Tapestry, Inc. (TPR) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a positive outlook with strong financial metrics, optimistic guidance, and strategic growth plans. Revenue and EPS are projected to grow, operating margins are expected to expand, and there is a significant shareholder return plan. The Q&A section reinforces confidence in sustained growth, especially for Coach, despite some uncertainties in market penetration and discounting impacts. Overall, the positive elements outweigh the concerns, suggesting a positive stock price movement.
Key Financial Performance
Pro Forma Revenue Growth 16% increase year-over-year, driven by 21% growth at Coach. Reasons include strong global momentum and strategic growth initiatives.
Adjusted Operating Margin Expanded by 200 basis points year-over-year. Reasons include disciplined cost control and operational improvements.
Earnings Per Share (EPS) $1.38, a 35% increase year-over-year. Reasons include revenue growth, margin expansion, and disciplined execution.
North America Sales 18% increase year-over-year, led by 26% growth at Coach. Reasons include strong customer acquisition and increased profitability.
Europe Revenue 32% increase year-over-year. Reasons include strong new customer acquisition, particularly among Gen Z, and increased local consumer spending.
Greater China Revenue 19% increase year-over-year. Reasons include notable strength in digital and strategic investments.
Gross Margin 76.5%, a 120 basis point increase year-over-year. Reasons include operational improvements and benefits from the divestiture of Stuart Weitzman.
SG&A Expenses Increased by 11%, with marketing investment representing 11% of sales. Reasons include disciplined cost control and growth-focused investments.
Inventory Levels 1% below prior year on a reported basis. Reasons include strategic inventory management and current positioning for the holiday season.
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Operating Highlights
Fashion innovation and product excellence: Coach achieved accelerated growth in core leather goods, with standout products like the Tabby, New York, and Terry families, as well as the viral success of the large Kisslock bag. Footwear also saw double-digit growth, driven by sneakers and the High Line and Soho families.
Marketing campaigns: Coach launched campaigns like 'Revive Your Courage' and 'Not Just for Walking,' featuring global ambassadors and cultural influencers, which resonated with Gen Z and drove brand engagement.
Experiential retail: Coach introduced coffee shops in North America to enhance retail experiences, especially for younger audiences.
Kate Spade product focus: Kate Spade launched the Duo handbag and reimagined the 454 family, focusing on Gen Z acquisition and reducing handbag styles by 40% to streamline offerings.
Global market growth: Coach achieved double-digit revenue growth in North America (26%), China (21%), and Europe (39%), outpacing the industry.
Gen Z customer acquisition: Coach acquired 1.7 million new customers globally, with a focus on Gen Z, who are transacting at higher average unit retail (AUR) and showing higher retention rates.
European market potential: Tapestry sees significant growth opportunities in Europe due to low market penetration and increasing local consumer spending.
Direct-to-consumer model: Tapestry's direct-to-consumer model drove mid-teens growth in both digital and brick-and-mortar sales, supported by real-time data insights.
Gross margin expansion: Gross margin increased by 120 basis points to 76.5%, driven by operational improvements and the divestiture of Stuart Weitzman.
Inventory management: Inventory levels were 1% below the prior year, with a focus on maintaining current and well-positioned stock globally.
Amplify growth agenda: Tapestry advanced its growth strategy by acquiring 2.2 million new customers globally, focusing on building lifetime value and emotional connections with consumers.
Kate Spade turnaround: Kate Spade is undergoing a strategic reset, focusing on Gen Z acquisition, uplifting luxury positioning, and disciplined investments to return to profitable growth by fiscal year 2027.
Capital allocation: Tapestry plans to return $1.3 billion to shareholders in fiscal 2026 through dividends and share repurchases, reflecting confidence in its financial position.
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Risk or Challenges
Market Conditions: Uncertain external environment and challenging consumer backdrop in Japan could impact revenue and growth.
Regulatory Hurdles: Incremental tariffs and duties are expected to create a $170 million headwind for the fiscal year, with a full annualized run rate of $250 million.
Strategic Execution Risks: Turnaround efforts for Kate Spade are still in early stages, with revenue trends down 9% in the first quarter and a high single-digit decline expected for the fiscal year.
Economic Uncertainties: Volatility in quarterly profit due to rapidly shifting market conditions and tariff impacts.
Supply Chain Disruptions: Tariff and duty impacts are affecting gross margins and profitability, requiring mitigation strategies.
