Tapestry Q2 2026 Tapestry Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Tapestry Inc Earnings Call
Operator: Please stand by. Your meeting is about to begin. Good day, and welcome to this Tapestry Conference Call. Today's call is being recorded. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone.
Operator: Please stand by. Your meeting is about to begin. Good day, and welcome to this Tapestry Conference Call. Today's call is being recorded. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. At this time, for opening remarks and introductions, I would like to turn the call over to the Global Head of Investor Relations, Christina Colone.
Speaker #2: stand by . Your Please about meeting is to begin . day and welcome to this tapestry Good Conference call . Today's call is being recorded .
Speaker #2: Later you will have the opportunity to ask during the questions question and answer . To to ask register , a question time , at any press please one on your star keypad .
Speaker #2: this At for opening time , remarks and introductions , I would like to turn the over to Global Head of call Relations , Investor session Christina Colone .
Christina Colone: Good morning. Thank you for joining us. With me today to discuss our second quarter results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements... please refer to our annual report on Form 10-K, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance.
Christina Colone: Good morning. Thank you for joining us. With me today to discuss our second quarter results, as well as our strategies and outlook, are Joanne Crevoiserat, Tapestry's Chief Executive Officer, and Scott Roe, Tapestry's Chief Financial Officer and Chief Operating Officer. Before we begin, we must point out this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes projections for our business in the current or future quarters or fiscal years. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements... please refer to our annual report on Form 10-K, the press release we issued this morning, and our other filings with the Securities and Exchange Commission for a complete list of risks and other important factors that could impact our future results and performance.
Speaker #3: Good morning . Thank you With me us . today to discuss our results , as well as our strategies and outlook are Joanne Crevoiserat Tapestry's Chief joining Executive Officer and Scott Tapestry's , Financial Chief Operating Officer and Chief officer .
Speaker #3: Before we must begin , we point out that this conference call will involve forward looking statements within the meaning of the private securities Litigation Reform Act .
Speaker #3: This includes projections for our business in the current or future quarters or fiscal years . Forward looking statements are not guarantees and our actual results may differ materially from those expressed or implied in the forward looking statements .
Speaker #3: Please refer to our annual Report on Form 10-K . The press release we issued this morning and our other filings with the Securities and Exchange Commission for a complete list of important risks and other factors that could impact our future performance results and non-GAAP Financial measures .
Christina Colone: Non-GAAP financial measures are included in our comments today and in our presentation slides. For a full reconciliation to corresponding GAAP financial information, please visit our website, www.tapestry.com/investors, and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brands. Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, CEO and Brand President of Coach. After Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO.
Christina Colone: Non-GAAP financial measures are included in our comments today and in our presentation slides. For a full reconciliation to corresponding GAAP financial information, please visit our website, www.tapestry.com/investors, and then view the earnings release and the presentation posted today. Now, let me outline the speakers and topics for this conference call. Joanne will begin with highlights for Tapestry and our brands. Scott will continue with our financial results, capital allocation priorities, and our outlook going forward. Following that, we will hold a question-and-answer session, where we will be joined by Todd Kahn, CEO and Brand President of Coach. After Q&A, Joanne will conclude with brief closing remarks. I'd now like to turn it over to Joanne Crevoiserat, Tapestry's CEO.
Speaker #3: In our comments today and in the presentation or slides, you'll find a full reconciliation to the corresponding GAAP financial information. Please visit our site, and then view the release and the presentation posted today.
Speaker #3: Now, let me outline the topics for this conference speakers call. Joanne will begin with four highlights: Tapestry and our certain brands.
Speaker #3: Scott will continue with our financial results . Capital allocation priorities and outlook going forward . Following that , we will hold our question and answer session where we will be joined by Todd Kahn , CEO and Brand president of Koch .
Speaker #3: Q&A . After Joanne will conclude with closing remarks . I'd now brief like to turn it over to Joanne Crevoiserat earnings CEO , tapestry .
Joanne Crevoiserat: Good morning. Thank you, Christina, and welcome, everyone. Our second quarter outperformance demonstrates the compounding impact of our Amplify strategies. During the key holiday period, we delivered pro forma revenue growth of 18%, expanded adjusted operating margin by 390 basis points, and grew earnings per share by 34% versus prior year, each exceeding our expectations. These standout results, combined with the momentum in our business, enabled us to confidently increase our outlook for the year, reinforcing that our advantages are structural and sustainable and underscoring our commitment to driving durable growth and value creation. I want to recognize our exceptional global teams. Their passion, creativity, and disciplined execution made these results possible. Now, turning to the strategic actions from the quarter, actions that are delivering results today while advancing our long-term growth ambition.
