Good day, and welcome to this Tapestry Conference Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

[Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations at Tapestry, Christina Colone..

Good morning. Thank you for joining us.

With me today to discuss our fourth quarter and year-end results, as well as our strategies and outlook are Joanne Crevoiserat, Tapestry's Interim Chief Executive Officer; Andrea Shaw Resnick, Tapestry's Interim Chief Financial Officer; Todd Kahn, President and Interim CEO and Brand President of Coach; Liz Fraser, CEO and Brand President of Kate Spade; and Giorgio Sarne, CEO and Brand President of Stuart Weitzman.

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. This includes projection 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 Annual Report on Form 10-K, our most recent quarterly report on Form 10-Q and the press release we issued this morning and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance.

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

Now let me outline the speakers and topics for this conference call. Joanne will begin with a brief recap of our fourth quarter and year-end results for Tapestry. She will then provide an overview of our multi-year growth agenda. Todd, Liz and Giorgio will speak to our individual brand strategies and initiatives.

Andrea will continue with our financial results and our priorities going forward. Following that, we will hold a question-and-answer session. After Q&A, we will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO..

Thank you and good morning, everyone. I’m honored to have the opportunity to speak with you today as Tapestry's CEO, particularly given this pivotal moment in the company's history. I have a passion for our business and our brands, and I see tremendous opportunity ahead.

In addition to having a portfolio of three strong brands, Tapestry has built a powerful platform to enable our brands to achieve higher heights than they could on their own. Today, I'll be sharing the work we're doing to strengthen this platform through the Acceleration Program that we announced this morning.

This program is aptly named as it will accelerate our path to stronger growth and operating margins in each of our brands in the years to come. I'm pleased to be joined on the call by our brand CEOs, all of whom have significant experience in building businesses and brands.

Together, we've been hard at work, laying the foundation of this plan; and I'm excited to have Todd, Liz, and Giorgio share more details about the opportunities we see in each of our brands moving forward. Over the past few months, Tapestry has been confronted by significant change, both externally and internally.

Amidst these changes, our steadfast commitment to our purpose and values as well as focus on our multiyear strategic agenda have remained constant. Looking forward, I'm confident that Tapestry's next chapter of growth is ours to write.

Let me start by sharing the guiding principles of Tapestry's Acceleration Program, which include; first, sharpening our focus on the consumer; second, leveraging data and leading with a digital-first mindset; and finally, transforming into a leaner and more responsive organization.

These principles both inform our strategies and focus our execution, which will fuel desire for Coach, Kate Spade and Stuart Weitzman, driving accelerated revenue growth, higher gross margins, and substantial operating leverage across Tapestry's portfolio.

Before discussing the details of our strategic plan, I want to briefly touch on the key financial highlights of our fourth quarter results. We exceeded internal expectations across key metrics, demonstrating the power of our unique brands and the decisive actions taken to adapt our business to the rapidly evolving environment.

Our teams moved quickly to better support and engage consumers, leveraging social and digital capabilities. And our customers responded, with digital growth increasing triple-digits year-over-year. Performance in Mainland China was also a bright spot, returning to positive growth in the quarter.

We made progress in safely reopening our stores globally, with the vast majority of our fleet fully open and operational by the end of the fiscal year. Importantly, we delivered significantly better than expected margins by maintaining the disciplined promotional strategy while implementing effective cost management initiatives.

We ended the year in a solid liquidity position with $1.4 billion in cash, reflecting the health of our balance sheet, and inventories well-positioned heading into the new fiscal year. I'm incredibly proud of our team's passion, resilience, and focus during these unprecedented times.

Our people are the key to our future success, and I'm confident that we will continue to execute at a high level as we move forward. Further, I’m convinced that Tapestry's ability to weather the challenges over the past few months is due in part to our culture of embracing diversity. We've always strived to contribute to a world that is inclusive.

We understand that we are better together when different voices, life experiences and perspectives allow us to develop entirely new ideas, solutions and products. This principle drives everything that we do, and it is embedded in the DNA of our company and in each of our brands.

Before jumping into the key pillars of our Acceleration Program, I want to provide some context for the work we've been doing. We began a comprehensive review of our business in the fall of last year. This diagnostic work crystallized the path to fuel accelerated growth for Tapestry in each of our brands.

Of course, we are now clearly operating in a different environment than when we began that review. However, as I mentioned earlier, the changing landscape has not changed our priorities. In fact, it has been a catalyst to accelerate them.

I'll now walk you through the key elements of our Acceleration Program, which serves as shared priorities across our organization. First, we're sharpening our focus on the consumer. We will operate with a clearly articulated purpose for each of our brands and an unwavering focus on the consumer at the core of everything we do.

Authentically engaging consumers is foundational to the success of any brand, and we have strong brands with rich heritage to build from in this work. To ensure that we deliver on the potential of our brands, we are more clearly defining the distinctive brand equities in key customer segments for each of our brands.

This clarity will guide decision making, and it will drive stronger consistent execution at all brand touch points and deeper engagement with consumers. This is critically important because we understand that to win in today's environment, the bar is high.

Consumers have more choice than ever before, and consumers' priorities are changing, they are increasingly driven by their values, are more connected and seek brands with authenticity that engage seamlessly and align with their values.

Our 3 powerful brands, all with authentic heritage and distinctive positioning in the market are well positioned to thrive in this context. We will deepen our connection with our consumers through our grounding and purpose, authentic principles and heritage, and our relentless focus on the omni-channel experience.

Todd, Liz, and Giorgio will expand on the specific work happening in each brand in a few minutes. And to keep that customer front and center, our second priority is to become more data-driven and lead with a digital-first mindset.

We are building industry-leading data and analytics capabilities and we'll operate with a digital-first mindset to drive decision-making, increase efficiency, and personalize the consumer experience. As we look to build on our strong foundation, we are focused on changing not just what we do, but how we do it.

We understand that leveraging insight about our consumer requires us to become more sophisticated users of the data that we have, which is why we are embedding data-driven decision making throughout the value chain. This really touches all aspects of our business, including product design, development, merchandise planning, marketing and pricing.

For example, we are leveraging data to inform assortment choices at a store level to better reflect local consumer preferences, driving higher AURs and productivity. In another example, we are more dynamically influencing our marketing, running small tests to understand consumer response, measuring our results, iterating the process and scaling wins.

As we continue to develop resources and processes, our teams will be armed with more tools for real-time measurement and analytics. We are empowering them to champion this test and learn approach that allows us to gather new information quickly and move with speed to respond to changes in consumer preferences and demand.

Perhaps most importantly, leaning into the momentum that we're driving in our digital channels, we will offer immersive customer experiences across our e-commerce and social platforms.