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Guidance & Outlook
Revenue Expectations: For fiscal 2026, revenue is expected to be approximately $7.3 billion, representing pro forma growth of 7% to 8% on a nominal basis or 6% to 7% in constant currency. By region, North America revenue is expected to increase mid- to high single digits, Europe is expected to grow around 20%, Greater China is expected to achieve low double-digit growth, Japan is forecasted to decline by high single digits, and other Asia is anticipated to see high single-digit gains.
Operating Margin: Operating margin is expected to expand by approximately 50 basis points for fiscal 2026. Gross margin is expected to decline by about 50 basis points, with operational gross margin expansion of 140 basis points offset by a 230 basis point headwind from incremental tariffs and duties.
Earnings Per Share (EPS): EPS is projected to be between $5.45 and $5.60 for fiscal 2026, representing 7% to 10% growth compared to the prior year.
Capital Expenditures: CapEx and cloud computing costs are expected to be around $200 million for fiscal 2026, with approximately 60% allocated to store openings, renovations, and relocations, and the remainder for IT and digital investments.
Shareholder Returns: The company plans to return $1.3 billion to shareholders in fiscal 2026, including $300 million in dividend payments and $1 billion in share repurchases.
Brand-Specific Projections: Coach is expected to achieve low double-digit revenue growth, while Kate Spade is expected to see a high single-digit revenue decline for fiscal 2026. Sequential improvement is anticipated for Kate Spade in the second half of the fiscal year, with a return to profitable growth expected in fiscal year 2027.
Regional Growth Projections: North America is expected to grow mid- to high single digits, Europe by 20%, Greater China by low double digits, Japan to decline by high single digits, and other Asia to grow by high single digits.
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Shareholder Return Plan
Quarterly cash dividend: $0.40 per common share, representing $83 million in dividend payments for the quarter.
Annual dividend rate: $1.60 per share, with approximately $300 million in dividend payments expected for fiscal '26.
Share repurchase in Q1: $500 million spent to repurchase over 4.7 million shares.
Total share repurchase for fiscal '26: $1 billion, increased from the original outlook of $800 million.
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Key Q&A
Q:Can you elaborate more on the drivers of the accelerated growth that you're seeing and the sustainability of the momentum, especially at Coach?
A:Joanne Crevoiserat highlighted the structural and sustainable advantages of their growth, emphasizing new customer acquisition, higher lifetime value, and investments in capabilities. Todd Kahn provided five key drivers: product innovation, engaged people, strategic store locations, purpose-led marketing, and pricing strategy. He expressed confidence in sustaining double-digit revenue growth and achieving a $10 billion target.
Q:Can you break down the drivers of the material 2-year inflection in Coach's revenue growth and explain the moderation embedded in the back half guide?
A:Scott Roe attributed the growth to structural advantages, significant unit growth, geographic expansion (notably 40% in Europe), and new customer acquisition. He noted that the back half guidance remains consistent with a 2-year stack approach, emphasizing prudence given the upcoming holiday season.
Q:Can you explain the factors behind the gross margin assumptions for the year and the industry trends impacting your business?
A:Scott Roe stated that gross margin guidance increased by 20 basis points, with tariff pressures and timing issues in the second half being key factors. Joanne Crevoiserat noted a more constructive backdrop in the handbag category, particularly in China, and emphasized their focus on building emotional connections with consumers to drive growth.
Q:What is driving the growth in the European market for Coach, and what is the potential for penetration there?
A:Todd Kahn highlighted 39% growth in Europe, driven by customer acquisition, youth engagement, and value proposition. He emphasized their strategy of opening stores in diverse locations and leveraging digital channels, while maintaining strong margins.
Q:What is driving the sequential improvement in North America for Kate Spade, and how long will the promotional holdback continue?
A:Joanne Crevoiserat mentioned actions to reset the brand, including reducing discounting and focusing on handbags. She noted improvements in Gen Z acquisition, full-price sell-through, and retention rates. The promotional holdback will impact holiday performance, with a return to profitable growth expected in fiscal year '27.
Q:Can you provide more details on the performance of collection products in outlets and the real estate pipeline?
A:Todd Kahn reported success with the One Coach strategy, including introducing collection products like Tabby in outlets. He noted plans for international growth, particularly in China, with smaller format stores and innovative store formats like Coach coffee shops.
Q:How are you managing AUR growth in North America given tougher comparisons and consumer sentiment?
A:Joanne Crevoiserat and Todd Kahn emphasized their focus on consumer understanding, innovation, and reduced discounting to drive AUR growth. Scott Roe noted that AUR growth is balanced with unit growth and supported by supply chain efficiencies, ensuring gross margin protection.
