掛毯 (TPR) 2018 Q4 法說會逐字稿

Good day, and welcome to the Tapestry 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 Andrea Resnick, Global Head of Investor Relations and Corporate Communications.

Good morning, and thank you for joining us. With me today to discuss our quarterly and annual results are Victor Luis, Tapestry's Chief Executive Officer; and Kevin Wills, Tapestry's Chief Financial Officer. In addition, our 3 CEO and Brand Presidents, Josh Schulman for Coach, Anna Bakst for Kate Spade and Eraldo Poletto for Stuart Weitzman, will be joining us.

Before we begin, we must point out that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially, from those expressed or implied in the forward-looking statements. Please refer to our quarterly report on Form 10-Q for the period ending December 30, 2017, our annual report on Form 10-K, the press release we issued this morning and our other filings with the Securities and Exchange Commission for a complete list of risks and important factors that could impact our future results and performance.

Non-GAAP financial measures are included in our comments today in our presentation slides. You may find the corresponding GAAP financial information as well as the related reconciliations on our website, www.tapestry.com/investors, and then viewing the earnings release posted today and the presentation slides.

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 2018 results for Tapestry. Our brand CEOs will then review FY '18 and outline their strategies for their respective businesses, focusing on FY '19. Kevin Wills will continue with details on financial and operational results and our outlook for FY '19. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, Tapestry's President and Chief Administrative Officer. We will then conclude with some brief summary remarks.

I'd now like to turn it over to Victor Luis, Tapestry's CEO.

Good morning. Thank you, Andrea, and welcome, everyone. As you read in this morning's press release, our strong fourth quarter results capped an excellent fiscal year '18 performance, which demonstrated the power of our multi-brand model. Importantly, we achieved our overall sales and operating income guidance, driving significant growth, while earnings per share outpaced our forecast.

It was also a year of many milestones for our company. We completed the acquisition of Kate Spade and evolved into a true house of brands, establishing Tapestry as our new corporate identity. Our company is built upon shared values of optimism, innovation and inclusivity in a common platform, while our unique brands, Coach, Kate Spade and Stuart Weitzman, retained their distinctive personalities, respecting their individual narratives and positioning.

We also strengthened our executive and creative leadership across our brands, with a clear focus on global talent to execute our strategic vision. At Coach, we reinforced our regional leadership with the appointments of Laura Dubin-Wander as President, North America; and Fredrick Malm as President, Europe & International Wholesale. We also brought Cristiano Quieti, who is Head of Jack Spade, to lead Coach's men's business across channels.

At Kate Spade, we named Anna Bakst as CEO and Brand President in March, joining Creative Director, Nicola Glass, who started in January. We now have the right senior management in place to lead the talented Kate Spade team and drive the business globally.

At Stuart Weitzman, we're delighted to have Eraldo Poletto at the helm, who joined us as CEO and Brand President last quarter. He brings 30 years of fashion experience and a proven track record in luxury brand growth. And most recently, we brought in renowned footwear designer, Edmundo Castillo, as Head of Product Design. At Tapestry, Fabio Luzzi joined Tapestry's Global Strategy and Data Labs team as Vice President of Data Labs and Customer Analytics.

In addition, we brought fresh perspectives to our board, with the appointment of new directors, all with extensive and relevant business experience in innovation, digital and business operations.

Finally, we announced several important business development initiatives during the year, which allow each of our brands to assume greater direct control over their international distribution. To this end, we're excited to announce that we've now entered into purchase agreements to acquire Kate Spade's operations in Singapore, Malaysia and Australia as well as Stuart Weitzman's business in Southern China. These locations will transition to our brands' management in the September-October time frame. As we demonstrated with our past experience, controlling these businesses directly allows us to accelerate international growth and enhance each brand's development in these markets, with only a limited impact on near-term profitability as they transition.

As in the case of the initiatives previously announced, these agreements are focused on 2 global strategic priorities: First, leveraging the opportunities for our brands with the Chinese consumer globally; and secondly, unlocking the value of a multi-brand operating model.

Moving to category trends. During the fourth quarter, we estimate the men's and women's premium handbag and accessories market, which is now over $45 billion, grew at a low double-digit rate globally, benefiting in part from the weaker U.S. dollar. On an organic basis, we estimate that the global category rose high single digits, similar to the March quarter. The strong fourth quarter number drove the trailing 12-month growth rate to a low double-digit rate in U.S. dollars and a high single-digit on an organic basis.

Looking at other categories, which play an important role in Tapestry's growth. In FY '18, we also estimate the global men's and women's premium footwear category at about $30 billion and the premium outerwear category at about $12 billion. Both grew at a high single-digit rate in constant currency. Very positive global macroeconomic factors, including strong consumer confidence, historically low unemployment, rising consumer spending and stock markets near all-time highs, have driven consumer demand across our categories. Additionally, we see the resurgence of logo and branded product, which started with the European brands, as an incremental tailwind. However, we must note that there is uncertainty in the FY '19 macroeconomic outlook, which could impact market growth in the year ahead.

Moving forward, we are focused first and foremost on execution. Our goal is to deliver strong revenue and operating income growth in fiscal 2019 while making the right strategic investments to support our long-term vision and return to double-digit operating income and EPS growth in FY '20.

Specifically, this year, we will: First, continue to harness the power of our multi-brand model. To that end, we remain on track to achieve run rate synergies from both COGS and SG&A of approximately $100 million to $115 million in fiscal 2019. We're also building a scalable shared services model, including investments in systems and infrastructure to support our current and future growth initiatives.

Second, fuel innovation across brands, which Josh, Anna and Eraldo will speak to in detail shortly.

Third, drive global growth with an emphasis on the Chinese consumer. Across all of our brands, we are focused on maximizing the opportunities with Chinese consumers, both locally and globally. We will optimize our footprint, investing where needed and culling where appropriate. We will continue to see the Greater China market and in addition, Europe, as geographic opportunities across Tapestry's portfolio. And we will invest in local tailored marketing to drive brand awareness and amplify our global message as we create cultural context and relevance across markets.

And fourth, advance our digital and data analytics capabilities. We have made significant investments in our data infrastructure and database architecture. Today, we have nearly 120 million names in our global database and have a very high capture rate across channels, and we remain focused on growing and enhancing our database over time. Moving forward, the opportunities for us to leverage digital connectivity and data analytics from the front to the back of house is boundless. We've created a learning agenda, which includes exploring AI and machine learning for inventory management, merchandising and pricing analytics, to name a few.

