TAPESTRY Q4 FY26 earnings call TPR

Tapestry significantly exceeded its 3-year Investor Day commitments two years ahead of schedule in FY26, achieving $8 billion in revenue (up 17% pro forma constant currency), expanding operating margin to over 23% (up 340 bps), and increasing EPS by 38% to $7.05. This success was driven by intentional choices, disciplined execution, and a deep understanding of the consumer, strengthening the organization for durable growth and long-term shareholder value. The company's direct consumer relationships, data-driven decision-making, global scale, and agile operating model are cited as increasing competitive advantages.

Coach delivered another strong quarter with 14% constant currency revenue growth, capping an exceptional year. The brand welcomed 9 million new customers in FY26 (2 million in Q4 alone), primarily Gen Z, and saw existing customers drive strong sales. Handbag average unit retail (AUR) increased mid-teens, and unit volumes were roughly in line with the prior year, reflecting a deliberate strategy to prioritize brand health and reduce promotions. Strong performance was observed across North America (up 10%), Greater China (up 30%), and Europe (up 25%), reinforcing Coach's global resonance and path to becoming a $10 billion brand.

Kate Spade's strategy involves streamlining, solidifying its foundation, and positioning for scale. While top-line progress was more gradual than planned in FY26, the brand saw continued improvement in handbags, driven by blockbuster families like Margot, 454, and Duo. Kate Spade acquired 2 million new customers in FY26 (450,000 in Q4) at higher AURs. The appointment of Allison Badea as CMO and Jonathan Saunders as Executive Creative Director is expected to fuel brand desirability and creative execution as the brand moves towards sustainable, profitable growth.

Tapestry views international markets, particularly Europe and Greater China, as significant long-term growth opportunities due to relatively low brand penetration. Europe revenue grew 19% in Q4, and Greater China revenue rose 28%, both driven by robust new customer acquisition, especially among Gen Z, and meaningful market share gains. Japan is forecasted to return to growth in FY27, and Other Asia anticipates high single-digit gains, highlighting broad-based international momentum.

The company's D2C-led model continued to drive strong results, with D2C revenue increasing 11%, digital sales up mid-single digits, and global brick-and-mortar sales up mid-teens in Q4. Gross margin expanded 180 bps to 78.1% in Q4, primarily due to operational improvements and a favorable impact from the Stuart Weitzman divestiture, despite tariff headwinds^🌐. SG&A leveraged 80 bps, leading to a 250 bps expansion in operating margin and a 25% increase in operating income.

In FY26, Tapestry returned $1.7 billion to shareholders, comprising $326 million in dividends and $1.35 billion in share repurchases. For FY27, the company plans to return another $1.7 billion, including a 16% dividend increase to an annualized rate of $1.85 per share and $1.35 billion in share repurchases. The company maintains a strong balance sheet with $1.2 billion in cash and short-term investments, net debt of $1.2 billion, and a gross debt to adjusted EBITDA leverage ratio of 1.1x, well below its long-term target of 2.5x.

Tapestry is committed to leveraging AI, having secured its first AI patent and building on over a decade of investment in data and decision intelligence to differentiate operations. The company plans a step-up in CapEx and cloud computing costs to $300 million in FY27, with 70% allocated to growing and enhancing its store fleet. Coach specifically aims to add 40-50 net new doors globally (75% international) and expand its expressive luxury store concept to impact 80% of traffic by FY30, driving higher engagement with Gen Z.