Q:What are the trends in customer acquisition and retention across income cohorts and channels?
A:Joanne Crevoiserat stated that they are seeing strong acquisition and retention across all age groups and income cohorts, with no meaningful differences in performance.
Q:What is the potential for Kate Spade North America to return to positive growth this year?
A:Joanne Crevoiserat indicated that while holiday performance will be impacted by reduced discounting, sequential improvement is expected in the back half of the fiscal year, with a return to profitable growth in fiscal year '27.
Q:What is the impact of footwear and charms on Coach's global business?
A:Todd Kahn noted that sneakers are performing well globally across genders, and bag charms are driving repeat purchases and customer engagement.
Q:How are you addressing the risk of AUR growth moderation in North America and its impact on gross margins?
A:Joanne Crevoiserat and Todd Kahn highlighted their focus on innovation, reduced discounting, and the One Coach strategy to sustain AUR growth. Scott Roe mentioned additional levers like supply chain efficiencies to protect gross margins.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the potential size of the European market penetration and the exact contribution of collection products in outlets to overall growth. Additionally, they did not quantify the impact of reduced discounting on Kate Spade's holiday performance or provide precise numbers for AUR growth expectations in North America.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUR acquisition
America China
America Jersey
Amplify agenda
CEO start
China Europe
Coach increase
Commons importance
Courage insight
Crevoiserat
Day connection
Demon Hunters
Europe gain
Fashion Week
Gardens Woodbury
Gen customer
Hunters campaign
Instructions opening
Jersey Gardens
Judge campaign
KPIs lift
KPIs progress
KPIs sign
Lilas
Scott
Tabby New
brand desire
brand foundation
fall campaign
foundation term
handbag blockbuster
luxury positioning
pillar
result detail
runway
songwriter
turnaround
TPR Transcript
Tapestry, Inc. (TPR) Q3 2026 Earnings Call Transcript
Positive5-7
The earnings call presents a positive outlook with strong financial metrics, despite Kate Spade's decline. Operating margin and EPS growth are robust, and Coach's growth and innovation strategies are promising. The Q&A section highlights management's confidence in sustainable growth and effective strategies for customer acquisition and retention. Positive factors like increased shareholder returns and a focus on marketing investments further support a positive sentiment. However, lack of specific market cap data limits precise prediction, but overall, the stock is likely to see a positive movement of 2% to 8%.
Tapestry, Inc. (TPR) Q2 2026 Earnings Call Transcript
Positive2-5
The earnings call summary highlights strong financial performance, with significant revenue growth in key regions and brand momentum. The Q&A section reveals management's confidence in sustaining growth through strategic initiatives like AI implementation and customer acquisition. Despite some unclear responses, the overall sentiment is positive, supported by increased shareholder returns and operational discipline. The positive guidance and strong regional performance suggest a favorable stock price movement in the short term.
Tapestry, Inc. (TPR) Q1 2026 Earnings Call Transcript
Positive11-6
The earnings call reflects a positive outlook with strong financial metrics, optimistic guidance, and strategic growth plans. Revenue and EPS are projected to grow, operating margins are expected to expand, and there is a significant shareholder return plan. The Q&A section reinforces confidence in sustained growth, especially for Coach, despite some uncertainties in market penetration and discounting impacts. Overall, the positive elements outweigh the concerns, suggesting a positive stock price movement.
Tapestry, Inc. (TPR) Q4 2025 Earnings Call Transcript
Positive8-14
The earnings call reveals a positive sentiment with strong financial performance, customer acquisition, and strategic brand development. Despite tariff challenges, management is confident in their mitigation strategies and operating margin expansion. Positive guidance on EPS and share repurchase plans further enhance investor sentiment. However, the lack of detailed plans for tariff impact mitigation and reliance on general confidence could temper enthusiasm slightly. Overall, the combination of strong growth, optimistic guidance, and shareholder returns suggest a likely positive stock price reaction.
TPR Slides
Tapestry Q2 2026 slides: Coach powers 18% revenue growth, outlook raised2026-02-05
Tapestry Q1 FY26 slides: Record revenue and raised outlook, stock falls despite results2025-11-06
Tapestry FY25 slides: Record results amid Coach strength, Kate Spade challenges2025-08-14
Tapestry Q3 FY25 slides: Coach drives 8% revenue growth, guidance raised2025-05-08
TPR Report
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