I've been so impressed with the way our teams have responded to recent challenges and the innovation they've introduced to engage consumers over digital and social media platforms, reaching consumers where they are and how they want to engage with us.

We've seen tremendous traction across our digital channels as a result, evidenced in part by the recruitment of new younger customers to our brand at an accelerated rate. In fact, in the fourth quarter alone, we recruited nearly 1 million new customers across brands in North America through our digital channels.

We're also reengaging lapsed customers who are shopping with our brands. And not only are we driving revenue growth online, but we're driving but we're driving profitability as well as our digital businesses carry higher operating margins than their respective bricks-and-mortar channels.

At the same time, we recognize that physical stores will remain an important touch point in the consumer shopping experience. However, we are reevaluating the role of stores through an omni-channel lens in the context of the evolving consumer backdrop.

We are taking a rigorous approach to assessing our brick-and-mortar fleet by raising the bar and profitability thresholds. Our focus is to improve profitability across our fleet while delivering a consistent brand experience for our increasingly omni-channel consumer.

Finally, we intend to transform Tapestry into a leaner and more responsive organization. As part of this work, we reduced our global corporate headcount costs by 20% on a run rate basis. As a result, we are emerging as a more streamlined organization that will drive faster decision-making, leveraging scale and best practices.

In the near term, this better aligns our cost base with current demand environment. And over the long term, it will support operating leverage and profitable growth. We believe these actions will serve to unlock the potential of our global teams and brands.

We also continue to leverage the Tapestry sourcing model to drive efficiencies across our brand portfolio.

I was pleased to have had the opportunity to travel to Asia not long before the travel restrictions went in place, to spend time in those markets with our teams and consumers as well as spending time with some of our largest service providers and suppliers.

We have incredible teams and strong partners supporting our business, who continue to innovate and adjust to the current environment while maintaining our high standards.

Over the past few years, we have reduced production lead times from four months to three months without jeopardizing service delivery, and we delivered significant synergy savings through the power of our scale.

Our work is continuing, with an opportunity to drive more speed into our process and strengthen our strategic partnerships across raw material suppliers and service providers.

Our supply chain capabilities have always been a competitive advantage for our company, and we will continue to improve, driving more speed and responsiveness to deliver the beautiful, high-quality products our customers expect from us.

In closing, we believe the successful execution of these priorities will fuel desire for our brands, enabling us to accelerate growth across our portfolio, while enhancing the profitability and cash generation of the overall business. I'm confident that our strategy is the right one for our future.

We have three powerful brands, and Tapestry is the enabling platform to help them do what they can't do alone, by providing consumer insights across brands and across regions, providing the tools and consumer knowledge to unlock value, a globally diversified supply chain, which we are now evolving to make even more responsive, a technology infrastructure and robust digital capabilities available across the globe, and access to global talent across brands.

Importantly, we have the right team of strong and seasoned leaders in place who have worked collectively to create and implement this plan and who are committed to seeing it through.

I'm confident that together with their fantastic global teams, we have the ability to translate these initiatives into shareholder value creation through accelerated growth in revenue and profitability across our portfolio over our planning horizon. Now I'll turn the call over to Todd to dive into the details of the Coach brand.

Todd?.

Thank you, Joanne. Over the past five years, prior to COVID-19, Coach generated modest growth with excellent margins and was viewed as the engine of our house of brands.

However, of diagnostic work, combined with leveraging our deep understanding of the Coach brand, showed that there is a significant potential for growth and margin expansion beyond what we have already accomplished.

Before I explain why we have so much conviction in the potential we see ahead of us, I think it's important to provide some context on where we've come from.

As some of you may remember, at our Analyst and Investor Day in 2014, we presented a three-year plan to make Coach a modern luxury brand across product, stores and marketing, driving fashion credibility and targeting the cool girl and guy.

We added beautiful handbags at higher price point, such as the Swagger and the Rogue, opened engaging stores that were beacons for the brand, created unexpected and feminine ready-to-wear for our runway shows, and used our digital channels primarily as marketing vehicles. And our efforts worked.

We successfully combated the prior perception of sameness and ubiquity and built fashion credibility, supporting a lengthy period of positive comps. The next period, which we can call Coach 2.0, focused on commercial appeal and broadening our marketing to include Gen-Zs and millennials.

We distorted our offering in the sweet spot of the price pyramid with Parker and Charlie, bringing footwear in-house and sharpening our focus on select commercial ready-to-wear items. We started to use social and digital more fully, but still led with the store-first mentality.

Now while we consider the results of these initiatives a success, they have in many ways limited us, because at certain times, we have placed too much focus on the customer we wanted and not enough on who our customer actually is and what we as a brand stand for.

With that recognition, we are ready to reignite the accessible luxury segment by evolving our message from one rooted in high fashion imagery to one that is inclusive, culturally relevant and consumer-centric. Going forward, we will focus on authentic communications that are grounded in our values and embodied the courageous spirit of New York City.

Simply put, we're targeting the consumer who loves and appreciates Coach for who we are and what we stand for. At the Coach brand, this overarching strategy requires us to adapt a consumer-centric approach, combining instinct and data-driven insights.

When we have looked at the greatest areas of opportunity to implement the strategy, we see four key pillars for the work ahead; product creation, infusing purpose into the brand, driving omni and digital sales and recruitment; and finally, accelerating growth in China.

And across each of these initiatives, we will remain focused on supporting growth in both revenue and profitability.

First, our new approach will prioritize creating compelling product to meet the needs and exceed the expectations of our target consumers by geography and segment, and across fashion, function, price, quality and our proprietary brand codes.

While we've talked about this in the past, the key difference today is we are embedding our consumer insight work into the product creation process rather than simply hindsight.

Our design briefs will combine the creativity that you have come to expect from Coach, with clarity by styles to the customer segment by geography, age demographic and usage occasions. We are also rightsizing our assortment across channels.

Over the last five months, we have taken a dramatically more critical lens to the SKU proliferation and inventory churn. For this upcoming holiday season, we shrunk our SKU count by approximately 50%. We believe that this reduction is key to greater productivity and clearer brand messaging to the consumer.

Our customers are responding to our master styles like Tabby, and we will continue to offer extension to the successful collections. For this upcoming holiday, we're excited to announce that we have partnered with our global ambassador, Jennifer Lopez, on a Coach J. Lo designed handbag.

This beautiful bag at $495 will be the must have gift for this holiday season. Additionally, for the first time in my over 12 years at Coach, we are now managing to tighter inventory turn goals while maintaining gross margins. I have made inventory turn a key performance indicator for the team, holding all of us accountable for this metric.

Second, infusing purpose into the brand. Over the past few months, we have done the work to articulate our brand purpose and attributes. We know that consumers today emotionally connect with brand that share their values and they are buying and supporting brands that resonate with them for that reason. Therefore, the concept of excavation is key.

