So we are making progress. We do see opportunity as we continue to focus on strengthening that core handbag foundation. And when I talk about moving with speed, we’ve pulled up our launches. We talked about accelerating Madison and Outlet last quarter and that gaining traction, we also talked about pulling up and delivering a new signature platform in Outlet this quarter. And we’re excited about the potential that that represents, a signature platform for the brand. And we do expect that as we build this core handbag foundation to help us drive positive growth, again, on the top line. But again, we’re maintaining healthy brands. We drove mid-single-digit handbag AUR in the quarter. And we continue to see opportunity to take those AUR higher as we build out our growth plans.
So there’s a lot going on at Kate spade. We’re making progress as well in building our business in China. We’re doing that thoughtfully and making sure we’re investing behind the brand to build awareness. At the same time, we’re rolling out a new store format. We see that resonating with consumers, as well as our lifestyle categories, including jewelry, which is incredibly strong in China. So we have a lot of runways ahead at Kate in our current markets, but as well as in China.
Operator: Our next question is from Matthew Boss of JPMorgan.
Matthew Boss: Great, thanks. So, Joanne, on pricing power at the Coach brand, could you elaborate on drivers of the mid-single-digit AUR expansion in the first quarter and then initiatives in place that support the further pricing opportunities ahead that you cited, despite the more dynamic backdrop that you’ve embedded in the forecast? And then, Scott, just help us to think about the cadence of gross margin through the balance of the year or just any specific puts and takes that you’d want us to consider.
Joanne Crevoiserat: Yes, I’d love to go into the details of the Coach brand, but I fear that I’d feel Todd’s thunder. So why don’t Todd, I push it to you. And we’re delighted with what we’re seeing at Coach. Todd?
Todd Kahn: Thank you, Joanne. Yes, I mean, as you’ve noticed over the three years, we’ve increased our AURs by more than 30%, and I am very confident that we will continue to see AUR growth. And what gives me this confidence is what we’ve been doing now for a couple of years, and it’s compounding our innovation, our storytelling, our laser focus on the consumer we’re going after. That gives us so much confidence in what we’re doing, and what I love and what is so important about our category. Yes, there’s choppy environments out there, but we sell an emotional category. And given that emotion and given that we’re resonating with our customer, coupled with the fact that, as we’ve talked about in the past, there’s so much white space today between where our brand fit and wear traditional European luxury fit.
So even in challenging times, we have so much room. And our room is in two folds. One, it’s raising the bottom, but it’s also touching the top. Joanne mentioned in our prepared remarks the idle bag. The idle bag is a phenomenal bag. I was in Asia very few weeks ago and we’re chasing inventory for the idle bag. We’re chasing inventory for TAPE. Those are great opportunities, but we’re so disciplined in our approach that I would rather be in a chase mode, maintain our gross margin, and continue to deliver. And that’s what you’re going to see us do for the balance of the year and the years to come.
Scott Roe: Yes, and Matt, just to speak to your question on gross margin cadence, first of all, what a strong Q1 we had, right? At 250, strongest gross margin expansion that we’ve seen. And yes, it’s true that 150 basis points of that was free. A 100 of it was operational, which is all the things that Todd just talked about, right? Our continued investment in the brand focused on engagement versus just the pricing message, the innovation that’s coming down the pipeline. All those things combined are given as pricing power. And when you look at the full year, we said that our freight tailwinds would moderate in the second half. They don’t go to zero, but it’s 150 basis points. It’s very significant in the first half. It’ll be similar in the second quarter, and then waning in the second half.
But importantly, our gross margin for the entire year, including the back half, it remains very strong because of that operational gross margin performance that we just talked about. I mean, we’re up in 150 basis points kind of range for the full year. So I don’t want the freight to become the message. The message is operational discipline, continuing to reinvest in the brand, focused on quality of sales and engagement, is driving gross margin. And that’s what’s really holding this guide together for the full year, where even on a little bit moderated top line, we’re able to hold our profitability guidance. That coupled with the expense control that we talked about, we’ll start to see expense leverage in the second half, which combined with the gross margin is what allowed us to hold that profitability forecast.
Balance first half, second half, op income. Really, why EPS is front-ended is more about the shares and tax cadence as we stop the repurchase, which is going to benefit us less in the second half.
Operator: Our next question is from Michael Benetti of Evercore ISI.
Michael Benetti: Hey, guys, congrats on a nice quarter. Thanks for taking our question here. I just want to clarify one thing you just said to Matt’s question there, Scott. You said that we’re up 150 basis point range for the year. Was that referring to the total gross margin or the underlying operational portion of the gross margin that you and Todd spoke about?
Scott Roe: Yes, first of all, welcome back, Michael. And secondly, yes, you had it right, it’s the total gross margin for the year, implied in the guide. We didn’t actually guide to your gross margin. We did op margin, but that’s how you get there.
Michael Benetti: Understood. I guess then, maybe we could speak to the, I know I asked about this a little bit, but what you’re embedding in the trajectory for Coach, China sales 2Q in the second half within the, I know you gave us the year. And then, Joanne, you’re about to own a huge share of the aspirational handbag market globally. I know you don’t have the Capri brand in-house yet, but I know you’ve studied them a lot. And as you look ahead, and as the acquisition comes forward here and we start to sink in, what are some of the most attractive things you see as opportunities to drive the category in the global marketplace with all three of these big brands on the handbag side in-house, that some of the opportunities that are incremental to what you think you can do today.
