Tapestry(TPR) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a pro forma revenue increase of 16%, adjusted operating margin expansion of 200 basis points, and earnings per share growth of 35% compared to the previous year, all exceeding expectations [4][19][24] - The first-quarter gross margin was 76.5%, reflecting a 120 basis point increase year-over-year, driven by operational improvements and the divestiture of Stuart Weitzman [22][23] Business Line Data and Key Metrics Changes - Coach brand revenue increased by 21%, with North America growing by 26%, China by 21%, and Europe by 39%, indicating strong performance across key markets [6][7][19] - Kate Spade's revenue trends improved sequentially, with a decline of 9% in the first quarter, showing signs of progress in the turnaround efforts [12][13] Market Data and Key Metrics Changes - North America sales accelerated by 18%, Europe revenue grew by 32%, and Greater China revenue increased by 19%, showcasing strong global momentum [19][20] - In Japan, sales declined by 10%, reflecting a challenging consumer environment [21] Company Strategy and Development Direction - The company is focused on its Amplify Growth agenda, emphasizing emotional connections with consumers and targeting Gen Z for customer acquisition [4][5] - The strategy includes product innovation, enhancing direct-to-consumer channels, and creating immersive retail experiences [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth, citing structural advantages and a strong pipeline of innovation [36][39] - The company raised its fiscal 2026 outlook, expecting revenue of approximately $7.3 billion, representing pro forma growth of 7%-8% [27][28] Other Important Information - The company declared a quarterly cash dividend of $0.40 per share and plans to return $1.3 billion to shareholders through dividends and share repurchases [24][25] - Inventory levels were reported to be 1% below the prior year, indicating effective inventory management [26] Q&A Session Summary Question: Drivers of accelerated growth and sustainability - Management highlighted structural advantages and a focus on new customer acquisition, particularly among Gen Z, as key drivers of growth [35][36] Question: Breakdown of Coach's revenue growth - The growth was attributed to significant customer acquisition, increased average unit retail (AUR), and geographic expansion [40][41] Question: Gross margin expectations - Management confirmed that gross margin guidance remains unchanged, with ongoing progress against tariff impacts [44][46] Question: European market dynamics - The company noted a positive inflection in Europe, driven by effective marketing and customer acquisition strategies [49][50] Question: Kate Spade's merchandise margin progress - Management acknowledged the impact of tariffs and ongoing investments in customer engagement as factors affecting margins [51][52]