We want to create relationships on the basis of authenticity. So, we are extracting what is latent and real. Based on our most recent North America Brand Tracking Survey, Coach's brand momentum remains at an all-time high. Of course, we must build on the historic key attributes of fashion, function, price, and quality.

Furthermore, we will clearly articulate a brand purpose and promise to engage a younger consumer, stay relevant, and accelerate growth.

In our upcoming fall and holiday marketing campaign, we are highlighting our global brand ambassadors in candid multigenerational moments focusing on enduring themes of togetherness, timelessness, and family in the many ways family is defined. We believe these images and themes will resonate with today's consumers.

Third, we are expanding our digital and omnichannel capabilities and services to drive sales, and importantly, new customer recruitment, while evolving the role of the store to ensure an exceptional and seamless experience everywhere the customer chooses to shop.

It is about meeting with, engaging and empowering the consumer and connecting with their values. We understand that many shopping journeys start online even if they end in a store. COVID-19 has served to accelerate the consumer shift to digital that was already happening.

Over time, it is clear that online will gain increasing parity with brick-and-mortar. In retail e-commerce channels, we will be making significant investment in the digital and omnichannel experience globally, while fueling aspirational brand relevance and building loyalty through co-creation.

We recently launched made-to-order CitySole on coach.com, allowing our customers to design one of a kind sneakers, featuring a new innovative 3D and augmented reality experience. While in the value channel, we've rethought our online outlet, focusing on the inherent value proposition of our product rather than primarily on price promotion.

We are also investing in marketing to drive customer acquisition. In late April, we commenced this new approach in North America with coachoutlet.com. Since that time, we have acquired nearly 600,000 new customers across our digital channel. Of these new customers, half were Gen Z and millennials.

This is a strong example that our strategy and our product resonate with the younger consumer. Our next step is to offer special membership benefit to our online outlet loyalists starting this fall.

Concurrent with our focus on digital, we are rethinking the role of the store with a test and learn mindset, including new store formats and smaller square footage locations, such as station buildings in Japan. As Joanne had mentioned, we are focused on maximizing fleet profitability. Stores are commercial ventures.

They are not marketing exercises, and they will be held globally to higher profitability status. This may result in-store closures over our planning horizon if our profitability requirements through productivity increases or significant rent reductions are not met.

Fourth, we are accelerating growth in China through payloads and optimized assortments, including products specifically for the Chinese consumer, enhanced marketing and expanded reach across direct channels and third-party online distribution.

Since we began working with Tmall about a year ago, we have experienced tremendous results on their luxury pavilion. More recently, we were the first to partner with them on their luxury SOHO platform, focused on the younger, brand savvy consumer. And we were the number one handbag brand on the platform in the month of June.

The potential for the Coach brand in China, given the rapidly growing middle class who will likely focus their spend domestically is vast. Finally, driving enhanced profitability is critical. We will accomplish this through a continued AUR improvement and higher gross margins with more focused assortments to improve productivity.

In fact, in the fourth quarter, our global handbag AUR rose over 25%. In addition by rightsizing our SG&A cost structure and store fleet, we will achieve operation excellence.

So while Coach's results have been strong and largely consistent with our expectations, we believe that we have an opportunity now to unlock accelerated growth in the years ahead, both on the top and bottom line, and once again grow market share. And now I will turn it over to Liz to discuss Kate Spade.

Liz?.

clear colors, happy prints and novelty. We know that our novelty offering not only drives traffic, but it has an outsized impact on brand perception. It resonates with our most loyal and highest value customers.

The novelty penetration in North America increased consistently across all our channels throughout the year, up from 4% in FY 2019 to 7% in Q4 FY 2020. Starting with the with the Spring 21 collection, we will refocus our offering to capture market share and improve profitability.

We're using product hierarchies, differentiating our assortment between core fashion and novelty, to create a much stronger collection architecture. Our core offer will be stronger, and our assortment size will be reduced by 30% to 40%, so we will have a much higher SKU productivity.

This will allow us to be focused on global hero products and tell a clearer brand story. We've also just launched a signature platform with the Spade Flower, and initial reads have been really strong. We will maximize it by making a pillar -- make it a pillar of the brand and animate it with seasonal colors, prints and novelty offerings.

Outside of handbags, we are taking a much more streamlined view of ready-to-wear. Rather than creating a PR halo, we're pivoting to a commercial offering, with an optimized fit and pricing that speaks to our core customers.

Fourth, we're leaning into our digital strength by modernizing and creating engaging brand experiences across all of our digital platforms to fully unleash the power of the Kate Spade community and brand. As we've discussed, the global pandemic has acted as a catalyst to accelerate the shift to digital.

At Kate Spade, our digital penetration was already strong and ahead of the market, as our customer skews younger and is therefore more digitally native. We are continuing to build upon this strength by meeting all consumers where they want to shop.

In fact, in the fourth quarter, we attracted over 350,000 new customers to the brand in our digital channels in North America, an increase of over 100% from the prior year. Additionally, we reactivated nearly 140,000 lapsed customers as compared to last year. Overall, nearly 20% of all digital customers made two or more purchases for the quarter.

From a marketing channel perspective, it's also very encouraging to see growth from organic channels, especially for our full-price site. This fall, we are upgrading our North American website with a revamped aesthetic, a best-in-class video streaming capability and a dramatically improved site performance.

However, our focus is not simply transactional. In an increasingly digital world, we need to deploy our website and other digital platforms to create an emotional, immersive, and engaging brand experience. We need to cultivate our Kate Spade community.

Consumers want authentic engagement and we are focused on developing meaningful relationships to play a more active role in the consumer's life, specifically through content development. While we accelerate digital growth, our store fleet will continue to be an important part of our long-term omnichannel strategy.

In an effort to maximize productivity and profitability though, we will evaluate our footprint. We are focusing on markets where we already have high awareness and engagement, notably in North America and Japan. Once we build momentum in these regions, we will explore additional international opportunities, including China.

Across all of these initiatives, we are focused on capturing market share and improving our profitability. We're confident that we will continue to acquire, reengage, and retain customers as we execute on these priorities, driving profitable growth.

As a part of this, we will leverage our multi-category lifestyle portfolio to drive purchase frequency and build customer lifetime value. For example, our ready-to-wear and footwear customers have the highest repeat rates and lifetime value.

In addition, jewelry is a true extension of the Kate Spade lifestyle at a lower price point, which makes it perfect for recruitment and cross-selling. Lastly, we're focusing our assortments and optimizing our store fleet to increase the brand's productivity. In closing, I am incredibly optimistic about the long-term potential for Kate Spade.

