Tapestry(US:TPR)2025-11-06 11:47Financial Performance - Net sales for the first quarter of fiscal 2026 were $1,704.6 million, a 13.1% increase from $1,507.5 million in the first quarter of fiscal 2025[180]. - Gross profit increased to $1,300.5 million, representing 76.3% of net sales, compared to 75.3% in the prior year[180]. - Operating income rose by 30.2% to $328.2 million, up from $252.0 million in the same quarter last year[180]. - Net income for the first quarter of fiscal 2026 was $274.8 million, a 47.2% increase from $186.6 million in the first quarter of fiscal 2025[180]. - In the first quarter of fiscal 2026, total net sales increased by 13.1% or $197.1 million to $1.70 billion compared to the same period in fiscal 2025[191]. - Coach's net sales rose by 22.1% or $259.2 million to $1.43 billion, driven by a $222.7 million increase in DTC sales[192]. - Kate Spade's net sales decreased by 8.1% or $23.0 million to $260.2 million, primarily due to a $28.1 million decline in DTC sales[192]. - Gross profit increased by 14.6% or $165.6 million to $1.30 billion, with a gross margin of 76.3%, up 100 basis points from the previous year[193]. - Operating income increased by $76.2 million to $328.2 million in Q1 fiscal 2026, with an operating margin of 19.3%, up from 16.7% in Q1 fiscal 2025[200]. - Coach's operating income rose by $100.8 million to $487.4 million, with an operating margin of 34.1%, compared to 33.0% in the prior year[202]. - Kate Spade's operating income decreased by $21.4 million to $5.6 million, resulting in an operating margin drop to 2.1% from 9.6%[202]. - Net income increased by 47.2% or $88.2 million to $274.8 million in Q1 fiscal 2026, with net income per diluted share rising to $1.28 from $0.79[205][206]. Divestitures and Acquisitions - The Company divested the Stuart Weitzman business for $105.0 million, completed on August 4, 2025[164]. - The Company incurred total pre-tax charges of $14.7 million related to the Stuart Weitzman divestiture, impacting operating income[186]. - The divestiture of Stuart Weitzman resulted in net sales of $14.6 million and an operating loss of $1.0 million for the first quarter of fiscal 2026[190]. - Excluding the impact of the Stuart Weitzman business, net sales increased by 15.5% or $225.6 million[191]. - The Company completed the divestiture of the Stuart Weitzman Business for total cash consideration of $105.0 million on August 4, 2025[229]. Expenses and Charges - SG&A expenses rose by 10.1% or $89.4 million to $972.3 million, but as a percentage of net sales, they decreased to 57.0% from 58.6%[197]. - Organizational efficiency costs accounted for pre-tax charges of $11.0 million, primarily due to technology and severance costs[186]. - The Company recorded impairment charges of $244.1 million related to goodwill and $610.7 million related to brand intangibles for the Kate Spade reporting unit during fiscal 2025[237]. Cash Flow and Debt - Net cash provided by operating activities decreased by $6.9 million to $112.6 million, primarily due to changes in operating assets and liabilities[216]. - Net cash provided by investing activities was $69.3 million, a decrease of $120.8 million compared to $190.1 million in Q1 fiscal 2025[215]. - Net cash used in financing activities increased to $550.8 million from $74.5 million, primarily due to stock repurchases of $698.2 million[219][220]. - Total debt increased slightly by $0.7 million, with long-term debt at $2,378.6 million and current debt at $256.8 million[223]. - As of September 27, 2025, cash and cash equivalents decreased by $380.5 million to $719.5 million compared to $1,100.0 million on June 28, 2025[223]. - The Company has a total availability of $2.00 billion under its Amended Revolving Credit Facility and Commercial Paper Program, with $240.0 million currently outstanding[224]. - The Company issued notes under the Commercial Paper Program with a weighted average interest rate of 4.260%, totaling $240.0 million outstanding as of September 27, 2025[228]. Market Conditions and Strategy - The macroeconomic environment remains challenging, with ongoing geopolitical instability and trade tensions affecting consumer spending patterns[171]. - The Company aims to drive new customer acquisition focusing on Gen Z consumers and expand its lifestyle offerings in footwear[163]. - Management believes that cash flows from operations and access to credit markets will support operating and capital requirements for fiscal 2026 and beyond[226]. Tax and Corporate Expenses - The effective tax rate decreased to 13.8% in Q1 fiscal 2026 from 17.3% in Q1 fiscal 2025, attributed to excess tax windfall related to share-based compensation[204]. - Corporate operating expenses increased by 6.3% or $9.6 million to $163.8 million, driven by higher professional fees and compensation costs[202]. - Other income decreased by $1.1 million to $3.3 million, primarily due to a decrease in foreign exchange gains[203]. Capital Expenditures and Stock Repurchase - Capital expenditures for the first quarter of fiscal 2026 were $38.0 million, with an expectation of approximately $200.0 million for the full fiscal year[231]. - The Company repurchased $500.0 million of common stock during the three months ended September 27, 2025, with $2.74 billion remaining under the 2026 Share Repurchase Program[233].