Tapestry(TPR) - 2026 Q2 - Quarterly Report

Financial Performance - Net sales for the second quarter of fiscal 2026 reached $2,502.4 million, a 14.0% increase compared to $2,195.4 million in the second quarter of fiscal 2025[184] - Gross profit for the second quarter of fiscal 2026 was $1,888.4 million, representing 75.5% of net sales, up from 74.4% in the prior year[184] - Operating income increased by 45.4% to $716.4 million in the second quarter of fiscal 2026, compared to $492.8 million in the same period last year[184] - Net income for the second quarter of fiscal 2026 was $561.3 million, an 80.9% increase from $310.4 million in the second quarter of fiscal 2025[184] - Basic net income per share rose to $2.75 in the second quarter of fiscal 2026, up 94.9% from $1.41 in the prior year[184] - Net sales for the second quarter of fiscal 2026 increased by 14.0% or $307.0 million to $2.50 billion compared to the same period in fiscal 2025[195] - Coach's net sales rose by 25.3% or $433.1 million to $2.14 billion, driven by a $373.6 million increase in DTC sales, particularly in North America, Greater China, and Europe[198] - Kate Spade's net sales decreased by 13.6% or $56.4 million to $360.0 million, primarily due to a $54.0 million decline in DTC sales[198] - Gross profit increased by 15.6% or $255.3 million to $1.89 billion, with a gross margin improvement of 110 basis points to 75.5%[196] - Operating income for the second quarter of fiscal 2026 was reported at $716.4 million, reflecting a significant increase from $492.8 million in the same quarter of fiscal 2025[203] - Net income increased by 80.9% or $250.9 million to $561.3 million in Q2 fiscal 2026, compared to $310.4 million in Q2 fiscal 2025[210] - Net income per diluted share was $2.68 in Q2 fiscal 2026, up from $1.38 in Q2 fiscal 2025, reflecting a significant increase in profitability[211] - Net income increased by 68.2% or $339.1 million to $836.1 million in the first six months of fiscal 2026, compared to $497.0 million in the same period of fiscal 2025[239] - Net income per diluted share rose to $3.93 in the first six months of fiscal 2026, up from $2.17 in the same period of fiscal 2025[240] Expenses and Margins - SG&A expenses rose by 2.8% or $31.7 million to $1.17 billion, while the percentage of net sales decreased to 46.8% from 51.9%[201] - SG&A expenses decreased by 1.3% or $2.8 million to $202.8 million in Q2 fiscal 2026, while SG&A as a percentage of net sales increased to 56.4% from 49.3%[205] - Gross margin increased by 80 basis points due to net pricing improvements, despite higher tariffs impacting costs[212] - Kate Spade's operating income decreased by $51.7 million to $16.3 million, with an operating margin decline to 4.5% from 16.4% in Q2 fiscal 2025[212] - SG&A expenses rose by 6.0% or $121.1 million to $2.14 billion, but as a percentage of net sales, they decreased to 51.0% from 54.6%[230] - Operating income increased by $299.8 million to $1.04 billion, with an operating margin of 24.8%, up from 20.1%[231] - The divestiture of Stuart Weitzman contributed to a 100 basis point increase in operating margin, reflecting improved profitability[233] - Coach Operating Income increased by $326.4 million to $1.33 billion in the first six months of fiscal 2026, with an operating margin of 37.3% compared to 35.0% in the same period of fiscal 2025[238] - Kate Spade Operating Income decreased by $73.1 million to $21.9 million in the first six months of fiscal 2026, resulting in an operating margin of 3.5%, down from 13.6% in the prior year[238] Cash Flow and Financing - Net cash provided by operating activities increased by $568.2 million to $1,193.7 million in the first six months of fiscal 2026, driven by higher net income and changes in operating assets and liabilities[250] - Net cash used in financing activities was $1.26 billion in the first six months of fiscal 2026, a decrease of $5.52 billion compared to $6.78 billion in the same period of fiscal 2025[253] - The Company reported a decrease in cash and cash equivalents of $46.7 million in the first six months of fiscal 2026, compared to a decrease of $5.16 billion in the same period of fiscal 2025[249] - The Company had total availability of $2.00 billion under its Amended Revolving Credit Facility as of December 27, 2025[258] - The Company entered into a Commercial Paper Program allowing for the issuance of up to $2.00 billion of unsecured commercial paper notes, with no borrowings outstanding as of December 27, 2025[262] Divestitures and Acquisitions - The Company divested the Stuart Weitzman Business for total cash consideration of $105.0 million, completed on August 4, 2025[169] - The divestiture of the Stuart Weitzman business was effective in the first quarter of fiscal 2026, leading to a restructuring of reportable segments to Coach and Kate Spade[194] - Total pre-tax income related to the Stuart Weitzman divestiture was $0.8 million, primarily from a Transition Services Agreement[188] - The Company completed the divestiture of the Stuart Weitzman Business for total cash consideration of $105.0 million on August 4, 2025[263] Organizational Changes and Efficiency - The Company aims to sustain growth in North America while accelerating momentum in international markets, particularly in Greater China and Europe[168] - Organizational efficiency costs amounted to $4.2 million, mainly associated with technology expenses[188] - The Company has a voluntary supply chain finance program to improve working capital efficiency, allowing suppliers to sell receivables on a non-recourse basis[264] Market and Economic Factors - The macroeconomic environment has negatively impacted gross margin by approximately 190 basis points for the three months ended December 27, 2025, due to tariff changes[175] - Fluctuations in foreign currency exchange rates resulted in increased net sales of $11.4 million for the six months ended December 27, 2025, but negatively impacted gross margin and operating margin by approximately 20 basis points each[177] - There have been no significant changes to the Company's market risk management as of the latest reporting period[273] Capital Expenditures and Share Repurchase - Capital expenditures and cloud computing implementation costs for the three and six months ended December 27, 2025, were $54.2 million and $92.2 million, respectively, with an expectation of approximately $200.0 million for fiscal 2026[265] - The Company announced a 2026 Share Repurchase Program to repurchase up to $3.00 billion of its outstanding common stock, replacing the previous program with $561.7 million remaining[266] - During the six months ended December 27, 2025, the Company repurchased $900.0 million of common stock, with $661.7 million under the 2026 Share Repurchase Program[267] - As of December 27, 2025, the Company had $2.34 billion of remaining repurchase authorization under the 2026 Share Repurchase Program[267]