We have a brand that has a universal language of joy, optimism, and color. Our customers have historically been deeply connected to our brand emotionally. If we embed this language in our product, our marketing, and our customer experience, we are more confident than ever that we can delight our existing customers and attract new ones.

With that, I will turn it over to Giorgio and thank you..

Thanks, Liz and good morning everyone. For nearly 35 years, Stuart Weitzman has empowered women to feel confident, stylish, and sophisticated through its unmatched combination of fit, comfort, and quality. However, over the past several years, we have lost touch with our core values and brand esthetic.

Compounded by execution issues, this resulted in significant pressure to our revenue and profitability. Despite these challenges, our customers have remained loyal to the brand.

Looking ahead, our long-term strategy centers on one principle, focus; focus on the customer, focus on tightening the product offering, and focus on the most important geographic and channel opportunities. We have identified five key strategic initiatives, which I will talk to in detail.

First, we are renewing the brand's reputation for fit, comfort, and quality, listening and responding to our customers' needs to design beautiful and on-trend shoes which complement a lifestyle and [Indiscernible] shoes. We are infusing consumer-centricity and a data-driven across our brand and business.

To do so, we are rolling out to new regions to listen to our customers, putting them at the heart of our decision-making processes. In North America, we serviced 1,200 of our customers, and our Head of Design, Edmundo Castillo, had one-on-one styling sessions overseas. We will make bold moves to anticipate and respond to market trends.

For example, we are acting quickly to address the casualization shift happening in happening in the marketplace with comfort and quality. We will soon be launching our new Liz Family, one of the top booked new groups from the recent Spring 21 markets.

This exciting new family creates a more casual end-use for key styles and builds on our strength in boots, booties and sandals in a new and innovative ways. In addition, one of our newest styles, the Margarita, an on-trend, high-quality spatter was extremely well received selling out in a matter of weeks.

Second, we will grow key categories while clarifying and simplifying the product offering. In boots and booties will regain market leadership through design innovation around our icon styles, such as the 50/50.

In sandals, we'll be expanding on our strength by updating our new Liz family and launching new casual inspired key items at compelling price points. At the same times, we are reducing SKUs in order to drive clear seasonal messaging while anchoring the assortment with proven winning styles.

In turn, we believe this will grow our gross margin while reducing promotional activity as we maintain our position as the gateway to luxury. Third, we expect to restore profitability by focusing distribution on those market and channels of greatest opportunity, building on the existing brand momentum.

We believe this will be an important driver of improving operating results. Notably, we are targeting outsized growth in our highly profitable China business. We have seasonal captions, local ambassadors, selective new distribution and a strong digital expansion. That also means boldly exiting from unprofitable doors and international direct markets.

We will rationalize the North America retail fleet, reducing the number of doors in FY 2021, while closing all direct locations in Europe, Japan, Australia and Malaysia. Fourth, we are strengthening our relationship with wholesale partners by providing relevant products and faster and more consistent execution.

First and foremost, we intend to achieve consistent on-time deliveries to reestablish our relationship. It is more important than ever to increase our agility to allow for longer selling times and opportunities for drop ship.

Importantly, the reaction to the Pristine Spring T1 collection has been positive across all global markets due to the well-balanced offering between casual, daily and occasion styles. We have seen increased investments in newness, with clients in particular responding to our casual product executed with Stuart Weitzman.

Fifth and finally, we'll establish our robust digital presence to support best-in-class multimedia content and better assortment. We are investing in omni-channel efforts, utilizing the website to offer extended size options, while embedding greater personalization throughout the customer journey.

We are rolling out a new platform to update our site technology, which will allow us to create a more personalized and frictionless customer experience. We are also leveraging our store associates to support customer care and help with live chat.

E-commerce remains an important recruitment channel for Stuart Weitzman, and we saw new customer share in the U.S. increase plus 9% in the fourth quarter. I have had the good fortune of having been at the company for seven years, while leading Stuart Weitzman for almost six months. I'm very passionate about the brand and the Stuart Weitzman customer.

And I'm optimistic about the future. Through our strategic initiatives, I'm confident we'll return to profitable growth. Now, I will turn it over to Andrea..

first, $117 million in-store impairment charges as a result of a decline in both current and future expected cash flows exacerbated by COVID-19; second, $87 million in charges under our acceleration program, these costs were primarily due to organizational related charges driven by severance, as outlined in our Q3 earnings release, as well as store closure costs, inventory reserves and accelerated depreciation.

We expect to incur an additional $100 million to $115 million in charges in fiscal '21 associated with this plan. Turning to a discussion of our balance sheet and cash flows, we successfully implemented several mitigating actions that enhanced our financial flexibility and liquidity, while positioning the company for long-term growth.

We ended the quarter in a strong position with $1.4 billion in cash and equivalents. Total borrowings outstanding at the end of the quarter were $2.3 billion, including the $700 million we drew down on our $900 million revolver.

Total inventory ended the quarter down 5%, which was significantly favorable to our expectations due to our better than anticipated revenue results. As previously announced, we moved swiftly to reflow our late spring and early summer product introductions. We also reduced and canceled future receipts where appropriate.

We continue to expect these actions to preserve over $500 million of cash through lower inventory purchases through the end of FY '21, of which approximately $135 million was realized in FY '20.

In addition, our ending inventory balance also reflected the incremental obsolescence reserves taken primarily in the third quarter in light of the environment. While the backdrop remains uncertain, we believe our inventories are well positioned entering FY '21.

As Todd mentioned, as an organization, we are managing to tighter inventory turn goals while maintaining gross margins. CapEx for the quarter was $33 million, representing a decline of over 60% versus prior year as we took prudent steps to delay and cancel new store openings.

This brought CapEx down to $205 million for the year as compared to our most recent guidance of guidance of $225 million and our normalized run rate spend of approximately $275 million.

Moving forward, we will continue to prioritize investments in high-return projects, notably in digital, while tightly controlling overall spend and reducing our outlay for new stores.

As a result, we expect CapEx to be in the area of $150 million for FY '21, representing a decline of approximately $125 million compared to our normal annualized spend and in line with our previously announced target.

Free cash flow for the year was approximately $200 million, well ahead of our most recent expectations and a standout achievement that underscores the resilience and effective management of our brands and business as we have continued to successfully navigate this global pandemic.

Now touching on our capital allocation priorities, in the near term, our priority is to preserve our cash on-hand in light of the environment.

Longer term, our strategic intent is to return to sustainable top and bottom line growth in strong free cash flow generation which we intend to utilize for debt pay-down beginning with our revolver, as well as capital return to shareholders.

Turning to our outlook, as noted in our release, we're not providing specific guidance for the fiscal year at this time due to lack of visibility. However, assuming a continuation of the slow and steady recovery from the pandemic, we project revenues to be roughly even with the prior year for the full year fiscal 2021 on a 52-week basis.

