Detailed Narrative
FY25 Performance and Investor Day Target Achievement
Tapestry achieved a breakout fiscal year 2025, delivering $7 billion in revenue and $5.10 in adjusted EPS, meaningfully growing versus the prior year. The company successfully met key targets set at its Investor Day three years ago, including over $5 in earnings and returning more than $3 billion cumulatively to shareholders. These results were achieved amidst a complex macroeconomic environment, demonstrating the business's resilience and agility.
Coach Brand Momentum and Customer Acquisition
Coach delivered its strongest year in history, with a 10% revenue increase for FY25 and 13% constant currency top-line gains in Q4, driven by double-digit growth across North America (16%), China (22%), and Europe (12%). The brand acquired over 4.6 million new customers in North America, with nearly 70% being Gen Z and millennials, who exhibit higher AUR and retention rates. Product innovation, such as the Tabby family and New York family, along with successful archival-inspired collections like the Large Kisslock bag, fueled brand heat and relevance.
Kate Spade Turnaround Strategy and Investment
Kate Spade's performance was pressured in Q4, with revenue decreasing 13%, as the brand is in the early stages of a strategic reset. The strategy focuses on fueling brand heat through marketing to Gen Z consumers, strengthening the handbag offering by simplifying and elevating the assortment (reducing styles by over 30% by fall), and maximizing omnichannel cohesiveness. Fiscal year 2026 is planned as a year of investment, which will pressure revenue and profitability but is deemed essential for long-term sustainable growth.
Stuart Weitzman Divestiture and Capital Allocation
Tapestry completed the sale of the Stuart Weitzman brand to Caleres on August 4, aligning with its commitment to disciplined capital allocation and portfolio management. The company's capital allocation priorities include investing in brands for long-term growth and returning capital to shareholders via dividends, with a 14% quarterly dividend increase authorized for FY26. Share repurchases remain a key value creation driver, with $800 million expected in FY26, and the company maintains a long-term gross leverage target of below 2.5x.
Tariff Headwinds and Mitigation Strategies
The company faces greater than expected profit headwinds from tariffs and duties in FY26, totaling $160 million, representing a 230 basis point margin headwind. This includes the earlier-than-expected ending of de minimis exemptions, which accounts for approximately one-third of the impact. Tapestry is implementing mitigation strategies, including leveraging its agile supply chain to optimize global manufacturing and working with service providers to drive efficiencies, aiming to fully offset these impacts over time⏳.
Strong Start to FY26 and Gross Margin Phasing
Tapestry has started FY26 strong, with revenue trends accelerating at Coach, leading to an anticipated low double-digit total sales gain in Q1. While underlying operational gross margin strength is expected to continue, the impact of tariffs will cause gross margin pressure, primarily in the second half of FY26. Q1 FY26 reported gross margins are anticipated to increase by approximately 100 basis points, driven by structural operational strength, before tariff impact🌐s become more pronounced later in the year.