Overall, our strong fiscal 2018 performance reflected the benefits of diversification across brands, geographies and categories. We're proud of the progress we've made this year and couldn't be more excited about the opportunities ahead for Tapestry and each of our brands.

I will now turn over the call to our brand CEOs to walk through their respective results and strategies for fiscal year '19, starting with Josh to discuss Coach. Josh?

Thanks, Victor, and good morning, everyone. Coach posted a strong finish to fiscal 2018, with positive fourth quarter comparable store sales, again led by outperformance in North America and driven by fashion innovation across materials and price points.

In addition, and as expected, we drove significant gross margin expansion in the quarter, driving the full year margin above prior year levels. Taken together with tightly controlled expenses, we achieved operating income growth and operating margin expansion for the quarter and the year.

Looking at the full fiscal year, there were many highlights. In retail, fiscal 2018 represented a pivotal year for our global business, as several of our key strategies in product marketing and stores came to life. Fueled by the power of Selena Gomez in our marketing campaigns, we successfully executed our strategy to reinvigorate the $300 to $400 handbag price segment, with Charlie and Parker as the key new winning silhouettes.

Stuart Vevers relaunched Signature as part of his spring fashion show, and the customer immediately embraced this elevated expression of this brand icon. We grew categories outside of our core leather goods, notably, women's footwear in its first full year under Coach ownership, as well as ready-to-wear, driven by outerwear and other classifications of apparel.

In outlet, though we entered the year challenged by voids in our product assortment and inventory mix, we were able to put these problems behind us by the important holiday period. As we moved into spring, we were able to achieve higher margins on introductions of new innovative products. Specifically, we established precedent for commanding a premium on overt novelty. And we've proven the outlet consumers' appetite for footwear through the relaunch of the category in the second half of 2018.

In men's, we saw strength across categories and channels as we created greater demand for our lifestyle assortment with compelling specialty accessories and outerwear. In addition, our men's fragrance performed well. We were also delighted with the growth we drove in e-commerce, with notable strength in our retail dot-com business, both in North America and globally.

On stores, we've made significant progress since the launch of our customization program in October. Coach Create enables customers to cocreate select products with unique details. We are very excited by the volume and increasing traction we are seeing over the 9-month period since launch. Particularly exciting is the way this personalization resonates with millennial customers. In many doors globally, this customization is done on-site by a Coach craftsman while the customer shops, a point of differentiation from other brands that offer personalization. We also continued to expand our monogramming service, which is now available at over 50% of our global direct retail fleet, immersive craftsmanship bars or monogramming stations.

On marketing, we drove our fashion authority through our well-received runway shows and amplified our global brand message through both our successful collaboration with Selena Gomez and by working with local influencers in key regional markets. We had a lot of fun with the subversion of our Signature during Q4, which will continue into FY '19.

We also made significant shifts in our marketing mix from print to digital this year. This drove customers to all channels globally, and we had particular strength in the North American and European e-commerce businesses.

In our FY '18 North America brand tracking survey, we were excited to see Coach posting meaningful increases in being viewed as 'on the way up' by both the broad premium consumer and specifically, with millennials. We believe that this improvement in brand momentum is the collective impact of our marketing strategy with Selena Gomez, emphasizing the brand's beautiful and confident positioning, our merchandising strategy focusing on the sweet spot of $300 to $400 bags, the well-received relaunch of Signature and our increasingly personalized store experience. I could not be more proud of the global Coach team for creating these positive customer impressions every day.

Now to get into a bit of comp detail in the quarter before I move on to our strategies for the year ahead. Overall, our fourth quarter performance was very consistent with our second and third quarters, with global comparable store sales in bricks-and-mortar driven primarily by conversion, reflecting our strong product offering, with ticket also up. Internet performance globally exceeded our store comp.

During the quarter, our global Coach comp remains solid, rising 2%. North America, again, outperformed despite a tougher sequential compare with the Easter shift into the March quarter. Overall, Greater China comps rose, while Japan was also positive. Europe comped negatively, up against a double-digit comp in the year-ago quarter, while sales rose driven by new distribution. In aggregate, for the full fiscal year, comps matched our low single-digit Coach brand guidance.

Moving to wholesale. Our North America shipments again grew significantly during the quarter, driven in part by footwear, while our promotional days in the channel declined over 20% from last year. We were especially pleased with our core handbag and accessories sales growth at retail across our department store partners.

Our international wholesale revenue was even with prior year in Q4 despite the transition of Coach Australia and New Zealand to a directly-operated retail model. Overall, we are very pleased with Coach's performance in the quarter and the fiscal year. And moving forward, we believe we are well-positioned to generate continued positive comparable store sales driven by compelling product, our differentiated modern luxury store experience and bold marketing campaigns.

Looking at our 5 specific Coach brand strategies for FY '19. First, building on the success of this past year, we will continue to cascade leather goods innovation across fashion, occasion and price. This includes creating a good, better, best strategy, with Coach 1941 at the top of the pyramid, providing the creative vision and fashion inspiration for the broader assortment. Building Signature as a coveted brand icon through animation, adding new fabrications, colorways, embellishments and trim will be an important element of this strategy.

Also, in our outlet business, we will innovate to elevate with a substantial number of new style introductions in the first half of this year. Included among the introductions is The Edit, a collection of fashion-forward bags with elevated materials, hardware and luxury detailing. We believe that The Edit will allow us to grow our penetration of higher-priced bags in outlet.

Second, we will capitalize on growth opportunities outside of our core women's bags and small leather goods. We see 3 specific areas of focus, starting with men's. Over the last few years, we've developed our global men's business to about $850 million in sales, and we have a clear path to over $1 billion within our 3-year planning horizon. It's important to note, with about half of the business coming from North America, Coach is the #1 domestic men's resource for bags and small leather goods. We will fuel this business through our focus on the modern man, building out our active casual offering, including backpacks, belt bags and more casual silhouettes and updating our business assortment in leather goods to reflect our customers who are increasingly working in more casual, tech-friendly and modern workplaces.

Secondly, Coach women's footwear, which had a great start in its first year under our ownership in 2018. We believe this category has significant potential across all channels, including wholesale.