This includes the expectation for a sales inflection in the second half while the topline in the first half will remain pressured. That said, we are laser-focused on controlling the controllables in FY 2021 in order to create a strong foundation for profitable expansion over our planning horizon.

Importantly, we currently expect it to be a year of efficiency-led profit growth. This includes taking deliberate actions to lower promotional activity and increase AURs across brands, driving gross margin expansion. We are also taking further steps to aggressively control our SG&A spend.

As previously announced, in light of the environment, we are reducing fixed costs, such as rent and driving procurement savings, including curtailing external third-party services. We're also decreasing corporate costs through temporary compensation reductions for our Board, our management team, and employees.

And more importantly, we are also continuing to implement structural changes as part of our Acceleration Program, which are designed to create a scalable, agile framework.

These actions include a 20% reduction in the company's global corporate headcount expense on a run rate basis, while changing the way we work to create a culture of empowerment and entrepreneurship.

In addition, we are assessing our global store fleet and holding individual doors to a higher production -- higher productivity threshold, which is expected to result in store closures in FY 2021.

We estimate that we will realize approximately $300 million in gross run rate expense savings from these initiatives, including approximately $200 million in FY 2021 alone.

Overall, we believe our ability to drive gross margin increases and reductions in SG&A will be the initial indicators of progress along our multiyear growth journey, with traction already underway as evidenced by our strong fourth quarter results.

Looking ahead, we are creating a virtuous cycle or flywheel that should, as revenues, inflect drive bottom-line growth well in excess of topline gains. More specifically, we expect to drive profit growth in each of FY 2021, FY 2022, and FY 2023.

In closing, we're committed to strengthening our brands and organization by focusing, first and foremost, on the consumer, leveraging digital and data more fully, and transforming into a leaner and more responsive organization.

Importantly, our view of the long-term opportunities for our brands is unchanged and our strategic intent to drive organic growth and profitability is unwavering. Further and as Joanne mentioned, we are confident that together, benefiting from Tapestry's enabling platform, our brands can achieve greater size and share than they could on their own.

We look forward to keeping you posted on our progress as we move forward. I'd now like to open it up to Q&A..

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Bob Drbul of Guggenheim..

Good morning. Thanks for the information. I guess, just two quick questions. The first one really, what gives you the confidence in the multi-brand platform in this environment and your brands specifically? And I guess, no disrespect intended, but would you be better off with your brands being separate individually? Thanks..

Good morning, Bob. We believe in the benefits of our multi-brand model. And we're confident we have the right strategy to drive accelerated growth and profitability for Tapestry as well as in each of our brands.

Now we have three powerful brands, and we see Tapestry as the enabling platform to help those brands do what they can't do alone, in important ways, really four important, I think, key ways. The first is really through consumer insights.

We have consumer insights across brands and across regions, and we provide the brands with tools and consumer knowledge to unlock value. We also have a globally diversified supply chain, which has always been a competitive advantage for our company, and we're now evolving that to make it even more responsive.

And third, we have a technology infrastructure and digital capabilities that our brands can leverage to engage consumers, and I think we saw in the fourth quarter how powerful that platform can be for our brands. And finally, the access to global talent that we have across brands is a real competitive advantage.

I think our Q4 performance is a real proof point, illustrating the power of that platform..

Great. Thank you very much, Joanne..

Thanks Bob..

And ladies and gentlemen, as a reminder please for the interest of time, limit yourself to one question. Our next question will come from the line of Ike Boruchow of Wells Fargo..

Hi, good morning everyone. My question is on the top line recovery.

It sounds like the North America recovery has been fairly linear based on the comments on July, but anything to call out just -- if that is accurate? And then if there's anything to call out outlet tourist location versus enclosed mall assuming that version? And then along those lines, on the back half, you're trying to get -- you're talking about getting back to growth.

But when you guys are modeling out, or putting out your expectations for store volumes, are you assuming that those store volumes are back to fiscal 2019 levels in the back half or are you assuming that it's a little bit more gradual? Any color there would be helpful. Thank you..

Sure, Ike..

Go ahead, Andrea..

No, no. If you want to take it, Joanne. I was just going to say, as we look at the year and as we talked about, our expectation is for slow, steady recovery over the year with a significant inflection in the second half of the year. We have seen that as we've gone through and reopened stores on a phased opening so far.

And as we look at the year and look at the revenue rebound, we've seen it slow and steady. We saw it first in China and as we reopened here in North America, we've seen that slow and steady rebound.

Stores continue to be pressured on the traffic side, but where we've seen this astronomical growth has really been on the digital side, which, as you know, I think, is much more profitable for us than the bricks and mortar. But I know that Joanne wanted to hop in here too. So please do, Joanne..

I think you covered it well. We have seen a slow and steady recovery in North America, and your question was specific to North America. We were pleased to see the China market, as Andrea mentioned, return to positive comps in the quarter, a positive inflection in the quarter.

And as Andrea mentioned, we're engaging our consumers in the way they want to engage with us. And increasingly, in today's environment, it is through digital. So, again, we've seen a slow, steady improvement in our store business. But, importantly, we're engaging very fully through our digital channels with our consumers..

Our next question comes from the line of Erinn Murphy of Piper Sandler..

Great. Thanks. Good morning.

My question for you is on the 1 million new customers that came through in the fourth quarter on digital platforms, can you contextualize this for us a bit? What is the run rate or what was the run rate in prior quarters? Maybe what brands are consumers coming in from? And what product categories are attracting these new consumers to the brand? Thank you so much..

Thanks, Erinn. And I think the story may be slightly differently in terms of -- different in terms of product categories for each brand, so I'll let the brand CEOs chime in.

But we are excited about the traction we're seeing in new customer growth and the demographic of that new customer, particularly in some of our brands, and the engagement we're seeing both with new customers and also with lapsed customers.

And, I think, the drivers we see behind that are really, really clarifying and doubling down behind our key brand equities and our brand purpose, and some of the changes that we've made to really embed analytics and be more agile in our marketing and our approach to engaging these consumers.

So, really, really encouraged by the traction we saw in Q4 and look forward to more to come, but I'll pass it over to the brand CEOs. Maybe, Liz, starting with you..

Sure. Thanks. Yes. We at Kate saw an enormous increase in new customers digitally. I think it was over 350,000 new to the brand through the digital channel. It was predominantly driven by our tried and true products, our leather goods. But there were some bright spots in things that perhaps are very COVID-related.

We sold pajamas like crazy, for example, in a lot of our home products. But we really feel that it's mostly because we have dialed down on our brand story, our equities. We're fun, we're optimistic, we're happy. And at this time, we feel like that's exactly what everybody needs to buy..