Joanne Crevoiserat: Good morning. Thank you, Christina, and welcome, everyone. Our second quarter outperformance demonstrates the compounding impact of our Amplify strategies. During the key holiday period, we delivered pro forma revenue growth of 18%, expanded adjusted operating margin by 390 basis points, and grew earnings per share by 34% versus prior year, each exceeding our expectations. These standout results, combined with the momentum in our business, enabled us to confidently increase our outlook for the year, reinforcing that our advantages are structural and sustainable and underscoring our commitment to driving durable growth and value creation. I want to recognize our exceptional global teams. Their passion, creativity, and disciplined execution made these results possible. Now, turning to the strategic actions from the quarter, actions that are delivering results today while advancing our long-term growth ambition.
Speaker #3: Good morning .
Speaker #4: Thank you , Christina , and welcome everyone . Our second quarter outperformance amplify compounding strategies . During the key holiday period . We growth proforma delivered of 18% , adjusted operating expanded by margin 390 basis points , and grew earnings per share by 34% versus prior year .
Speaker #4: Each exceeding our expectations . standout results , These combined with the momentum in our business , enabled us confidently increase our outlook for the year , reinforcing that our advantages are structural and sustainable , and underscoring our commitment driving growth durable and value creation I want to recognize our exceptional global teams , their passion , creativity and disciplined execution made these results possible .
Speaker #4: turning Now to the strategic actions from the quarter . Actions that are delivering results today . advancing our long term growth ambition . First , we built emotional connections with consumers , acquiring over 3.7 million new customers globally in the quarter , driven by a strategic focus on Gen Z .
Joanne Crevoiserat: First, we built emotional connections with consumers, acquiring over 3.7 million new customers globally in the quarter, driven by a strategic focus on Gen Z. This continues to be central to our healthy top-line growth, as engaging consumers earlier in their purchase journey enhances repeat purchasing and lifetime value over time. We also drove growth with our existing customer base, demonstrating broad-based strength. These dynamics reinforce a durable competitive advantage, our ability to consistently attract and retain new generations of consumers to our brands. Next, we delivered fashion innovation and product excellence led by Coach, where desire and demand for the brand are strong. And we're winning in our core, with our leather goods offering leading our growth, driven by higher AUR and unit volume.
Joanne Crevoiserat: First, we built emotional connections with consumers, acquiring over 3.7 million new customers globally in the quarter, driven by a strategic focus on Gen Z. This continues to be central to our healthy top-line growth, as engaging consumers earlier in their purchase journey enhances repeat purchasing and lifetime value over time. We also drove growth with our existing customer base, demonstrating broad-based strength. These dynamics reinforce a durable competitive advantage, our ability to consistently attract and retain new generations of consumers to our brands. Next, we delivered fashion innovation and product excellence led by Coach, where desire and demand for the brand are strong. And we're winning in our core, with our leather goods offering leading our growth, driven by higher AUR and unit volume.
Speaker #4: This be central to our healthy top growth , as engaging line consumers earlier in their purchase journey enhances repeat purchasing and lifetime over value time .
Speaker #4: also We growth with our existing customer base , demonstrating broad based continues to . dynamics reinforce a durable competitive advantage . Our ability to consistently attract and retain new generations of consumers to our brands .
Speaker #4: Next , we delivered fashion , innovation and product excellence by led coach desire and demand , where for the brand are strong and we're winning in our core with our leather goods leading our growth offering , driven by higher order and unit volume .
Joanne Crevoiserat: The combination of craftsmanship, creativity, and value we offer to consumers at scale continues to be a clear, competitive, and structural advantage of our business and brands. We powered global growth through compelling experiences, delivering double-digit gains in North America, Greater China, and Europe, significantly outpacing the industry and growing market share in each of these regions. Our direct-to-consumer model keeps us close to our customers, allowing a deeper understanding of their needs and enabling more relevant brand building, which, together with the agility of our teams, sharpens execution and fuels growth. This was evident again this quarter as we achieved double-digit growth in stores and online at strong and increasing profitability. Overall, we delivered record quarterly results with a business that is strong, differentiated, and well-positioned for the future. Now, moving to our results by brand.