And ready-to-wear, notably outerwear, has also been an area of growth for Coach, as mentioned. To help fuel awareness of our assortment, we have several exciting collaborations in the pipeline. In fact, today, we are launching preorders on coach.com and neimanmarcus.com for an exclusive collaboration with Selena Gomez. In addition to handbags, for the first time, Selena collaborated with Stuart Vevers on a capsule of ready-to-wear.

Third, we will balance our position as a fashion authority while broadening our marketing messages. Through our brand transformation, we made Coach a part of the fashion conversation, now a staple at New York Fashion Week and highly regarded in the editorial community. We will continue to balance this fashion messaging with compelling communications that will cut through to a broader audience. We will drive our beautiful and confident positioning for the Coach woman while also addressing the modern Coach man. We will augment our global Selena and Coach collaboration with local influencers and celebrities, notably in the Asian markets.

And in keeping with our Tapestry goal of maximizing our business with the Chinese consumer globally, we will restore our investment to China. We have several important initiatives here to build on our already-strong relationship with the Chinese consumer. We have 2 Chinese celebrities, Guan Xiaotong and Timmy Xu, who will appear in our fall campaign. And most significantly, I am very excited to share that we will be doing our first-ever fashion show in Shanghai this December.

Fourth, we will continue to modernize, customize and personalize the customer experience with the goal of creating excitement and engagement. We are rolling out a new POS system in North America and Europe, the backbone of a more modern store experience, creating a seamless digital ecosystem within the stores, linking all of our tools, services and experiences into one fluid customer journey. We will maximize our successful Coach Create program and drive our Accessorize It focus across channels, transforming stores into true experiential retail destinations, integrating digital features such as our digital wallet and scarf bars.

And in customer outreach, we are implementing a digital clienteling platform across all markets and will be leveraging in-store events to drive customer retention and sales. Our China teams have been pioneers in digital clienteling, with LeadClient, and we've incorporated learnings from the system for our global clienteling application.

And fifth, further fueling digital innovation and e-commerce growth. We will be rolling out a redesign of coach.com with the goal of reducing friction, driving conversion and enhancing storytelling to engage customers. We are improving our product mix with a focus on online exclusives. And we are continuing to invest in our global capabilities, focused on our direct-to-consumer business to prepare to scale to new markets and add omnichannel capabilities in new geographies.

Taken together, we are confident that the Coach brand will achieve another year of solid revenue growth, driven by positive comparable store sales globally, growth in wholesale and limited new store distribution, primarily in China, while we continue to optimize store footprint in North America and Japan.

I would now like to turn it over to Anna Bakst to discuss Kate Spade.

Thanks, Josh, and good morning, everyone. It's great to be on my first Tapestry earnings call and with good results to speak to.

At Kate Spade, the successful integration onto the Tapestry platform continued, as we achieved the targeted synergies of $45 million for the year. Fourth quarter results exceeded our expectations from both the top and bottom line perspectives, with both sales and operating margin increasing from prior year reported results.

In our first year as part of Tapestry, Kate Spade delivered double-digit earnings per share accretion despite the strategic pullback in online flash and wholesale disposition. Most importantly, we set up the brand for future growth, focusing on the most significant geographic and category opportunities for the brand while staying committed to reducing negative promotional impressions.

Looking at results. Fourth quarter sales totaled $312 million, up about 4% from prior year on a pro forma basis, reflecting new store distribution and the consolidation of China.

Bricks-and-mortar comps were down 3% globally, impacted from the Easter shift in North America, which had helped our third quarter results, while aggregate comp was also down 3%.

Though we did pull back on circulation and open days and surprise this quarter from the single event held in the year prior, our e-comm main site as well as our store sales reflected the strong and immediate heartfelt response from loyal customers to the tragic news of our founder's passing. In fact, we were very touched by the outpouring of love across social media, filled with so many stories of the impact of her legacy and our brand.

For the full fiscal year, excluding the 10-day stub period not under Tapestry's ownership, which is worth about $30 million, Kate Spade sales totaled $1.28 billion. Global comps for the year declined 7%, in line with our guidance of a high single-digit comp decline, while bricks-and-mortar store comp was down 3%. For perspective, including the 10-day stub period that Kate was not under Tapestry's ownership, sales for the year totaled $1.32 billion as compared to $1.35 billion for fiscal 2017's full year sales results.

Overall, in fiscal year 2018, we took significant steps to position the brand for solid and sustainable profitable growth. Fiscal 2019 will be an exciting year at Kate Spade as we evolve the brand under Nicola Glass' creative direction, further leveraging our brand relevance as we expand globally.

For the coming year, our 5 key areas of focus are as follows: First, global expansion. We will build out and reinforce our presence in untapped markets, including Greater China, Southeast Asia and Europe. To this end, we expect to add 70 to 70 -- 60 to 70 stores globally, including those that will be acquired in Australia, Malaysia and Singapore. As we develop a clear and consistent global positioning, we will act locally to ensure we translate relevance in each market and region.

In addition, we will merchandise and assort the collection to specific customer segments and door types to deliver the right product to the right place at the right time globally.

Second, branding. We will evolve our brand messaging to play to our core attributes, fashionable and feminine while addressing fun in a more universal way. We will create compelling and covetable brand icons and codes such as distinctive hardware and branding, making our product instantly recognizable.

Third, introducing exceptional and aspirational product. We will lead with compelling design and best-in-class function and are extremely excited to show Nicola's first collection at New York Fashion Week next month. We are upgrading product quality through elevated materials and construction while maintaining price, providing excellent value with our unique optimistic feminine positioning. We are also aligning resources to support product categories that validate our aspirational lifestyle brand, including ready-to-wear, tech and jewelry.

Fourth, creating immersive channel experiences. We will develop and execute growth initiatives across our direct-to-consumer channels as well as wholesale, including global travel retail. We will elevate the customer experience and drive productivity with new store concepts, which will feature a new color palette, enhanced visual elements and merchandising by category, building on the successful ready-to-wear zoning test initiatives of fiscal year 2018.

We will also build on our leadership in digital e-commerce worldwide and are especially excited by the results of katespade.com in Europe.

And fifth, leveraging the Tapestry platform. We will fully capture synergies with Tapestry through cost and indirect savings as we optimize our supply chain, notably for bags and small leather goods, from raw materials buying and manufacturing through transportation and logistics. We will also leverage Tapestry's resources and expertise, such as global business development and store construction, to accelerate growth and improve profitability. Of course, all of these initiatives will be supported by our talented and passionate Kate Spade team around the world.

