Tapestry’s Earnings Call: Record Growth and Future Outlook

Tapestry ((TPR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Tapestry’s recent earnings call painted a picture of robust performance, underscored by record-breaking revenue and growth. The sentiment was largely positive, driven by Coach’s outstanding results, significant global customer acquisition, and enhanced shareholder returns through dividends and share repurchases. However, the company acknowledged ongoing challenges with Kate Spade’s turnaround and external pressures from tariffs and duties.

Record-Breaking Revenue and Growth

Tapestry reported a pro forma revenue increase of 16%, an adjusted operating margin expansion of 200 basis points, and a 35% rise in earnings per share compared to the previous year. These figures not only surpassed expectations but also highlighted the company’s strong financial health and growth trajectory.

Coach’s Exceptional Performance

Coach emerged as a standout performer, delivering a 21% increase in revenue with expanding margins. The brand saw double-digit top-line growth across key markets, with North America up 26%, China up 21%, and Europe growing 39%, showcasing its global appeal and market strength.

Strong Global Momentum

The company experienced strong global momentum, with North America sales growing 18%, Europe revenue increasing 32%, and Greater China revenue up 19%. This growth was fueled by strong new customer acquisition and increased local consumer spending, reflecting Tapestry’s successful international strategy.

Increased Dividend and Share Repurchase

Tapestry declared a quarterly cash dividend of $0.40 per common share and spent $500 million on repurchasing over 4.7 million shares. The company plans to return $1.3 billion to shareholders in fiscal 2026, demonstrating its commitment to enhancing shareholder value.

Successful Customer Acquisition

The company acquired over 2.2 million new customers globally in the quarter, with a strong focus on Gen Z engagement and high retention rates. This success underscores Tapestry’s effective customer acquisition strategies and its appeal to younger demographics.

Kate Spade’s Revenue Decline

Despite improvements, Kate Spade’s revenue trends were down 9% in the first quarter. The brand is in a turnaround phase, focusing on long-term growth strategies to overcome current challenges and revitalize its market position.

Tariff and Duty Headwinds

Tapestry faces external challenges, with tariffs and duties expected to be a 230 basis point headwind to gross margin, impacting fiscal 2026 by $170 million. These factors pose significant challenges to the company’s profitability.

Challenges in Japan

Sales in Japan declined 10% amid a challenging consumer backdrop, highlighting regional difficulties that Tapestry needs to address to sustain its global growth momentum.

Forward-Looking Guidance

Tapestry’s forward-looking guidance is optimistic, with the company raising its fiscal 2026 outlook. It projects revenue around $7.3 billion, reflecting 7% to 8% growth, and anticipates continued operating margin expansion. The company’s strategic focus on direct-to-consumer engagement and fashion innovation is expected to drive future performance, despite external challenges like tariffs and duties.

In conclusion, Tapestry’s earnings call reflected a strong performance with a positive outlook for the future. While Coach’s exceptional results and global momentum were highlights, the company remains vigilant about challenges such as Kate Spade’s turnaround and external headwinds. Tapestry’s strategic initiatives and focus on customer engagement position it well for sustained growth.