Joanne Crevoiserat: The combination of craftsmanship, creativity, and value we offer to consumers at scale continues to be a clear, competitive, and structural advantage of our business and brands. We powered global growth through compelling experiences, delivering double-digit gains in North America, Greater China, and Europe, significantly outpacing the industry and growing market share in each of these regions. Our direct-to-consumer model keeps us close to our customers, allowing a deeper understanding of their needs and enabling more relevant brand building, which, together with the agility of our teams, sharpens execution and fuels growth. This was evident again this quarter as we achieved double-digit growth in stores and online at strong and increasing profitability. Overall, we delivered record quarterly results with a business that is strong, differentiated, and well-positioned for the future. Now, moving to our results by brand.
Speaker #4: The combination of craftsmanship , creativity and value we offer to consumers scale continues to be a clear , competitive business and advantage of our brands at global , and we powered growth through compelling experiences , delivering double digit gains in North America , Greater and Europe , significantly outpacing the growing market share in each of these regions .
Speaker #4: Our direct to consumer model us keeps close to our customers , allowing a deeper their understanding of industry and and enabling more relevant brand building , which , together with the agility of our teams , sharpens execution and fuels growth .
Speaker #4: This was evident again this quarter as we achieved double digit in growth stores and online at strong and increasing profitability . Overall , we delivered record quarterly results with a business that is strong , differentiated and well positioned for the future .
Speaker #4: moving to Now our results by brand . Turning to coach the brand delivered exceptional quarter with revenue 25% and increasing . Growth expanding accelerated from the first quarter on a and two year with one basis , indicators key reinforcing the strength of the brand and the its durability of growth .
Joanne Crevoiserat: Turning to Coach, the brand delivered another exceptional quarter, with revenue increasing 25% and margins expanding. Growth accelerated from Q1 on a 1- and 2-year basis, with several key indicators reinforcing the strength of the brand and the durability of its growth. Customer acquisition once again drove top-line gains, welcoming 2.9 million new customers to the brand this quarter, rising meaningfully over the prior year, led by continued growth with our target Gen Z consumer. Our relevance with Gen Z is influencing all other generations, and we're driving healthy gains from existing customers, reflecting broad and increasing brand desire and reach. Growth was led by our core leather goods assortment, where we have deep expertise and clear differentiation, with broad-based strength and no single family accounting for more than 10% of sales.
Joanne Crevoiserat: Turning to Coach, the brand delivered another exceptional quarter, with revenue increasing 25% and margins expanding. Growth accelerated from Q1 on a 1- and 2-year basis, with several key indicators reinforcing the strength of the brand and the durability of its growth. Customer acquisition once again drove top-line gains, welcoming 2.9 million new customers to the brand this quarter, rising meaningfully over the prior year, led by continued growth with our target Gen Z consumer. Our relevance with Gen Z is influencing all other generations, and we're driving healthy gains from existing customers, reflecting broad and increasing brand desire and reach. Growth was led by our core leather goods assortment, where we have deep expertise and clear differentiation, with broad-based strength and no single family accounting for more than 10% of sales.
Speaker #4: Customer acquisition once again drove top line gains , welcoming 2.9 million new customers to the this quarter , brand rising meaningfully over prior the year .
Speaker #4: LED continued growth with our by target Gen Z , our consumer relevance with Gen Z is influencing all other generations , and we're driving healthy gains from existing customers , reflecting broad and increasing brand desire and reach .
Speaker #4: Growth was led by our core leather goods assortment, where we have deep expertise and clear, broad-based strength in single-family, no accounting.
Speaker #4: with For more than 10% of sales . Within leather goods , growth diversified , was well with both average retail and unit volumes unit increasing at mid-teens rates , demonstrating multiple drivers sustainable of growth in the core and momentum remains strong across key geographies , including North America , 27% .
Joanne Crevoiserat: Within leather goods, growth was well diversified, with both average unit retail and unit volumes increasing at mid-teens rates, demonstrating multiple drivers of sustainable growth in the core. Momentum remains strong across key geographies, including North America, up 27%, Greater China, rising 37%, and Europe, increasing 26%, highlighting the global resonance of the brand and the effectiveness of our regional strategies. With a large total addressable market of nearly 2 billion consumers, including 275 million at the point of market entry, we have under 1% share and meaningful opportunity ahead. Coach continues to benefit from its expressive luxury positioning, combining 85 years of heritage, craftsmanship, creativity, and value to build enduring customer relationships and support sustained growth. Now, to discuss our Q2 results in more detail....