As we look to the year ahead, we are confident that it will be a year of double-digit revenue growth. This will be driven by distribution growth as well as positive comps within the second half of the year, fueled by the arrival of Nicola's first collection.

In addition, top line growth will benefit from the acquisition of our businesses in Australia, Malaysia and Singapore as well as the full year impact of consolidating our joint ventures in Greater China. These initiatives will far outweigh some of the additional strategic pullback in wholesale disposition.

In addition, we will continue to see a significant improvement in our margin as we realize the incremental synergies from the Tapestry integration. Over our 3-year planning horizon, we continue to believe that Kate Spade brand can approach $2 billion in sales at significantly higher operating margins than we enjoy today.

Now I would like to turn the call over to Eraldo Poletto to discuss Stuart Weitzman. Eraldo?

Thanks, Anna, and good morning to everyone. At Stuart Weitzman, and as anticipated, fourth quarter results continue to be negatively impacted by development and delivery delays, which pressured sales and margin across all channels of our business.

For the fiscal year, sales were essentially unchanged, reflecting the second half challenges. Importantly, during the quarter, we continued to make progress in addressing the issue which arose this spring, as we continued our transition from a founder-led shoe manufacturer to a truly scalable global, multi-category footwear and accessories brand. The action we are taking are focused on 3 main areas, people, process and systems, to support the brand's creative vision and growth.

On the people front, I am delighted that Edmundo Castillo has joined the team in the role of Head of Product Design, reporting directly to me. Together with our Head Merchant, Francesca Bertoncini, we have the right team to move the brand forward from a design and merchandise perspective.

We have also made significant investments in our overall supply chain teams in Spain, and I am pleased with the progress they are making.

On process, we have added infrastructure and capacity as we contracted with additional manufacturing facilities also in Spain. We have built a quality assurance team on the ground to ensure that all of our footwear delivers on our brand promise of fusing fashion and feet.

And finally, on systems. While the most significant benefit will come from the future implementation of our new ERP SAP platform, we have added additional reporting capability to improve visibility of our order and capacity.

Looking to fiscal year '19, our strategic priority for Stuart Weitzman are focused on creating clear direction and improved execution, the impact of which will have a longer-term benefit beyond just the year ahead and create a stable platform for sustainable growth.

The Stuart Weitzman 5 key strategies for fiscal year '19 are: First and foremost, we are focused on further evolving and refining our product development processes and supply chain. We understand that this underpins our ability to achieve all of our goals and therefore, is our most immediate priority. And as I just mentioned, we already made significant progress and will continue to do so.

Second, we will expand our footwear offering in new classification while maintaining our authority in boots and sandals. We will leverage the brand recognition we have built with the 5050 boot and the NUDIST family with new essentials, including pumps, sneakers and slides, capturing more end users and a greater share of our customers' footwear wardrobe.

Further, we will expand globally with a focus on the Chinese consumer. As you know, we bought back our Northern China distributor in mid-February and expect to close on the acquisition of a Southern China business in the fall.

While our iconic styles are very well-known in China, we have a significant opportunity to drive SW brand awareness. And we are also excited to be relaunching our brand in Japan, where we believe our unique blend of design and comfort will be embraced by the local consumer as well as the Chinese tourist.

Globally, we are introducing new store concepts and making it distinctively SW: Sleek, inviting and luxurious.

Fourth, growth beyond footwear, gaining credibility in handbags and leather goods. We believe there is a significant opportunity in handbags and small leather goods, a natural complement to shoes. And we'll be expanding this category across retail and select wholesale accounts. We are working on creating an everyday bag icon with key brand codes while also offering a small bag assortment for evening, given the already brand's strong position in special occasion.

And fifth, we will create a brand desire through powerful 360 degrees marketing activity. We will build brand relevance of the consumer through our identifiable seasonal advertising campaigns, and we will launch an influencer project in China while continuing to benefit from our strong celebrity following globally.

In summary, we are addressing the challenges in our supply chain and expect it to be back into quality and on-time deliveries by the end of the calendar year.

Given the team's excellent progress to date and they're [likely to save between] now expected to return to top line growth by the second fiscal quarter, ahead of our original second half 2018 target. We are excited about the opportunities for the brand across geographies, classification and categories and are confident in our long-term vision.

With that, I will turn it to Kevin for the financial review of the year and our outlook. Kevin?

Thanks, Eraldo, and good morning. The team has just taken you through the highlights and strategies. Let me now take you through some of the important financial details as well as our outlook for fiscal year '19.

Before I begin, 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.

Overall, we delivered strong results in fiscal 2018, fueled by the acquisition of Kate Spade and organic growth, reflecting the benefits of our multi-brand model.

Total sales rose 31% for both the quarter and year. We achieved our top line guidance for Tapestry, generating revenue of $5.9 billion in FY '18, with sales and comps for Coach and Kate Spade consistent with expectations. At Stuart Weitzman, sales were roughly even with prior year, reflecting challenges we experienced in the second half, as discussed.

Turning to gross margin. For the quarter and as planned, we generated significant gross margin expansion, with total Tapestry gross margin of 68%, up 120 basis points versus prior year, driven by a 220 basis point increase at Coach. In addition, Kate Spade's gross margin of 65.6% in the quarter exceeded our expectations and represented a significant increase from prior year, helped in part by the realization of COGS synergies, as we are now starting to benefit from migrating the brand onto the Tapestry supply chain.

Stuart Weitzman's gross margin of 53.5% in the quarter was down 540 basis points versus prior year, including 520 basis points of pressure from currency. For the year, Tapestry's gross margin of 67.5% declined 120 basis points from prior year, primarily due to pressure of 110 basis points from the addition of Kate Spade, given the lower-margin profile of the brand.

Importantly, Coach gross margin of 69.5% was consistent with expectations, representing a 10 basis point increase from prior year.

SG&A expenses were well-controlled throughout the year, totaling $781 million in the fourth quarter and approximately $3 billion in FY '18. On a rate basis, SG&A represented 50.7% of sales in FY '18 as compared to 50.6% in the prior year. The change versus prior year reflected the benefit of leverage at Coach, offset by deleverage at Stuart Weitzman as well as the incremental costs associated with our global business development initiatives and the acquisition of Kate Spade, as the brand has a higher expense ratio relative to our organic business.

