Tapestry, Inc. Q2 FY2026 earnings call

• Second quarter outperformance due to Amplify strategies: pro forma revenue growth 18%, adjusted operating margin expanded 390 basis points, earnings per share grew 34%. • Built emotional connections with consumers, acquiring over 3.7 million new customers globally, focused on Gen Z. • Delivered fashion innovation and product excellence, especially from Coach with strong demand for leather goods. • Powered global growth with double-digit gains in North America, Greater China, and Europe via direct-to-consumer model. • Scott discussed financial results: pro forma revenue growth 18% led by Coach, operating margin expanded 390 basis points, earnings per share $2.69, up 34% vs prior year. • Capital priorities: invest in brands, return capital to shareholders via dividends and repurchases, with $1.5 billion expected to be returned to shareholders in fiscal 2026.

Coach saw 25% revenue growth in the second quarter. Its revenue contribution was significant, with 2.9 million new customers acquired, led by Gen Z. Leather goods were a key growth driver, with mid-teens growth in average unit retail and unit volumes. North America, Greater China, and Europe all saw double-digit growth for Coach. Kate Spade had a 14% revenue decline in the second quarter, reflecting deliberate actions to reset the brand through pullback in promotional activity, but showed progress in brand consideration and Gen Z acquisition trends with handbags.

• Raised full-year guidance for fiscal 2026: expects revenue over $7.75 billion, pro forma growth ~15% nominal or 14% constant currency. • Coach expected high teens percentage growth, Kate Spade expected high single-digit decline in revenue with sequential improvement in second half. • Anticipates operating margin expansion of approximately 180 basis points, gross margin to increase ~20 basis points, fully offsetting tariff impact. • Expect SG&A leverage of ~160 basis points favorable, marketing as % of sales to increase ~130 basis points. • EPS expected to be $6.40 to $6.45, up over 25% vs prior year, adjusted free cash flow ~$1.5 billion. • Q3 sales trends strong, expected total sales increase in constant currency, operating margin expected to expand ~70 basis points.

• Tariff and duty impact: negative tariff and duty impact of 190 basis points in Q2, including ~140 basis point impact on Coach's gross margin and 520 basis point impact on Kate Spade's gross margin. • FX headwinds: expected 20 basis point FX headwind, partially offset by 70 basis point tailwind. • Dependence on consumer trends and market conditions affecting brand performance and sales.

Q: Matthew Boss asked about the confidence in delivering the fiscal 2026 earnings guide and revenue/margin drivers.

A: Joanne Crevoiserat and Scott Roe responded that the results reflect the power of strategies, brands, and business model, with compounding effects from customer acquisition, product innovation, and scaled investments. Scott mentioned new gear of growth with operational discipline, returning 100% of free cash flow to shareholders, and seeing expanding gross and operating margins from global opportunities.

Q: Brooke Roach asked about confidence in Coach sustaining strong growth momentum in North America.

A: Todd Kahn responded, highlighting TAM opportunities, focus on Gen Z acquisition with heat halo effect, growth from core leather goods category with balanced family and brand codes, AUR at previous levels with runway for units, and strong CPI indicators supporting long-term growth.

Q: Ike Boruchow asked about China and Europe performance.

A: Joanne Crevoiserat and Todd Kahn responded that China saw over 34% revenue growth with broad-based channel growth and Gen Z acquisition driving share gains. Europe has long-term opportunity with low penetration, local consumer focus, and tactical marketing execution. Todd mentioned China collaboration with Clot and Europe's wholesale and neighborhood store approach.

Q: Rick Patel asked about AUR and opportunities.

A: Joanne Crevoiserat and Todd Kahn responded that AUR growth is from brand heat, innovation, and value proposition, with mix and customer aspiration driving growth. They emphasized not compromising value or using artificial promotion, balancing to achieve optimal results.

Q: Adrienne Yih asked about AI in IT and newness from Coach.

A: Joanne Crevoiserat discussed AI tools embedded in product development, inventory, pricing, and marketing, with teams leveraging AI for speed and creativity. Todd Kahn mentioned strong future product pipeline with new innovation and commercial ideas, balancing logic and magic in design.

Q: Bob Drbul asked about demand for signature styles and innovation.

A: Todd Kahn responded that Coach's styles like Tabby, Brooklyn, Terry are strong and well-balanced, with new product lines showing continued growth potential from innovation.

Q: Mark Altschwager asked about gross margin outperformance and back half opportunity.

A: Scott Roe responded that operational improvements, especially AUR growth, are driving gross margin outperformance. Tariff impacts have timing, with majority seen into next year, but full-year guide offsets tariff impact, and next year expected to continue margin expansion.