Yes. On behalf of Coach, we couldn't be more excited. I mean we saw over 600,000 new customers come into the brand as one could expect, it is primarily handbags. But what's really interesting and engaging is we're seeing a younger customer coming to the brand. And as we indicated, 50% of the 600,000 are Gen Z or Millennials.

And that really bodes well for what we're doing, and we're excited about them, and we're now focused on increasing that number, but increasing purchase intent with that group, because its one of the things you know the most valuable customers are not just getting them and being one-and-done.

But continuing them on the journey and making them lifelong customers. And we're really focused on that, and we're seeing early days, but very encouraging repeat purchase intent..

Yeah. Let me say a few words about Stuart Weitzman. What we have seen is very encouraging, because we have seen a strong interest -- a continuous interest for our iconic styles.

And also, we have seen a strong interest for our iconic styles where we have infused, I would say, a touch of casual – casual -- casualization is becoming a big trend and we are adopting very quickly to this new trend. I'm very pleased to see what the teams are preparing for the next season.

As I also mentioned, the – we saw an unbelievable performance of our very elevated foundry in Margarita with this beautiful red color that sold out in a matter of weeks. So it's very encouraging..

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

Good morning. Thanks so much for taking the question. You mentioned the opportunity for gross margins across the brand. I wonder if we could dig into that a little bit more. This historically delivered very strong gross margins at Coach and reasonably high gross margins elsewhere.

Can you talk about how high those can go and what the key drivers are across brands? I think the AUR story is a big piece of that..

Yes. The AUR story is definitely a piece of the gross margin expansion. And we're incredibly excited about the traction we're seeing to the work we're doing.

And it's a combination of getting closer to our consumer and leveraging data and analytics to make our assortments even sharper, stepping away from discounts and really driving more relevance in our product. And I think there's a theme across all our brands and how we're doing that.

But again, I'll turn it over to the brand CEOs to let them speak to how that's coming to life in each of their brands.

Todd, do you want to start?.

Sure. And you hit on it. I mean, we ended the quarter and really pleased with the 73.6% gross margin we delivered for Coach. COVID has presented us an opportunity to be very focused and really reduce the promotionality and the discounting that you've seen and we're encouraged by that.

And so we've really shifted the conversation, both digitally, but also in stores to one of value instead of promotionality. And I see that trend continuing. Our inventories are in really good shape. And so we're not – we don't have that outsized pressure that perhaps others do in terms of discounting. So I see a trend continuing through the year..

I can jump a bit in on the Kate piece. We have a big opportunity to raise our AURs and we've already begun partially by reducing our promotionality. But as we go forward, we're building a collection that's really based on a strong core, one where we can really create pure products and iconic products that people will pay for.

And we need to really have a good, better, best strategy so that we do have the opening price points so that we can go all the way up. We've got a best-selling bag right now that's a pineapple and it's $348 and she's happy to pay for that because it makes her happy.

So really it's drilling into how to create the strong hero products and that's going to help to our AUR significantly..

And for us at Stuart Weitzman, it's again a very important product, so we are really working on touching the product offering and then also focusing on the most important geographic and channel opportunities.

So, we -- when we look at the products and the iconic styles we have, we can leverage these ties even more, but with a renovated point of view, we can reduce the SKU count. We are reducing the SKU count in order to drive clear seasonal messages.

And then this, in turn, will grow our gross margin while reducing the promotional activity, maintaining our positioning at the gateway to luxury..

And if I could just tie this all -- if I can just all tie this all up, Alex, what I would like to say is that, obviously, we had 370 basis points in this last quarter. And while we wouldn't necessarily expect that going forward, I would like to note that we did that with very low wholesale exposure, and we did this with 90% direct business model.

We did it on the back of lower promotional activity, higher AURs. And when we look at this going forward, we do think we have a lot of growth left not only through the lower AURs and the lower -- the higher AURs and the lower promotional activity.

But do keep in mind that as we move towards digital -- and I think this does set us apart from some of our other peers out there, as we grow digital, and digital went to a mid-teens percentage of our business this quarter -- excuse me, this fiscal year versus only 10% last year, it is a higher channel of profitability than the relevant store whether it's outlet.com versus Outlet or our e-commerce retail businesses versus retail.

As that increases in penetration, that will also be a tailwind to gross margin. So, we're not looking for another 370 basis points in FY 2021, but we do believe that will continue to be a tailwind and gross margin does have significant upside for all our brands and Tapestry as a whole..

And at the risk of piling on, I do think there's one more important point that I want to call out. As we deliver value for our consumers and get even closer to our consumers in each brand, we're doing that with a balance -- what we like to call, a balance of magic and logic.

So, we're understanding how to tailor our assortments, to be more relevant to the consumer, but there's a creativity element in delivering value for our consumers.

And it means maybe something different in each brand, but the closer we get to our consumer and the more we understand and deliver against that value proposition, the more the consumer is willing to pay for the value we deliver. And as I think about that in Coach, it has been and it is about driving cultural relevance.

The team has done a great job through collaborations and design aesthetic to deliver that cultural relevance. And Kate, you heard Liz talked about novelty as one of the aspects of real brand signature and the creativity that is driving consumers to want to spend $395 for a pineapple bag, bringing them a little bit of joy in their life.

And in Stuart Weitzman, just said that real creativity behind casual, that is an emerging trend, but doing it in a Stuart Weitzman way with the Stuart Weitzman aesthetic, and with the signature comfort and fit that the brand is known for.

So, it's when those elements come together that we really see traction with the consumer, and that's what drives our gross margins..

Our next question comes from the line of Oliver Chen of Cowen..

Hi, thank you.

Regarding outlet and your journey going forward in the outlet, how are you going to balance fashion credibility relative to what you're doing in outlet? And what are some of the guardrails you're thinking of? And should outlet become a much bigger percentage of total as you broadcast directly to this consumer? I would also love your thoughts on SKU rationalization, just trying to ensure that you're rationalizing the right products in the past.

There's risk factors around rationalizing the wrong products relative to what customers want? Thanks a lot..

Yeah. Let me start with the outlet question. I think the way we're thinking about it, Oliver, is really how do we deliver for our consumers. And we have consumers in that space, a really broad market of consumers who we're meeting and delivering the right value, the right product and the right experience for those consumers.

And we're meeting those consumers more and more where they are. That includes digital channels. We're making the right adjustments to our stores in an increasingly omni-channel world, so that we are -- our focus is 100% on delivering for our consumers no matter where they choose to shop with us.

And in terms of SKU rationalization, I think the brands -- as we've done the work to get more focus behind our key brand equities and knowing our consumers, we're also getting more focused in our assortments and presenting actually much more clear stories for our consumers. It's helping us deliver a more clear message.