Our operating income totaled $228 million in the fourth quarter, representing an increase of 27% over prior year. For the full year, consistent with our guidance, operating income rose 22% to $992 million. Our FY '18 operating income growth was driven by the contribution from Kate Spade of $158 million, inclusive of synergies of approximately $45 million in mid-single-digit growth at Coach, partially offset by year-over-year decrease at Stuart Weitzman.

As projected, net interest expense was $14 million for the quarter and $74 million for the year.

Our effective tax rate was 17.4% for the quarter and 17.2% for the year. This compared favorably to our annual guidance of 18% to 19%, due primarily to the geographic mix of earnings. Overall, our EPS was $0.60 in the quarter and $2.63 for the year, exceeding our most recent guidance of $2.57 to $2.60. Our FY '18 EPS gain of 22% versus prior year included double-digit accretion from the acquisition of Kate Spade.

Now moving to global distribution per brand. As outlined in our release, we ended the year with over 1,400 directly-operated stores globally across our brands, including 987 Coach, 342 Kate Spade and 103 Stuart Weitzman locations.

Looking at our distribution activities for the year by brand. For Coach, we opened a net of 4 locations globally and added 21 stores through the acquisition of our businesses in Australia and New Zealand from our distributor. This is slightly higher than our previous guidance, which called for a net decrease of 5 locations pre-buyback activity, as some door closures shifted into FY '19. In addition and consistent with our most recent guidance, we opened 17 net new Kate Spade locations globally while taking operational control of 50 stores across Mainland China, Hong Kong, Macau and Taiwan. And for Stuart Weitzman, we opened 2 net new locations and acquired 20 stores as part of the buyback of the Northern China business.

Turning to our balance sheet and cash flows. At the end of the fiscal year, our cash and short-term investments were approximately $1.3 billion while our borrowings outstanding were $1.6 billion, consisting primarily of senior notes. As a reminder, during the year, consistent with our commitment to conservative balance sheet management, we fully repaid $1.1 billion in term loans, utilizing excess cash, resulting in reduction of our leverage by about a turn on a debt-to-EBITDA basis.

Inventory levels at quarter-end were $674 million versus ending inventory of $470 million in the year-ago period. Excluding the impact of Kate Spade as well as the inventory associated with regional buyback activity, total inventory increased approximately 6% versus prior year. Importantly, as planned, we rightsized the inventory at Kate Spade in the second half of FY '18.

For the full fiscal year 2018, net cash from operating activities was $997 million compared to $854 million a year ago. Our CapEx spending was $267 million versus $283 million last year. This spend was modestly below our expectation of $300 million. Free cash flow in fiscal 2018 was an inflow of $729 million versus an inflow of $571 million in the same period last year.

Now turning to our capital allocation policy. Our long-term priorities remain 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 dividends. As you saw in our release, we're maintaining our dividend at an annual rate of $1.35. Overall, our strong balance sheet will support our growth initiatives while also allowing us to maintain strategic flexibility.

Before turning to FY '19 guidance, I want to touch on the topic of tariffs. As you know, the Trump administration released a list of $200 billion worth of products, including handbags, imported from China into the U.S., that may be subject to potential tariffs. Naturally, we're monitoring the situation closely. But it's important to note that given the diversity of our manufacturing base and the steps we've made to migrate Kate Spade onto the Tapestry supply chain, less than 5% of handbags across Tapestry are produced in China.

Now moving to our 2019 outlook. Consistent with our prior practice, the following guidance is presented on a non-GAAP basis. Starting with sales. We expect total revenue for Tapestry in fiscal 2019 to increase on a mid-single-digit rate from fiscal 2018 to $6.1 billion to $6.2 billion. This includes the expectation for low single-digit growth at Coach, driven by continued positive low single-digit comps. We expect Kate Spade sales to increase on a double-digit rate from reported fiscal 2018 results, fueled by new distribution as well as positive comps in the second half of the year. As discussed, we now expect Stuart Weitzman revenue growth in the second fiscal quarter.

In addition, we are projecting the operating income growth rate to exceed the revenue growth rate, driven by gross margin expansion, offset in part by SG&A deleverage. Our operating income growth reflects the organic gains in our business, the realization of incremental synergies from the Kate Spade acquisition as well as the impact of distributor consolidations and buybacks and systems investments. As previously announced, the company expects that synergies related to the acquisition will total $100 million to $115 million in FY '19.

Net interest expense is expected to be approximately $50 million for the year. The full year fiscal 2019 tax rate is projected at about 21% to 22%. The expected rate increase versus fiscal 2018 is due primarily to the introduction of a new tax regime requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations known as the GILTI Provision. Consistent with prior years, we would expect a substantially lower tax rate in the third quarter relative to the other quarters of the year.

We expect our weighted average diluted shares outstanding for the year to be approximately 295 million. Overall, we are projecting earnings per diluted share for the year in the range of $2.70 to $2.80. We expect CapEx to be in the range of $300 million to $325 million in FY '19, which we would expect to be the peak level of spend over our planning horizon. As outlined in our press release, we expect to incur nonrecurring pretax charges of $10 million to $15 million attributable to the company's ERP implementation efforts and estimated pretax integration and acquisition charges of $50 million to $60 million.

Before turning to a discussion of our distribution plans, I want to mention that beginning in fiscal Q1, our reported results will reflect a change in our SG&A reporting at the segment level to align with the way we've organized and managed the business. This change will reflect a reclass of certain expenses and importantly, will have no change on our total Tapestry reporting.

As part of the continued integration of Kate Spade and the evolution of the company as a multi-brand house, we anticipate that some expenses, primarily related to employee costs within shared functional groups that were reported within our brands in FY '18, will shift to the corporate segment. In keeping with our commitment to transparency and providing you with information to track our progress against our plans, in conjunction with our Q1 '19 earnings announcement, we intend to restate quarterly FY '18 results for comparability.