Joanne Crevoiserat: Within leather goods, growth was well diversified, with both average unit retail and unit volumes increasing at mid-teens rates, demonstrating multiple drivers of sustainable growth in the core. Momentum remains strong across key geographies, including North America, up 27%, Greater China, rising 37%, and Europe, increasing 26%, highlighting the global resonance of the brand and the effectiveness of our regional strategies. With a large total addressable market of nearly 2 billion consumers, including 275 million at the point of market entry, we have under 1% share and meaningful opportunity ahead. Coach continues to benefit from its expressive luxury positioning, combining 85 years of heritage, craftsmanship, creativity, and value to build enduring customer relationships and support sustained growth. Now, to discuss our Q2 results in more detail....
Speaker #4: China Greater 37% and Europe up rising increasing 26% , highlighting the global resonance of the brand and the effectiveness of our regional strategies .
Speaker #4: With a total addressable market of nearly 2 billion consumers, including 275 million at the point of market entry, we have a large and meaningful opportunity ahead.
Speaker #4: Coach continues to benefit from its expressive luxury , positioning , combining 85 years of heritage , craftsmanship , creativity and value to . Build enduring customer relationships and support sustained growth .
Speaker #4: Now to discuss our second quarter more results in detail creative . Our teams are innovation delivering compelling to through a blend consumers of magic and logic that are the hallmarks of our .
Joanne Crevoiserat: Our creative teams are delivering compelling innovation to consumers through a blend of magic and logic that are the hallmarks of our brand. Our icons continued to lead, consistent with our strategy. In particular, the Tabby franchise, the New York Family, including the Brooklyn and Empire, and Teri, Juliet, and Laurel outperformed, driven by accelerated Gen Z customer recruitment. By animating our proven hero silhouettes through new colorways, materials such as crystals, and sizes, we built on our leadership in our core category and delighted our consumers during the key holiday season. Importantly, Coach's accelerated growth in leather goods highlights the enduring values of the brand and the value we offer in the luxury market.
Joanne Crevoiserat: Our creative teams are delivering compelling innovation to consumers through a blend of magic and logic that are the hallmarks of our brand. Our icons continued to lead, consistent with our strategy. In particular, the Tabby franchise, the New York Family, including the Brooklyn and Empire, and Teri, Juliet, and Laurel outperformed, driven by accelerated Gen Z customer recruitment. By animating our proven hero silhouettes through new colorways, materials such as crystals, and sizes, we built on our leadership in our core category and delighted our consumers during the key holiday season. Importantly, Coach's accelerated growth in leather goods highlights the enduring values of the brand and the value we offer in the luxury market.
Speaker #4: icons Our continued to lead brand our strategy , in particular , the tabby franchise , the New York family , including the and Brooklyn Empire , and Terry , Juliet and Laurel outperformed , driven by accelerated Gen Z customer recruitment by animating our proven silhouettes through new hero , materials such as crystals and sizes , we built on our leadership in our core category and delighted consumers during the key our season .
Speaker #4: Importantly , coaches accelerated growth in leather goods , highlights the enduring values of the brand and the value we offer in the luxury Looking forward , we have a market strong product .
Joanne Crevoiserat: Looking forward, we have a strong product pipeline that we believe supports gains in both AUR and units, reinforcing the diversified drivers in place to support healthy and sustained growth, while never compromising the value proposition we offer to consumers, a key structural advantage. Next, turning to footwear. We delivered high single-digit growth in the quarter, fueled by sneakers with the continued success of the Soho family. Building on our footwear assortment that is designed with the timeless Gen Z consumer in mind, we also successfully launched the Margot family, featuring sandals and slingbacks. Footwear remains a long-term growth opportunity for Coach, given our brand strength, low share of the market, and the category's relevance to our target consumer. Touching on marketing, the compounding benefits of our strategic brand investments were evident during the quarter, with a clear focus on long-term demand creation.
Joanne Crevoiserat: Looking forward, we have a strong product pipeline that we believe supports gains in both AUR and units, reinforcing the diversified drivers in place to support healthy and sustained growth, while never compromising the value proposition we offer to consumers, a key structural advantage. Next, turning to footwear. We delivered high single-digit growth in the quarter, fueled by sneakers with the continued success of the Soho family. Building on our footwear assortment that is designed with the timeless Gen Z consumer in mind, we also successfully launched the Margot family, featuring sandals and slingbacks. Footwear remains a long-term growth opportunity for Coach, given our brand strength, low share of the market, and the category's relevance to our target consumer. Touching on marketing, the compounding benefits of our strategic brand investments were evident during the quarter, with a clear focus on long-term demand creation.
