TPR — Tapestry, Inc.

Tapestry (TPR) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Pro Forma Revenue: Increased by 16% year-over-year, driven primarily by a 21% growth at Coach.
• Adjusted Operating Margin: Expanded by 200 basis points.
• Earnings Per Share (EPS): Rose 35% to $1.38, exceeding expectations.
• Gross Margin: Improved to 76.5%, up 120 basis points from the prior year.
• SG&A Expenses: Increased by 11%, but the company achieved 80 basis points of expense leverage.
• Shareholder Returns: Declared a quarterly dividend of $0.40 per share and repurchased $500 million worth of shares.

2. Strategic Updates and Business Highlights

• Amplify Growth Agenda: The company is focusing on customer acquisition, particularly among Gen Z, with over 2.2 million new customers acquired globally in Q1.
• Coach Brand Performance: Achieved a 21% revenue increase, with strong growth across North America (26%), China (21%), and Europe (39%). The brand's product innovation and emotional marketing campaigns are resonating well with consumers.
• Kate Spade Turnaround: Revenue declined by 9%, but there are signs of improvement in key performance indicators (KPIs) such as brand consideration and Gen Z acquisition trends.
• Direct-to-Consumer Model: Continued growth in both online and brick-and-mortar sales, providing valuable consumer insights for data-driven decision-making.

3. Forward Guidance and Outlook

• Fiscal 2026 Revenue Guidance: Raised to approximately $7.3 billion, reflecting 7-8% pro forma growth.
• Regional Expectations: Anticipate mid- to high single-digit growth in North America, around 20% in Europe, and low double-digit growth in Greater China.
• Operating Margin: Expected to expand by approximately 50 basis points for the year.
• EPS Forecast: Projected to be between $5.45 and $5.60, indicating 7-10% growth compared to the previous year.

4. Bad News, Challenges, or Points of Concern

• Kate Spade's Performance: Despite some improvements, the brand is still experiencing a decline, and the turnaround is ongoing, with expectations for a modest profit loss this fiscal year.
• Tariff and Duty Headwinds: Anticipated to impact gross margins, with a forecasted headwind of $170 million for the fiscal year.
• Market Volatility: The company acknowledges potential fluctuations in performance due to external economic conditions, particularly during the holiday season.

5. Notable Q&A Insights

• Sustainability of Growth: CEO Joanne Crevoiserat emphasized the structural advantages of the business and the importance of acquiring new customers to drive long-term growth.
• Coach's Momentum: Executives expressed confidence in sustaining double-digit revenue growth, supported by product innovation and effective marketing strategies.
• AUR and Units: There was a notable inflection in units sold at Coach, indicating a shift from previous reliance on average unit retail (AUR) growth alone.
• European Market Potential: Strong performance in Europe was highlighted, with a focus on reaching younger audiences and expanding brand presence.
• Kate Spade's Strategy: The brand is focused on reducing discounting to improve long-term profitability, although this may impact short-term revenue.

Overall, Tapestry reported a strong quarter with significant growth driven by its Coach brand, while navigating challenges with Kate Spade and external market pressures. The company remains optimistic about its strategic initiatives and long-term growth potential.