Finally, turning to our fiscal year '19 directly-operated distribution plans by brand. For Coach, we expect a modest net decrease in our store count in FY '19, due primarily to closures in North America and Japan. For Kate Spade, we expect to accelerate openings in FY '19, with 40 to 50 net new doors planned, notably with distribution expansion planned in international markets where we see significant opportunity for growth. In addition, as mentioned, we've entered into a purchase agreement to acquire the brand's operations in Singapore, Malaysia and Australia, where there are approximately 20 locations. And for Stuart Weitzman, we expect to open approximately 30 net new locations in fiscal year, primarily in China. As announced, following the successful buyback of the brand's business in Northern China in FY '18, we've entered into an agreement to acquire the brand's operations in Southern China, where there are a total of 6 locations.

In closing, we are pleased with the progress we've made and are committed to our goal of delivering solid sales and operating income growth in fiscal 2019 while making the right strategic investments to support our long-term vision and return to double-digit operating income and EPS growth in FY '20. Overall, we remain very optimistic about our global opportunities across the Tapestry portfolio of brands, supported by a very healthy balance sheet and a strong team to drive results.

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

(Operator Instructions) Our first question comes from the line of Bob Drbul of Guggenheim Securities.

I guess, Kevin, just -- with what you've just finished on, one of the big comments I think is important, I was wondering if you could talk a little bit more about the earnings algorithm that you mentioned returning to both double-digit operating income and EPS growth in FY '20.

Sure. First and foremost, we'll just let everyone know we're going to extend the call a little bit, given that we had quite long prepared remarks, given year-end. To your question, Bob, obviously, first and foremost, we're very excited by '19 and the year ahead of us, with the operating income outpacing our top line. And this, of course, in spite of the significant investments that you just heard us mentioned in our prepared remarks with the buybacks. And for '20 and beyond, we're clearly targeting mid-single-digit top line growth with double-digit op inc and earnings per share growth as these investments pay off. So a lot of excitement right now in terms of seeing things into the medium and long term.

Your next question comes from the line of Irwin Boruchow of Wells Fargo.

I guess I'll give this one to Kevin. So the Coach brand gross margin, I think was the strongest in 8 years this quarter. Maybe, Kevin, could you just give us some more detail around the margin performance? Maybe AUC tailwinds versus improvements in pricing or promotion, and then whatever benefits you saw on the cost side, how much tail is there to that as you enter the next fiscal year?

Sure. As indicated, we were very pleased with our Coach gross margin performance for the quarter, up 220 basis points. It was consistent with our expectation, which we outlined at the end of third quarter. As you know, there are a number of components that go into the gross margin determination, but principally, saw benefits in product cost and mix is what drove the quarter. And as we look at the next year, we certainly feel good about our inventory position as we enter into FY '19 and are looking for gross margin expansion in Coach in '19.

Your next question comes from the line of Erinn Murphy of Piper Jaffray.

Great, I guess my question is for Victor and then maybe Josh as well. I guess overall, you referenced the category as growing up high single, and the Coach brand globally is comping in a low single-digit range. So maybe for Victor, if you could walk through the factors that are creating the discrepancy between overall category and the run rate of the Coach brand? And then in 2019, when you think about low-single-digit comps, any key regions that you feel most confident in to get there?

Sure. I'll let Josh discuss the Coach factors in a moment, but in terms of the overall category, Erinn, of course, a lot to be excited about over the past year. Much of that growth, as we've referenced pretty consistently over the last 3 to 4 quarters, has been driven by just a few limited European luxury brands, those that are the most highly branded, where there's been a lot of excitement and innovation most recently, and of course, remains for us a key opportunity given our history there. Globally, in dollars, of course, as I mentioned during the call, low double digits, high single digits on an organic perspective. Of course, very unpredictable as we look ahead. Given the torrid pace with a few brands this past year, we don't see that as being sustainable. But all points to, I would say, a pretty good picture for the handbag and accessories category and most importantly, for consumers' attraction to brands, and of course, our own very strong feelings in continuing to invest in our brand portfolio. Josh?

In terms of how we're feeling about '19, when you look at the performance in '18, North America outperformed. And as we go into '19, we see many of the same economic factors that Victor referenced in his opening remarks continuing in North America. We're also making a very significant investment in China marketing this year. So that is going to be a very big focus for us. I mentioned earlier about the fashion show that we're bringing to Shanghai. So there's going to be an unprecedented amount of attention and investments on China, which we think will drive the Chinese business as well as our global traveling Chinese consumer.

Yes, and specifically to your question, Erinn, on the discrepancy, I would just add that obviously, the 2 or 3 brands that are driving outsized growth are really unique within the space. And of course, for ourselves, within our own journey to replatform, if you will, and to transform the brand, we're in the very early stages of our own Signature growth and Josh can speak to that. But as you know, we've only relaunched Signature ourselves in March, April of this year. So very, very early innings for us.

Your next question comes from the line of Oliver Chen of Cowen and Company.

Regarding data, Victor, what are your thoughts on nearer-term opportunities versus longer? And how you will also pursue data across the organization and structure that over time as you look to best practices and findings? And our other question was just on the Coach comp and modeling the Coach comp. Is there going to be more pricing or conversion-led in terms of positive comps? And if you could brief us on where you think Logo penetration can go versus where it is versus in the past. I think that'd be a helpful parameter, too, because it sounds like there's a nice runway of opportunity.

Sure. I'll let Josh, in a moment, talk about the drivers of Coach comp and then Signature penetration. As it relates to data, I'm really excited, Oliver. And you and I have talked a little bit offline about this. In terms of the talent that we're bringing to bear to this, we have the infrastructure now in place in terms of our database. We've hired key leadership for the Data Labs, with Fabio Luzzi having joined us, and in fact, just a couple of weeks ago, presented a very detailed strategy to our board discussing both what we would like to do near and longer term. Nearer term, you're going to see us, of course, leverage the 120 million names that we already have, looking to drive insights with our merchant teams. We are beginning to leverage some machine learning in terms of driving better allocation of product and better inventory management overall. Those would be some of the key priorities in addition to what we could do in managing pricing much more dynamically across channels. So a lot of work going on. A lot of testing going on. And I would imagine that over the next 2 or 3 quarters, we'll be able to share much more some of those results with you. Josh?