Speaker #4: We believe this supports gains in both our AUR and units, reinforcing the diversified place to drivers in support of healthy and sustained growth, while never compromising the value proposition.
Speaker #4: offer to consumers . key A structural advantage . Next , turning to footwear . We single digit quarter , growth in the fueled by sneakers with delivered high the continued success Soho of the .
Speaker #4: Building on our footwear assortment that is designed with the timeless Gen Z consumer in mind, we successfully launched the Margo Family, featuring sandals and slingbacks. Footwear remains a long-term growth opportunity for Coach.
Speaker #4: Given our brand strength , low share of the market and the categories relevance to our target consumer . Touching on marketing , the compounding benefits strategic brand investments were evident during the quarter , with a clear focus on long term demand creation .
Joanne Crevoiserat: We increased marketing spend by approximately 40% versus the prior year, with a continued shift toward top-of-funnel brand building to support sustained customer acquisition. This sustained investment in fueling brand desire supported accelerating customer acquisition during the quarter, even as we meaningfully reduced promotional messaging during the most discount-driven period of the year, demonstrating both our commitment to the strategy and its effectiveness. Importantly, we continue to prioritize building emotional connections with Gen Z consumers globally through the Gift for New Adventures campaign, a new holiday campaign positioning the brand as the ultimate destination for gifts that spark confidence and self-expression in the year ahead. The campaign featured a diverse global cast, including Oscar-nominated actor Elle Fanning, actors Charles Melton and Kōki, and K-pop rapper Soyeon, building cultural relevance and reach across key markets.
Joanne Crevoiserat: We increased marketing spend by approximately 40% versus the prior year, with a continued shift toward top-of-funnel brand building to support sustained customer acquisition. This sustained investment in fueling brand desire supported accelerating customer acquisition during the quarter, even as we meaningfully reduced promotional messaging during the most discount-driven period of the year, demonstrating both our commitment to the strategy and its effectiveness. Importantly, we continue to prioritize building emotional connections with Gen Z consumers globally through the Gift for New Adventures campaign, a new holiday campaign positioning the brand as the ultimate destination for gifts that spark confidence and self-expression in the year ahead. The campaign featured a diverse global cast, including Oscar-nominated actor Elle Fanning, actors Charles Melton and Kōki, and K-pop rapper Soyeon, building cultural relevance and reach across key markets.
Speaker #4: marketing spend by approximately 40% versus the prior We year , with a continued shift brand top of building to sustained toward customer acquisition .
Speaker #4: This sustained investment in fueling brand desire supported accelerating customer growth during the acquisition quarter, even as we meaningfully reduced promotional messaging during the most discount-driven period of the year, demonstrating both our commitment to the brand and its effectiveness.
Speaker #4: Importantly, we continue to prioritize building emotional connections with Gen Z consumers through the Gift for New Adventures, a new holiday campaign, positioning the brand as the ultimate destination for the spark, confidence, and self-expression.
Speaker #4: gifts that In the year ahead . The campaign featured a diverse global cast , including Oscar nominated actor Elle Fanning , actors Charles Melton and Cokie , and K-pop rapper Soyeon .
Speaker #4: Building cultural relevance and reach across key markets . In addition to support growth acceleration in China , we launched a collaboration with clot , a leading Chinese streetwear and lifestyle brand .
Joanne Crevoiserat: In addition, to support growth acceleration in China, we launched a collaboration with CLOT, a leading Chinese streetwear and lifestyle brand. The partnership bridges heritage and street sensibility, fusing Coach's expressive spirit with CLOT's disruptive approach to daily wear, reinterpreting iconic Coach silhouettes through a China-specific streetwear lens. Collectively, these actions reflect a disciplined, long-term approach to brand building at scale, deepening cultural relevance, accelerating consumer acquisition at point of market entry, and reinforcing a growing brand moat around consumer understanding and sustainable demand creation. And finally, we are strengthening brand desire through distinctive, immersive retail experiences that elevate how consumers engage with Coach. We continue to bring expressive luxury to life through unique store formats, including our newly remodeled stores in Ginza, Yorkdale, Macau, and the Dubai Mall. These locations reinforce brand desirability while providing valuable insights that will inform our future store investments and expansion.
