Tapestry, Inc. Q1 FY2026 earnings call

• First quarter marked powerful start with 16% pro forma revenue growth, 200 basis points adjusted operating margin expansion, and 35% earnings per share growth.
• Advanced Amplify growth agenda, acquiring over 2.2 million new customers globally, driven by Gen Z.
• Coach delivered exceptional Q1 with 21% revenue growth, strong in key markets like North America, China, and Europe. Focus on fashion innovation, product excellence, and marketing campaigns.
• Kate Spade is in turnaround with improved sequential revenue trends, focusing on fueling brand heat, building handbag blockbusters, and enhancing omnichannel experiences.
• Launched new campaigns like Coach's 'Revive Your Courage' and Kate Spade's 'Spark Something Beautiful', and new retail experiences like Coach coffee shops.

Coach: Delivered 21% revenue growth in Q1 with expanding margins. North America saw 26% growth, China 21%, and Europe 39%. Leather goods drove growth, footwear had double-digit growth. Marketing campaigns like 'Revive Your Courage' and 'Not Just for Walking' were effective, and new Coach coffee shops were launched. Revenue contribution: Coach was the main driver, with strong growth in multiple markets. Kate Spade: Revenue trends improved sequentially to down 9%. Focus on fueling brand heat, building handbag blockbusters, and maximizing omnichannel experiences. Revenue contribution: Kate Spade had a sequential improvement but remained in a downturn.

• Raised fiscal 2026 outlook; expects revenue ~$7.3B, pro forma growth 7%-8% nominal or 6%-7% constant currency.
• Operating margin expected to expand ~50 basis points. Gross margin to decline ~50 basis points but offset by operational improvements and Stuart Weitzman disposition.
• SG&A expected at least 100 basis points of leverage. Anticipates returning $1.3B to shareholders via dividends and share repurchases, including $300M in dividends and $1B in share repurchases.
• Q2 expected pro forma total sales growth ~7% with low double-digit revenue growth at Coach and mid-teens decline at Kate Spade.

• Tariffs and duties impact: Incremental tariffs and duties pose a 230 basis point headwind in fiscal 2026.
• Competitive market environment: Uncertain external backdrop and dynamic consumer sentiment could impact performance.
• Turnaround challenges at Kate Spade: Early stages of turnaround with outsized tariff impacts and brand investments leading to modest profit loss.

Q: Elaborate on drivers of accelerated growth and sustainability of momentum at Coach.

A: Joanne and Todd cited product innovation, strong people, strategic place, effective marketing, and attractive price point as drivers. New customer acquisition, AUR growth, and geographic expansion contribute to sustainability.

Q: Break down drivers of 2-year inflection in Coach's revenue growth and moderation in back half guide.

A: Scott mentioned inflection in units, new customer acquisition, geographic growth, and AUR growth. Back half guide accounts for tariff pressures and strategic planning for sustained growth.

Q: Walk through gross margin factors and industry trends impact on business.

A: Scott discussed progress against tariff impacts and confidence in growing gross margins. Joanne noted a constructive market backdrop for the handbag category, with Coach outperforming the market due to emotional connections and innovation.

Q: European market penetration and Kate Spade's merchandise margin progress.

A: Todd highlighted strong growth in Europe due to value proposition and purpose campaigns. Scott noted Kate Spade is reducing discounting for long-term growth, with margin pressure from tariffs and brand investments.

Q: AUR vs units growth at Coach and Kate Spade's sequential improvement.

A: Scott said Coach saw inflection in units driving growth, with balance between AUR and units expected. Joanne noted Kate Spade's reset efforts with sequential improvement in the back half and focus on long-term profitable growth.

Q: Footwear and charms business penetration globally.

A: Todd said footwear growth is global, driven by sneakers and High Line/Soho families. Bag charms are meaningful with add-on sales potential across categories.

Q: AUR growth risk and margin levers.

A: Joanne and Todd discussed innovation, customer understanding, and reduced discounting as drivers of AUR growth. Scott noted multiple levers to protect gross margin, including supply chain efficiency and consumer value balance.

Q: Customer acquisition and retention across income cohorts.

A: Joanne stated strong customer acquisition and retention across all age groups and income cohorts, with no meaningful difference in performance across income levels.

Q: One Coach product performance in outlet and real estate pipeline.

A: Todd shared positive performance of collection product in outlet, with plans to expand into other categories. Real estate pipeline focuses on international growth, including new store formats and 100+ store launches in China over 3 years.