Oliver, in terms of the Coach comp, we see opportunity of -- primarily in conversion. We also have a pricing opportunity as well. We referenced earlier that in outlet specifically, we are focusing on a significant amount of innovation. And this amount of innovation is coming in at elevated prices. And we really did a study of what attributes the customer is willing to pay for in the outlet channel, and I could not be more excited about the product that's coming in the outlet channel to drive pricing. In terms of Signature penetration, I think you're referring to in retail, where we reintroduced Signature this March. Our Signature penetration at -- had outperformed our initial expectation. The customer immediately embraced the way Stuart Vevers was reinterpreting this icon and is already at 10%. We see opportunity to grow from here significantly, but we're doing it in a really disciplined manner. We don't want to get back to the overexposed nature of Signature. And the best part about Signature, it shows really how the customer is feeling about the Coach brand, that 4 years into the transformation, she is feeling so proud to wear Signature out in the world. And we saw this both in terms of our comp performance this year, the impact of Signature, but also in the brand tracking that we mentioned, that the customer really sees Coach 'on the way up', both the broad premium customer and the millennial customer. And having Signature at elevated prices at the pinnacle of our brand is giving her pride to wear that icon the way she wears the European luxury brands.

And the final question, the bigger picture. But Victor, with millennials and Generation Z, and we're also seeing some interesting trends regarding the sharing economy and the circular market in terms of handbags as well as the rise of smaller brands and an openness to smaller brands, which may or may not have high degrees of awareness, what are your thoughts for Tapestry over the long term in the context of ensuring that your strategies are consistent with how the new generation of shoppers are evolving?

Sure. I think, in essence, Oliver, it comes down to maintaining brand relevance and us behaving in the most innovative ways possible to be relevant to younger consumers, whether, of course, that be through product, everything that we're doing digitally through marketing, everything that we could do, of course, through other forms of marketing and ensuring that our store experiences, whether they be on the digital or brick-and-mortar stores, stay relevant as well. I think it's job description for our teams to continue to innovate. And obviously, in the case of Coach, you've heard Josh reference a lot of the work there. In the case of Kate Spade, very excited about that launch happening in September under Nicola's new creative direction and for you to see that live. And I know that Eraldo and Edmundo are very, very active in writing the next chapter of Stuart Weitzman as well.

(Operator Instructions) Your next question comes from the line of Mark Altschwager of Baird.

A lot of moving pieces with the Kate Spade model this year. Beyond the incremental synergies, how should we be thinking about the core organic EBIT growth rate at Kate versus the contribution from the distributor acquisitions? And then separately, if I could, I just wanted to follow up with Josh. At the end of the prepared remarks, you talked about the opportunity to optimize the footprint in North America. If you could just expand on that a bit more and maybe discuss by channel how we should be thinking about the magnitude of change happening this year.

Sure, Mark, I'll take the Kate Spade question. We would expect the Kate Spade operating income ex synergies to be flat to up slightly, due to the required investments that we're going to be making in the distributor buybacks, some new store distribution as well as a modest pullback in the wholesale distribution.

Josh?

In terms of your question on North America, we don't have any significant store closures planned. We will continue to address things as they come up for renewal. What I was referring to more specifically was our efforts to modernize, customize and personalize the store network. And that's really about infusing our existing store network with some of these experiential elements. So whether it's craftsmanship bars or some of our digital styling bars that are really creating an ecosystem for the customer, in a much more experiential way.

Your next question comes from the line of Alexandra Walvis of Goldman Sachs.

I wanted to dig a little bit more into your commentary on North America retail. It sounds like there are lots of initiatives to drive conversion and pricing. And I wanted to ask about traffic. Has there been much of a change in traffic trends in the North America retail channel? And how would you expect that to progress going forward?

I'll let Josh jump in, in a moment on Coach. I would say that what you're going to hear from him is pretty consistent, really, across all 3 brands.

Yes, what we've been seeing in traffic, actually, in the last quarter, regional mall traffic remained slightly positive. In the outlet channel, we did see a shift there to the March quarter, primarily driven by Easter, because that is more holiday-driven, the traffic in the outlet centers. In general, we're feeling good about our North America business across channels, across retail, outlet, e-commerce, wholesale. Obviously, the economy is strong in North America, but what we're hearing from customers is that they are very excited about what's happening in the Coach brand with our product. It's really resonating with the North American customer.

Yes, and I would say, Alexandra, if we take the channels as a whole, especially as we get into smaller, full-price malls, the very long-term trends that we have been seeing remain constant when we talk to mall operators, which is full-price malls seeing low to mid-single-digit drops and slightly better performance than outlet malls has been the very consistent long-term trends, of course, as consumers continue to be more selective in their shopping habits, and of course, also given the shift that's continued to online channels.

Your next question comes from the line of Simeon Siegel of Nomura Instinet.

Victor, on a -- any way to contextualize the incremental Kate sales opportunity on that weighted $2 billion, maybe thinking about geography, product category channel, just anything you'd be willing to share there? And then a similar question on the really nice gross margin reimprovement at Kate. Can you just talk to the longer-term opportunity there?

I think you're going to see us, of course, grow Kate, especially internationally as we've mentioned. One of the key investments we're making this year, Simeon, have been in the control of our JV in China. We've also just announced, of course, controlling further our distribution in Southeast Asia. And just for context there, when we took the Coach business back in China, we were at $50 million. Today, that's a business north of $600 million. Coach today has a 30% unaided awareness. Kate Spade is at 2%. Stuart Weitzman, probably, as an example, another great opportunity for growth, is at 1%. Coach to date has a 70% aided awareness in China after our near decade of investment. Kate Spade is at 10%, Stuart Weitzman is at a -- just north of 10%. And Coach has a 180 locations in 70 cities. We know that there's north of 200 cities in China with a population of a million or more. And so really, outside of North America, I would say that, that is the single largest untapped opportunity for all of our businesses. We're very excited about China. This year, for us, is a year across all 3 brands of increased investments with the Chinese consumer. And we're very, very excited about that. And relative -- just as an example, relative to the Coach's 181 locations, Kate today has just north of 30. So a lot of opportunity there. So we see distribution growth internationally, and then of course, some slight distribution growth in North America. And then positive comps from the second half here in North America, not only as we launch the new product in full price, but of course, Anna and team are very, very excited about the opportunities for them to drive further efficiencies in the outlet channel as well, as that product flows through. So a lot of levers for us.

Your next question comes from the line of Jamie Merriman of Bernstein.

Kevin, I was wondering if you could talk a little bit about the systems investments that are ongoing that are planned for 2019? Can you just remind us of where you are in the process of the systems upgrades? And then what kinds of benefits do you expect to see from those initiatives?