Joanne Crevoiserat: In addition, to support growth acceleration in China, we launched a collaboration with CLOT, a leading Chinese streetwear and lifestyle brand. The partnership bridges heritage and street sensibility, fusing Coach's expressive spirit with CLOT's disruptive approach to daily wear, reinterpreting iconic Coach silhouettes through a China-specific streetwear lens. Collectively, these actions reflect a disciplined, long-term approach to brand building at scale, deepening cultural relevance, accelerating consumer acquisition at point of market entry, and reinforcing a growing brand moat around consumer understanding and sustainable demand creation. And finally, we are strengthening brand desire through distinctive, immersive retail experiences that elevate how consumers engage with Coach. We continue to bring expressive luxury to life through unique store formats, including our newly remodeled stores in Ginza, Yorkdale, Macau, and the Dubai Mall. These locations reinforce brand desirability while providing valuable insights that will inform our future store investments and expansion.
Speaker #4: The partnership bridges street heritage and sensibility , fusing clots coaches expressive spirit disruptive daily to , reinterpreting coach iconic through a China silhouettes specific streetwear lens .
Speaker #4: Collectively , these actions reflect a disciplined , long term building at brand scale , deepening relevance cultural , accelerating consumer acquisition at point of market entry reinforcing a growing and brand moat around consumer understanding and sustainable demand creation .
Speaker #4: And finally , we are strengthening brand immersive retail experiences that elevate how consumers engage with coach . We continue to bring luxury to expressive life through store unique formats , including our newly remodeled stores in Ginza , Yorkdale and the , Macau Mall of Dubai .
Speaker #4: These locations reinforce brand desirability while providing valuable insights that will future store investments and expansion. Our Coffee Concepts at Coach Jersey Gardens and Commons Woodbury also continue to perform ahead of expectations, resonating especially well with younger consumers.
Joanne Crevoiserat: Our Coach coffee concepts at Jersey Gardens and Woodbury Common also continue to perform ahead of expectations, resonating especially well with younger consumers. In closing, Coach continues to deliver standout results, guided by a clear brand vision and a deep focus on the consumer. Our teams are operating with purpose and discipline, translating insights into meaningful action and impact. Importantly, this performance reinforces our conviction that Coach will be a 10 billion-dollar brand over time, with best-in-class margins and an unwavering commitment to what makes the brand iconic, valued, and loved by consumers around the world. Now, moving to Kate Spade. Our results for the quarter matched expectations, from strategy to financial outcomes. In Q2, revenue declined 14%, reflecting, in part, deliberate actions to reset the brand through a pullback in promotional activity.
Joanne Crevoiserat: Our Coach coffee concepts at Jersey Gardens and Woodbury Common also continue to perform ahead of expectations, resonating especially well with younger consumers. In closing, Coach continues to deliver standout results, guided by a clear brand vision and a deep focus on the consumer. Our teams are operating with purpose and discipline, translating insights into meaningful action and impact. Importantly, this performance reinforces our conviction that Coach will be a 10 billion-dollar brand over time, with best-in-class margins and an unwavering commitment to what makes the brand iconic, valued, and loved by consumers around the world. Now, moving to Kate Spade. Our results for the quarter matched expectations, from strategy to financial outcomes. In Q2, revenue declined 14%, reflecting, in part, deliberate actions to reset the brand through a pullback in promotional activity.
Speaker #4: In closing , coach continues to deliver standout results guided by a clear brand vision and a deep focus on the consumer . Our teams are operating with purpose and discipline , translating insights meaningful action and into impact .
Speaker #4: this performance reinforces Importantly , conviction that coach will be a $10 billion brand over time with best in class margins and an unwavering commitment to what makes the brand iconic , valued and loved by consumers around the world .
Speaker #4: Now moving to Kate Spade , our results for the quarter matched expectations from strategy to financial outcomes . In the second quarter , revenue declined 14% , reflecting in part deliberate actions to reset the brand through a pullback in promotional same .