It's helping us with execution all the way down through our supply chain, and even as we bring it to life on our digital channels and in our stores. But again, I'd love for the brand CEOs to chime in on the SKUs..

Yeah. It's an interesting question that when I feel that we've gotten for a very, very long time on outlet, first and foremost, we have a fashionable customer in outlet. And they love fashion, and they love it whether it's in brick-and-mortar or whether it's online. And we must and we will continue to innovate product across all of our channels.

All of our channels are important. So we believe in brick-and-mortar full price. We believe in coach.com as a full price digital channel, as well as the coachoutlet.com channel and as well as the brick-and-mortar outlet mindset.

Regarding SKU proliferation, when you really take a look at it, and we've done a lot of the work here, is what we're cutting out of the tail? We're cutting out the least relevant, the least productive SKUs, and really focusing and allowing us to have greater clarity of message, going further with the winners and really getting that focus.

And you've seen it. You've seen it with Tabby. You've seen it in our history where we have great product. It resonates across geographies. And it -- having that higher productivity by SKU allows us to keep these families alive longer. And that's really important, particularly in the world we live in today.

So we're excited about the productivity that we're seeing..

Our next question comes from the line of Mark Altschwager of Baird..

Good morning. Thanks for taking the question. Just a quick follow-up and then a bigger picture question. Just on the follow-up. Andrea, I think you mentioned June sales down 30% and then you said material progress in July in your prepared remarks.

And I just want to clarify that given you also said expectations for a gradual recovery earlier -- early this year.

So maybe if you could just speak any more specifically on the quarter-to-date sales trends by brand that would be helpful? And then just a bigger picture question on Coach, so pre-pandemic, Coach was a $4.3 billion brand, generating 27% operating margins.

Just with respect to Todd's comments about your work, showing that the brand has potential for significant growth and margin expansion.

Is there any way you can frame up the revenue and margin potential here, bigger picture? And does the increased focus on digital affect the long-term margin increased focus on digital affect the long-term margin structure, especially if we approach parity there over time? Thanks..

Sure, Mark. So I'll start with – we exited the quarter at 30% loss for sales, and so as I said, it improved over the quarter. And we exited the quarter or exited June at a down 30% and made substantial improvement in – or meaningful improvement in July on a quarter-to-date basis with stores continuing to improve and digital continuing to be strong.

Beyond that, I'm not going to get any more specific. Obviously, we have the remainder of the quarter ahead of us. And September last year, remember, we benefited specifically in Japan from the pull forward of volume due to the consumer tax increase coming in October.

So we do expect July -- excuse me, Q1 to be – show continued sequential improvement with stores continuing to be pressured in traffic, although I will tell you that we've seen Mainland China continue to be strong and as I said, improvement everywhere else.

But we would expect still to be fairly negative in Q1 and then continuing to move more positively as we go through the remainder of the year but not to see positive results until we get into Q2 in terms of a sales inflection. So we have been pleased, but bricks-and-mortar continue to be pressured in terms of traffic.

In terms of the opportunity for Coach, I can turn that over to Todd to speak specifically on the opportunity long-term for the brand.

Todd?.

Yes. Thank you, Andrea. And I think you I think you were talking about the inflection taking place in the second half, not in the half, not in the second quarter..

In the second half, sorry, yes, I think I misspoke and said second quarter, second half. Thank you very much, Todd..

It's very rare in my history to ever be able to correct Andrea Resnick so....

On the number?.

On anything. But one of the issues is, it's hard to have full visibility given the world we live in today. We know though we feel very good about the profitability of the digital channel. And we see that growing. We have expectations to still grow the brick-and-mortar.

So we're not going to completely abandon that and just see all of our growth come from digital. We think we can have tremendously outsized growth in digital. Also, we're very, very excited about what continues to be the opportunities in China. And the opportunities in China are both digital and brick-and-mortar.

So we see that growth really outstripping some of our prior growth. And so again, not to get too ahead of our SKUs, but we're excited about the opportunity ahead of us. And as soon as you can tell me when the world returns to normal, I can tell you exactly when we'll see that massive inflection..

And I'll just add to that. Mark, through all brands, we're focused on the digital business and for an inflection in top and bottom line growth, as the environment and backdrop recovers, we're positioning our company to be able to take advantage of that. And as Andrea pointed out, our digital margins are ahead of our margins in brick-and-mortar.

We do see that as an accretive strategy for us. But, again, our focus is on meeting the consumer where they are and responding and being available with the right experience and ensuring that we can drive further profitability moving forward. And we have confidence that strategy helps us unlock that..

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

Thanks very much.

Just with respect to your digital growth ambitions and the shift to really being much more data-focused, can you just talk a little bit about how you're able to leverage your existing customer file, or are there investments that you need to make in terms of being able to really tap into that data-driven decision-making process still ahead? Thanks..

Sure. I can kick that off. And then maybe the – a couple of the brands can provide some anecdotes. But we're well positioned to take advantage of the shift to digital.

We have a pretty robust technology infrastructure and digital capabilities globally, but we are continuing to invest in that space, particularly with our customer file being able to add tools that allow us to better utilize and better use the information that we do have.

So those investments we are making this year and we expect to continue to make them going forward, but a few anecdotes in terms of our ability to leverage that and drive both digital growth as well as profitability. I'll start with the traction we're seeing in new customer acquisition and some of the changes that we've made in our marketing process.

We have embedded data and analytics more fully into our marketing operations and enabled those teams to really drive a test and learn mindset and test a lot of new things, I think, we’ve managed our 50 tests in the fourth quarter alone through that platform, and we're learning a lot.

It's interesting, because this test and learn platform allows us to learn new information really that we didn't have before about how our customers respond. And some of those things work, some of them don't. We learn fast, which is part of the agility. We're learning fast, and we're scaling the wins.

And we saw, again, a lot of traction in the fourth quarter behind that. Really pleased with the new customer acquisition and the engagement of lapsed customers. So we are seeing traction there.

And then as it relates to being data-driven, I talked a little bit in my prepared remarks about some of the assortment analytics we're using to determine the right assortments at a door level, again, unlocking more productivity out of our assortments, more productivity in our stores.

And that's really a key enabler to driving AUR growth and gross margin. And I don't know, Liz, if you want to talk about some of the traction you've had on the marketing side with the Kate brand, but some real traction there as well..

Yeah. Thanks, Joanne. I mean, absolutely, the platform that we have from the Tapestry data labs, as well as all the work that we're doing, with the test and learn on our marketing cost has been a key driver in us getting all the new customers that we have gotten.

And we match that with kind of our – tweaking our marketing to be much more about the customer that we have, really dialing up the tone of fun and happy and joyful everything that you associate Kate Spade with, has shown actually remarkable and immediate response in terms of driving our business up. This for us is a key lever.