Sure, and I believe at the end of 2016, as part of the operational efficiency plan, the company announced that they would be embarking on a major systems upgrade. We've been working very hard on that in the last 2 years, and we're excited that we're now starting to move into the rollout phase. We have already started with some of the HRS rollout as well as the new point-of-sale. We will be picking up finance and supply chain as we move through the year. We would expect that by the end of '19, we would be substantially complete with the process. And again, overall, we feel great about where we're at in the process. It's really foundational setting for us as we move to the future. Our existing systems, I think, were about 20 years old. So it's now it's time to move forward. And we're really moving from about 7 ERP systems today with our different businesses onto 1. So a lot of work to do this year, but we're optimistic about the platform that it gives us for growth in the future.

Your next question comes from the line of Michael Binetti of Credit Suisse.

Just a couple of questions for you. So as we think about the mid-single-digit items, revenue guidance for this year, just because of all the moving parts, could you help us maybe put that into a couple of buckets between what you think on currency this year, what's organic and how much all the licensed distributor roll-ups add to that number, just so we have the rough components there?

Michael, you were breaking on us a little bit. If we understood the question correctly it was in terms of the mid-single-digit was -- was that question? Mid...

What are the drivers?

What are the drivers for the mid-single-digit, of currency and the like?

Yes.

Okay. And how much of that is currency, how much of that is distribution, is what I think the question was, Kevin.

E

Yes, Michael, as we outlined today, we would expect that the Coach business to be in the low-single-digit comps. The Kate business is a combination of distributor buybacks plus growth plus new door expansion. And on the distributor buybacks, we've not given out the components of the details on that. So there are a number of moving pieces, but all opportunistic ability for us to grow the business.

Okay. I was wondering -- I thought the interesting data point was the operating profit growth in fiscal 2020 that you helped us with today of low double, so a bit of an inflection from the guidance you just gave in the fiscal '19 year. I'm assuming here that we'll see Coach growth rates for the Coach brand fairly similar to what we're seeing right now. So by then, we will be past a lot of the synergies and integration for Kate. So I think a lot of that growth comes from Kate Spade after the synergy period, so a lot of operating profit dollar growth contribution from Kate there. Is there a way that you can just help us look a little bit ahead to the plan there as to what you've -- what are the biggest buckets that you guys will be attacking with the Kate brand in that -- that's implied in that 2020 guidance?

Yes, with -- I think, Michael, we're talking about obviously driving top line and bottom line across all 3 of our brands, we should see accretion. The difference between '19 and '20, of course, is that a lot of the initial investments that we're making this year are behind us and we've lapped those. And so you're going to see a lot more of that growth drop to the bottom line. That's really where the unlock is, both in distribution -- and then you don't have the incrementality of the systems investments as well, so -- that we're making this year that, of course, are across the entire organization.

Okay. And if I could just sneak one more in. Is there -- would there be any way you could give us a little language to help us with some of the closer-term outlook for the guidance you just gave this year, maybe in first quarter, just because we have so many moving parts relative to the growth rates you gave for the year, I guess?

Well, we've indicated for Coach, low-single-digit comps. We've indicated for Kate, we'd expect to return to comp sales increase in the second half. For SW, we've indicated that we would continue to see some pressure in the first quarter, but we are returning to top line growth in SW starting in Q2.

So Michael, obviously, look, in terms of thinking about the first quarter, we don't normally give guidance, of course, within -- on a quarter-to-quarter basis. But given last year, if you remember, we had some -- and Josh mentioned, as we had some opportunities with inventory, we would expect it to be our easiest comp in terms of the, especially the Coach brand, but it is our worst tax rate. So I would just caution you on that.

Your next question comes from the line of Omar Saad of Evercore ISI.

I wanted to ask a follow-up around outlet. It sounds like you're really kind of increasingly confident about the Coach brand, what's happening in the channel. You referenced the study that you did that gave you confidence in your ability to kind of increase the kind of quality and style quotient. It sounds like Logos are doing well. Maybe you could just add any elements to what's going on in the channel? Is there a tourist phenomenon? Are local customers kind of reengaging with the channel? Again, it sounds like your confidence is increasing there.

Yes, I think the outlet channel, as you know, is one that we have a deep history in. And the outlet customer loves innovation. And we are approaching outlet with the same type of innovation, thinking about good, better, best in outlet the same way we do for our retail business. And that's appealing to both the local and the tourist customer. And in the fourth quarter, we started testing some of these new introductions, which have these attributes that we get higher AURs on. And we've been encouraged by that. And so you'll see in our stores The Edit, which is the consequence of some of that testing and learning that we've been doing, about the appetite of the outlet customer for higher-AUR product, more fashion-forward product and more elevation.

Yes, and I would just add, Omar, and I think we've discussed in the past, that channel globally, if we think about it outside of North America, has been one of the few that has continued to see investments, not only from developers, still at much lower number of doors, of course, both in Europe and in Asia, but has continued to see development and continues to gain relevance, because a lot of our European luxury peers are looking at the channel, are making some key investments there. And so not every door is the same, but those that are true luxury destinations in the outlet channel continue to gain traction. And we find that, of course, very encouraging as a multichannel player.

We have time for one last question. Your last question comes from the line of Lorraine Hutchinson of Bank of America Merrill Lynch.

Just wanted to follow up on Omar's question and some of the commentary around The Edit. Have you seen innovation allow you to curtail promotions in the channel? And maybe just how big do you think this Edit program could be over time?

The outlet channel, by nature, it is a promotional channel. So we will always be promotional in outlet. The Edit is coming in now, and we're going to continue to learn about it and see how big it can be. It is obviously something new right now, and so we're seeing the customer response in real time.

Yes, but certainly, Lorraine, that would be the objective. And I think Josh called it innovative to elevate, is to try and continue to get the customer to see the value in what we're doing and pay for it.

Thank you for joining us today. That concludes our Q&A. I will now turn it over to Victor for some concluding remarks.

Thank you. Thank you, Andrea. And I just want to thank our teams, as is our long-standing custom. A team that's 21,000 strong across the world and that truly is working every single day to drive our performance. I couldn't be prouder of them and nor more excited about the limitless opportunities that we have for Tapestry as we continue to evolve as the house of desirable brands with highly talented and incredibly dedicated teams. Thank you.

Thank you. That does conclude today's Tapestry Quarterly Earnings Conference Call. You may now disconnect your lines and have a wonderful day.