Tapestry (NYSE:TPR) executives told investors the company delivered “record quarterly results” in its fiscal second quarter, citing strong holiday-season demand, accelerating customer acquisition, and margin expansion that management said reflects the compounding impact of its “Amplify” strategy.
On a pro forma basis, the company reported revenue growth of 18% versus the prior year, expanded adjusted operating margin by 390 basis points, and grew earnings per share by 34% to $2.69, with Chief Executive Officer Joanne Crevoiserat and Chief Financial Officer Scott Roe saying results exceeded expectations and supported a higher full-year outlook.
Quarterly performance and customer growth
Management attributed the quarter’s momentum to a combination of product innovation, brand-building investments, and the company’s direct-to-consumer model. Crevoiserat said Tapestry delivered double-digit gains in North America, Greater China, and Europe, which she said outpaced the industry and resulted in market share gains in each region. Roe added that Tapestry achieved double-digit growth in stores and online “at strong and increasing profitability.”
Brand results: Coach drives growth; Kate Spade executes reset
Coach again led performance. Crevoiserat said Coach revenue increased 25% in the quarter with margin expansion, and that growth accelerated from the first quarter on one- and two-year bases. She highlighted 2.9 million new customers acquired at Coach during the quarter—described as the highest in the brand’s history—led by Gen Z.
Coach’s growth was driven by its core leather goods business, which management said benefited from both higher average unit retail (AUR) and higher unit volumes, each rising at mid-teens rates within leather goods. Crevoiserat also emphasized the breadth of demand, noting no single leather goods family accounted for more than 10% of sales. She cited strength in North America (up 27%), Greater China (up 37%), and Europe (up 26%).
Management discussed several product and marketing drivers at Coach, including continued strength in key franchises such as Tabby, the New York family (including Brooklyn and Empire), and Teri, as well as Juliet and Laurel. The company said it animated “hero silhouettes” through new colorways, materials such as crystals, and sizes during the holiday period. Footwear grew at a high single-digit rate, led by sneakers including the Soho family, and the brand launched the Margot family with sandals and slingbacks.
Coach also increased marketing spend by about 40% versus the prior year, with management describing a shift toward top-of-funnel brand building. Crevoiserat said the brand reduced promotional messaging during what she called the “most discount-driven period of the year,” while still accelerating customer acquisition. She highlighted the holiday campaign “Gift for New Adventures,” which featured a global cast including Elle Fanning, Charles Melton, Kōki, and K-pop rapper Soyeon. In China, Coach launched a collaboration with CLOT, which management said helped support growth acceleration.
Kate Spade posted results that management said matched expectations as the brand continues a reset. Crevoiserat said second-quarter revenue declined 14%, reflecting in part “deliberate actions” to reduce promotional activity. She said the company made incremental investments to advance the turnaround and reported progress in leading indicators it has previously outlined, including improved brand consideration tied to its holiday marketing and improved Gen Z acquisition trends driven by handbags.
Crevoiserat said Kate Spade’s “handbag blockbusters”—the Duo, Kayla, Margot, and 454—outperformed the rest of the assortment, with higher AUR and strong Gen Z acquisition. She also said the brand reduced handbag styles by 40% during the holiday period to focus the assortment and support less promotional activity, higher full-price selling, and handbag AUR growth. In addition, Kate Spade tested visual and merchandising updates in 10 locations, which management said lifted conversion and average dollar transaction and outperformed the broader chain, with plans to expand the format in North America by fiscal year-end.
Regional and channel trends
Roe detailed performance on a pro forma constant-currency basis, with North America revenue up 17%, Europe up 22%, and Greater China up 34%. He said Greater China outperformed expectations with broad-based growth across channels and market share gains, noting digital as a “notable contributor” and that Coach ranked as a top-performing brand over the Double 11 period. In other Asia, revenue increased 12%, led primarily by Australia and South Korea, while Japan declined 6% as expected due to an intentional pullback in promotions.