We really think that we're well on our way to becoming the $2 billion brand we want to be. And because digital is also much – a much higher profit margin, we can be much more profitable. So this is a key, key, key lever for us. We're super, super excited about what we've already started.

Todd, do you want to add anything?.

Thank you, Liz. One of the things that I think has always been so great about Coach and what attracted me a long time ago, I think, we were really best-in-class in using data, and you heard Joanne mention it before. This was part of the magic-logic combination. I think now what is so exciting is, we're not just using it for hind-sighting.

We're really using it to be predictive, both predictive in our business, but also being predictive and using it as a tool for helping even inform our designs and our merchandising briefs. So that is really exciting. And what we're able to do under the Tapestry umbrella and using all of the resources there is exciting.

Sometimes, people think that Coach doesn't always benefit from all of that, but we actually do. And we're using that quite a lot. So I think you're going to see us be much, much more data-driven.

But, again, we're always going to balance that, and it's not going to overshadow creativity because we need both, but we have the opportunity to do both really, really well..

And, again, leveraging the Tapestry powerful database and the tools we have, I have to say, what we are seeing as Stuart Weitzman is that, we are understanding more of the customer journey, the needs they have, where they want to buy.

And what is interesting is that we are really now utilizing the website and the data to offer specific sizes, extended sizes and embedding greater personalization throughout all the journey. So it's very exciting to see what we are seeing and we'll leverage even more this powerful tool..

Our next question comes from the line of Lorraine Hutchinson of Bank of America..

Thanks. Good morning. Stabilizing sales at a higher margin would be a big positive for free cash flow.

Can you talk about plans for the capital structure? And any change to your thinking under the new plan?.

Sure. Sorry about that, Lorraine. I was on mute there. Yes. When we look at capital allocation, obviously, what our priority is right now is, first and foremost, on preserving cash and financial flexibility to navigate the current environment.

As you know, we made the decision to suspend our quarterly dividend and our share repurchase, and that's going to save us about $700 million on an annualized basis compared to 2020. Our intent is, as you noted, to return to sustainable top and bottom-line growth and strong free cash flow generation, which we first intend to use for debt paydown.

As you know, we've taken out $700 million on our $900 million revolver. We do expect to start paying that down in fiscal year 2021. Longer term, we're going to -- we'll certainly look at shareholder returns as part of our priorities for cash, returning both cash -- excuse me, both dividend and share repurchase.

But we're going to be prudent before reinstating those. And we have to consider near-term liquidity needs of the business and we have to look at credit metrics. We understand what it means to be investment-grade and it is important to us.

So, we have to balance those things as we look going forward, and obviously, keeping an eye on the macro environment and the pandemic..

And ladies and gentlemen, we have time for one final question. Our final question will come from the line of Paul Trussell of Deutsche Bank..

Well, good morning and thank you for squeezing me in. I appreciate all the color that has been provided. My question will be just a little bit more color on your efficiency-led profit growth plan.

Maybe just speak in even more detail on how we should think about the contributors to the $300 million gross run rate savings and maybe more specifically, how to think about the timing of the $200 million that's projected in fiscal 2021.

And somewhat related to that, just maybe speak a little bit more around your view of the current store fleet? And what could transpire from a closing standpoint over time, especially just given your kind of higher level of store profitability standards that you're focused on. Thank you..

I'll let Joanne and Todd start with the store fleet, and then I can come in on the $300 million and where that's coming from, if that's okay..

Yes. Thank you, Andrea. As we think about our management of the business, particularly moving through this year, it is what we're calling efficiency-led profit growth. We are monitoring very closely the environment and driving and have more agility in the organization to respond to demand changes as we see them.

But really focused on gross margin expansion through the opportunities that we talked about, being closer to our consumers, embedding data in our decisions, some of the SKU rationalization, driving that gross margin expansion. And then the operating expense and SG&A management, it's very tight.

But I think importantly, we're positioning the company for long-term growth and to be in a position to accelerate growth and take market share when the economy recovers.

So, not only do we see efficiency-led profit growth this year, but we're positioned to be able to accelerate the topline and drive margin expansion -- significant margin expansion as we return to growth.

As it relates to our store fleet, we believe that in the physical presence and touch point of our stores, but we know that the role of the store is changing. And our focus is really on delivering a great experience for our consumers regardless of how they engage with our brands, whether that be through a physical or a digital touch point.

And as Todd mentioned, we have raised the profitability thresholds and standards on our fleet. And we expect to drive more profitability, but also an improved experience for what we see as an increasingly omni-channel consumer. I can send it to Todd for a little bit more color on how that -- those negotiations are going..

Yeah. I mean you -- Joanne hit most of the high points. Again, I think we're going to see over time changes. We believe very much in the brick-and-mortar channel. We, obviously, will let the consumer decide. I don't think there's a formula in terms of exact mix. It is not formulaic. We think, over time, you'll see us try new things.

In Japan, we did station stores, much smaller square footage for the Coach brand, but profitable. So I think how the stores look, how they interact with the customer, how they participate in the omni journey of a customer will change over time. And our landlords globally many have been very responsive to being a good partner for us dealing with COVID.

We're still working with some domestically. And I am hopeful that there’ll be a recognition that we are in this together and it is about having great brands in their malls like Coach, Kate Spade and Stuart Weitzman..

And I think, Paul, when you're looking at the structural contributors to the $300 million, we did outline some of them on the call, including the 20% reduction in our global headcount expense, includes the associated expense savings with closing some of our stores, which is going to be both fixed rent, and depreciation and amortization, of course, as well as pulling back on third-party outlays.

We did reduce marketing. We don't expect to reduce it further, but we're going to hold it on that lower level this year from where we took it to in FY 2020. So those are a number of the contributors to the lower level of expense. The $200 million, we are not giving specific guidance on how it's going to flow through this year.

But, obviously, you saw it hit 4Q, and we'll still have that coming through as we go through this fiscal year, we would expect substantial SG&A dollar decreases in each quarter.

And I think Christina, do we -- are we ending it here and returning to Joanne for some closings?.

Thanks, Andrea. Thank you, Andrea. And I want to thank all of you for joining the call this morning and spending a little extra time with us. I'm pleased that the brand CEOs were able to join me today to provide more details on the work happening in each of our brands.

I'm confident in our strategy and the opportunities for Tapestry and each of our brands to accelerate top and bottom line growth moving forward. But importantly, behind all of the numbers are our people.

We're operating in unprecedented times, and I appreciate the continued passion and focus of our global teams, especially those in our stores and DCs who are providing exceptional service for our customers every day. Thank you..

And ladies and gentlemen, this does conclude today's conference call. You may now disconnect and have a wonderful day..