand?

Yes. On the international question, we have not provided comps on that, and on the North America, we have historically, like we say, going forward, we're going to provide global comps. And as you indicated, we're expecting this to be low single digit growth in the Coach brand in fiscal '18.

Our next question is from Omar Saad with Evercore ISI.

I saw you made some interesting comments around the outlet consumers' response to some of the new products going through there, the fact that maybe you had to be a little bit more promotional than you expected. And then I think you also made some comments around logo -- not having enough logo product. Where do you see that cycle shifting back and forth? Help us understand what's going on in that channel because the products seem so much better.

It is. Thank you, Omar. Very good question. I'll let Josh jump in on that.

One of my early observations was really how this team has driven the outlet channel through innovation and how that has been resonating with our customers these past few quarters. I think what we saw different at the end of Q4 was that there was a resurgence in demand for some of our logo products that has traditionally occupied a higher margin within our mix. And so we had a higher churn on the logo product in the fourth quarter. And we're actually working hard now to position ourselves to be in business in that product. And my observations are that somewhat related to the overall logo trend. But I also see it as a terrific sign for the brand's health that this heritage product that is so iconic to Coach is seeing resurgent demand wherever we have it.

Got it. Do you think it's a little bit of a trend, logos? And also just a reflection of the brand health and the demand for it.

Yes. We see it as positive, and we're actively chasing now. And we anticipate to be in a more complete stock position for Q2.

Omar, let me just add to that. I think you'll see us developing into that across channels go forward, which is an exciting sign for us. It really is.

Full price, too?

Yes, yes, full price, too.

Our next question comes from Michael Binetti with UBS.

I just want to clarify one thing on the guidance really quickly. The [gen lar] consolidations sounds like it's contributing to the gross margin guidance that you talked about for the year. Is there anyway you could help us dimensionalize what that adds to the revenue or the EBIT line for the year -- EBIT dollar line?

Mike, this is Kevin. Now to be clear, it's a negative to the gross margin rate for the year -- because previous -- the last of the business effectively 100% margin, then we take it in-house, and obviously, it's less than 100% because you got a cost. So it's actually a modest headwind on the gross margin rate for the year. And overall, it will be small dollars in the big picture. So it's not a material impact, but it's modestly or very slightly negative for the year as we're taking back.

Okay. It does contribute to the upside of the revenue line. I just want to make sure that that's in there, right.

We've not disclosed that. But again, it's a very tiny number in relation to basically a $6 billion business.

Yes, Michael. As you've heard in my speaker's notes, we're really taking a very deliberate approach to the stock there in year 1. We've got a business that was starting with about 100 SKUs. That compares to anywhere north of 500, 600 SKUs on the [gen lar]. We're starting with about 120 wholesale doors, which from a department store to department store channel and wholesale, for example, we compare to 500 to 600 doors under gen lar . If we were to include the disposition channel, they were at over thousands of doors. So we're really starting with a very, I would say, a very focused and deliberate launch but very excited about the opportunity long term, given the fact that it's a $28 billion opportunity for us that is growing. And of course, we're leveraging a lot of the knowhow, specifically around fit that we're getting from the Stuart Weitzman team.

Okay. And then -- yes, most of our other questions have been answered. But I'm a little curious if you can give us a little language around the promotional environment. I know you have some competitors that are planning to close doors or may start closing doors. Maybe you could talk about what you're seeing in some of the local markets? How does that happen? And how you feel about your market share opportunities as you look ahead? And obviously, you'll be pulling back on one of your other brands, Kate Spade. How you think about the Coach market share opportunity into those competitive dynamics.

Sure. We don't see, look, overall, I would say that we don't see dramatic shifts across channels from a promotional perspective. Of course, the department store channel has specifically seen the most substantial pullback across brands. And there, the impact of Kate Spade is truly minimal. One of the most positive surprises for us, actually, and we knew this through our due diligence prior to the acquisition, has been just how clean that brand has been and how well it's been managed from a promotional perspective as it relates to the department store channel. And so we're excited about that. There's not much cleaning to do there. As it relates to the online channel, again, we see most of the impacts from our own actions and what we see from Kate Spade is being very difficult to read in terms of impact across brands or across channel. For us, this is really not as much about reducing it to gain market share in one channel or another but really about managing brand health for the long term. That's the strategy. That's what we're focused on. And in so doing, of course, allow for a much more sustainable growth, both top and bottom line for our brands.

Our next question comes from Paul Trussell with Deutsche Bank.

You certainly touched on this already. But maybe just a little bit more detail on the comp, especially in North America. You obviously comped the comp, which was impressive this quarter. Maybe just elaborate on your confidence to be able to continue to do so over the coming quarters and the particular factors and drivers that you're most excited about.

Yes. I would say, look, we wouldn't add anything to what Josh already shared with you, which is, obviously, incredibly pleased with the fact that it's our fifth consecutive positive comp here in North America, very focused on continuing to drive engagements across channels, both, of course, our brick-and-mortar full price outlet and digital channel. And you'll see, of course, as Josh mentioned, digital continuing to be increasingly important for him and for the brand under his leadership. And globally, I wouldn't add anything to what we've just guided, which, of course, is the low single digit comp for the brand across markets, which we're excited about. So our brand is increasingly global as you know with growth coming especially out of Europe and China, which has been the theme for a few quarters, and of course, in China, for a few years that we're continuing to be very excited about.

Operator, we'll take one last question.

Our final question this morning will come from the line of Simeon Siegel with Nomura.

Anything you can elaborate on your comment to refocus Kate's licensing? I believe they license a broader assortment of products, so how much flexibility do you have there? And then with that comment pertaining to geographic JV you have in Asia as well?

Yes, [ID,] the licenses are -- the discussion about licenses are product-based licenses, not distribution-based licenses. As I mentioned, we do have a JV with China that, of course, we will be focusing on. As it relates to the product-based licenses, there is no intent to end anything early. A lot of these licenses do have short terms. So we will be reevaluating them on a case-by-case basis. I think our objective is to truly focus on the core fashion category, especially in certain home licenses, but that you will definitely see us reduce the number and leverage talent much more fully within the handbag and accessories business, where we believe the greatest opportunity lies.

Okay. And just a random question, if I can. When you talk about the promotional levels of outlet, do you find you're impacted by promotional levels across all outlet retailers? Or it's specifically promotional levels of your peers?

I would say, in general, when we talk about promotional levels, of course, we're most focused on what is happening, I would say, in the premium branded space and those domestic and European players that are closest to us across the distribution channels, whether that be especially, of course, in wholesale and in the outlet channel, which of course, by nature, is a promotional channel.

Thank you. I'll turn it back over to Victor for some brief concluding remarks. Victor?

Thank you, Andrea. I just want to close by, first and foremost, welcoming the Kate Spade team. I know there's quite a few of those folks listening in and welcoming them to the Coach, Inc., family. We're incredibly excited to have them as a part of the team and very much looking forward to supporting them and their growth as a brand, not only here in the U.S. but globally. I also want to thank and congratulate the Coach and Stuart Weitzman teams on a fantastic fiscal year '17 as we continue to drive results in our brand transformation and as the Stuart Weitzman team moves under the direction of Wendy and Giovanni Morelli in its new chapter as well. Obviously, we could not be more excited about our evolution corporately as a house of brands and bringing our vision to markets across the globe and looking forward to continuing to connect with all of you as we share the work that we're doing, not only in driving our brands, but of course, in integrating the Kate Spade brand in the quarters ahead. Thank you all.

This does conclude the Coach Earnings Conference Call. We thank you for your participation in today's call. You may now disconnect your lines, and have a wonderful afternoon.