By channel, Roe said direct-to-consumer revenue grew 17%, including about 20% growth in digital and a mid-teens increase in global brick-and-mortar sales.
Margins, tariffs, and capital returns
Tapestry’s second-quarter gross margin was 75.5%, up 110 basis points year over year. Roe said this reflected about 250 basis points of “operational” expansion and a 50-basis-point benefit from the divestiture of Stuart Weitzman, offsetting a 190-basis-point headwind from tariffs and duties. He quantified the tariff impact as roughly 140 basis points on Coach’s gross margin and 520 basis points on Kate Spade’s gross margin.
SG&A expenses rose 8% but leveraged by 270 basis points, which Roe attributed to expense discipline while reinvesting in growth—particularly marketing, which was 11% of sales in the quarter.
On capital allocation, Roe said the board declared a quarterly dividend of $0.40 per share, representing $81 million in dividend payments for the quarter. The company also repurchased $400 million of stock during the quarter, bringing year-to-date repurchases to $900 million, or about 8.3 million shares, at an average stock price of $109. Roe said Tapestry now expects to return $1.5 billion, or 100% of expected adjusted free cash flow, to shareholders in fiscal 2026 through dividends and repurchases, including $1.2 billion of buybacks (up from a prior $1.0 billion outlook) and more than $300 million in dividends.
Roe said the company ended the quarter with nearly $1.1 billion in cash and investments and total borrowings of $2.4 billion, implying net debt of $1.3 billion. Gross debt to adjusted EBITDA was 1.2x, which he said is more than a full turn below Tapestry’s long-term target. Adjusted free cash flow for the quarter was an inflow of $1.0 billion, and CapEx and cloud computing costs were $54 million.
Raised fiscal 2026 outlook and AI investments
Management raised its fiscal 2026 guidance (provided on a non-GAAP basis and excluding Stuart Weitzman). Roe said Tapestry now expects revenue of over $7.75 billion, representing pro forma growth of about 15% nominally, or 14% constant currency, with foreign exchange expected to be a 70-basis-point tailwind. The company guided to operating margin expansion of about 180 basis points and EPS of $6.40 to $6.45, compared with a prior outlook of $5.45 to $5.60. Roe also guided to adjusted free cash flow of about $1.5 billion and CapEx and cloud computing costs of around $200 million.
For the third quarter, Roe said early sales trends remained strong, with the company modeling about 14% pro forma constant-currency sales growth and forecasting EPS of about $1.25.
During Q&A, management emphasized what it described as durable drivers of growth at Coach, including customer acquisition, balanced product families, and contributions from both AUR and units without relying on promotions. Coach CEO and Brand President Todd Kahn said global market share remains below 1% and described North America share as “single digits,” while noting unit volumes remain below pre-pandemic levels.
Executives also discussed the company’s use of AI, with Crevoiserat saying Tapestry is applying AI tools across the value chain—product development, inventory management, pricing, and marketing—and described a focus on putting tools “in the hands of the decision-makers.” She cited examples including faster design iteration and more rapid content testing in marketing, while Roe added that a significant portion of the company’s technology foundation is already in place, making adoption more of a change-management opportunity than a large incremental capital challenge.
In closing remarks, Crevoiserat said the company is “moving forward with confidence” and remains focused on sustainable growth and long-term shareholder value.
About Tapestry (NYSE:TPR)
Tapestry, Inc is a New York City–based house of fashion brands that designs, produces and distributes a range of accessible luxury and lifestyle products. The company manages a portfolio led by Coach, along with Kate Spade New York and Stuart Weitzman, each offering distinct product lines that include handbags and leather goods, footwear, ready-to-wear apparel, accessories, small leather goods, jewelry and lifestyle items. Tapestry’s operations encompass product design, marketing, wholesale partnerships, retail store operations and digital commerce.
Historically, the Coach brand traces its roots to a leather workshop in New York dating to the mid-20th century.
