Joanne Crevoiserat: Yes. Let me pick up the portfolio shaping — portfolio question you asked. We are creating a global house of iconic brands. And what’s important to us, the most important thing is that these brands are iconic and that they trade in attractive and growing categories. Adding these brands to our platform, we’ve talked about the strong industrial logic of this transaction. It extends our reach across customer segments, across geographies and across product categories. So it provides more diversification for our business, and taken together, enhances our opportunity to drive value, superior value for all of our stakeholders. We are disciplined capital allocators. And to your point, we — any capital allocation decision we make, we use a four-lens framework.
You mentioned lenses. There is rigor and discipline in our evaluation. That’s how we arrived at the decision to make the acquisition of Capri. And the four lenses are really first does it fit with our strategies as a company. Second, what do we bring as an owner? Are we a good owner of these assets. Third, what is the financial outcome we expect in the modeling and the shareholder return we expect. And the fourth lens is really a degree of difficulty of execution. And as we evaluated all of those, we landed on this Capri acquisition is quite compelling. And any future capital allocation decision we make will apply those same four lenses and the same rigor and discipline.
Michael Binetti: Thanks a lot, guys. Again, great quarter.
Joanne Crevoiserat: Thank you.
Operator: Our next question is from Mark Altschwager of Baird.
Mark Altschwager: Thank you. Good morning. A couple of questions on Kate. First, you talked about the need to accelerate some of the changes there. What are the insights you’ve gathered over the last few quarters that are informing the changes you’re making to plans over the next few seasons here? And then separately, on margin, you are delivering margin expansion at Kate despite the ongoing sales pressure this year, which is nice to see. So I was hoping you could just update us on how you’re thinking about that path to the mid or even high teens EBIT margin. What’s the time line there? And is there a level of revenue that is needed to get within that range? Thank you.
Joanne Crevoiserat: Thanks, Mark. We remain confident, to your point, in the strategies and our long-term vision for Kate Spade. The team exercised incredible discipline and agility in the quarter. To your point, we expanded gross margin, operating margin and profit. All of those were ahead of last year and ahead of our expectations. But to your point, the top line remains challenging. We didn’t see an inflection from first quarter. So we saw a continuation of our first quarter trends. And we have higher aspirations for the brand as it relates to growth. We noted an opportunity to improve our execution and really three key areas we talked about in our prepared remarks. We’ve been focused on strengthening the core handbag foundation.
And that continues to be an opportunity. Where we’ve delivered newness and innovation in our core handbag assortment, we are seeing the customer respond. And we will see as we move into the back half newness grow, both in the back half and into fiscal 2025. Newness will grow as a percent in penetration in our assortment. The second opportunity that we see is an opportunity to power the omni-channel experience with our consumers. You saw us launch outlet.com in the last quarter. That is an important foundational element to provide consumers a real 360 experience and a quality 360 experience with the brand. We believe that we can build on that foundation as we move forward. And then last, it’s an opportunity to drive more emotional marketing to fuel brand heat.
So it’s around the execution in these three points. You’ll see us — actually, this week, we launched our spring campaign. We’ll be investing more in top-of-funnel marketing to cut through the noise and drive more brand heat. We have clear actions in place. We’re moving with speed to achieve those higher aspirations we have for the brand. The pace of the margin improvement is welcome this year, again, ahead of expectations in the quarter. And we expect continued growth, both on the top line as well as margin. And certainly, top line growth is a part of it. But as we demonstrated this quarter, there are other opportunities that we are leveraging to drive growth in operating margin.
Scott Roe: Yes. And maybe I’ll just do a quick build on that, Mark. We do still see a path to the teens operating margin. And I think this year, even overall at Tapestry with modest growth, I mean, a couple of percent of growth, the discipline of our teams and you think about everything from gross margin expansion, controlling expenses and operating margin expansion even as the top line has been pressured, that’s disciplined, right? And we didn’t mention it but inventory, down teens — overall down teens in this brand, right? So we’ve made room for innovation and new product coming in the second time. One thing that our insights do and don’t do, as I’ve said repeatedly, they don’t make us infallible, right? But they, in general, help us make better decisions and because of our model and our direct-to-consumer data, we see trends and issues quicker.
So that’s allowed us to react in terms of inventory, to react in terms of expenses. And that’s one of the reasons that you see this gross margin and operating expansion in Kate even with the pressure on the top line.