Joanne Crevoiserat: At the same time, we made incremental investments to advance the turnaround underway, remaining focused on strengthening the brand's foundation for long-term growth. Once again, where we placed our focus and investments, we drove progress, as tracked against the leading KPIs we've previously outlined. We saw a lift in brand consideration with our holiday marketing campaign and delivered an improvement in Gen Z acquisition trends, driven by handbags. While still early in the turnaround, the improvement in these KPIs are signs that we are executing our strategies, and they're beginning to take hold. To touch on our results of the quarter in more detail, our first strategic priority is to fuel brand heat through our uplifting luxury positioning to become top of mind and relevant with the Gen Z connector, our target customer. In the quarter, we stood behind our Spark Something Beautiful campaign, featuring influential Gen Z celebrities....
Joanne Crevoiserat: At the same time, we made incremental investments to advance the turnaround underway, remaining focused on strengthening the brand's foundation for long-term growth. Once again, where we placed our focus and investments, we drove progress, as tracked against the leading KPIs we've previously outlined. We saw a lift in brand consideration with our holiday marketing campaign and delivered an improvement in Gen Z acquisition trends, driven by handbags. While still early in the turnaround, the improvement in these KPIs are signs that we are executing our strategies, and they're beginning to take hold. To touch on our results of the quarter in more detail, our first strategic priority is to fuel brand heat through our uplifting luxury positioning to become top of mind and relevant with the Gen Z connector, our target customer. In the quarter, we stood behind our Spark Something Beautiful campaign, featuring influential Gen Z celebrities....
Speaker #4: activity time , we made incremental advance the turnaround underway , remaining on focused strengthening the brand's foundation for long term growth . Once again , where we placed our focus in investments , we drove progress as tracked against the leading KPIs we've previously outlined .
Speaker #4: We saw lift in brand consideration with our holiday campaign marketing delivered an and improvement in Gen Z acquisition trends driven by handbags . While still early in the turnaround , the KPIs in these are signs that we are executing our strategies and they're beginning to hold .
Speaker #4: take results of on our the quarter in more detail To , our first strategic priority is to brand heat through our uplifting luxury positioning to top of mind fuel and relevant Gen Z connector .
Speaker #4: Our target customer . In the quarter , we stood behind our spark , something beautiful campaign featuring influential Gen Z celebrities . We updated the with a to make campaign twist holiday it reinforcing a cohesive festive , while message over This .
Joanne Crevoiserat: We updated the campaign with a holiday twist to make it festive while reinforcing a cohesive message over time. This campaign drove an improvement in purchase intent among Gen Z consumers, reinforcing our investment in brand building. Next, we advanced our strategy to build handbag blockbusters with a consumer-informed assortment that is more relevant and focused. During the quarter, we made important progress. Our handbag blockbusters, the Duo, Kayla, Margot, and 454, outperformed the balance of the offering, with higher AUR and strong Gen Z acquisition. This is another example of how our strategic focus is translating into early positive signs in the business.
Joanne Crevoiserat: We updated the campaign with a holiday twist to make it festive while reinforcing a cohesive message over time. This campaign drove an improvement in purchase intent among Gen Z consumers, reinforcing our investment in brand building. Next, we advanced our strategy to build handbag blockbusters with a consumer-informed assortment that is more relevant and focused. During the quarter, we made important progress. Our handbag blockbusters, the Duo, Kayla, Margot, and 454, outperformed the balance of the offering, with higher AUR and strong Gen Z acquisition. This is another example of how our strategic focus is translating into early positive signs in the business.
Speaker #4: campaign drove an in time purchase improvement intent among Gen Z consumers , reinforcing our investment in brand building . Next , we advanced our strategy to build handbag blockbusters with our consumer informed assortment that is more relevant and focused .
Speaker #4: During the quarter , we made important progress . Our handbag blockbusters , the duo Kayla , Margaux and for 54 outperformed the balance of the offering with higher order and strong Gen Z acquisition .
Speaker #4: This is another example of how our focus is strategic translating into early positive signs in the business . we've discussed , we've also brought more to the assortment , reducing focus handbag 40% .
Joanne Crevoiserat: And as we've discussed, we've also brought more focus to the assortment, reducing handbag styles by 40% this holiday, allowing us to stand behind our big ideas with clarity and intention while supporting a reduction in promotional activity, an increase in full price selling, and handbag AUR growth. These actions are consistent with our commitment to building a healthier brand. Finally, touching on our third strategic pillar to maximize compelling omni-channel consumer experiences. A critical part of this work involves removing deselection barriers with cohesive messaging that elevates the brand and builds desire. As part of this work, we tested updates to the visual experience and merchandising in 10 locations. These stores experienced a lift in conversion in ADT and outperformed the balance of the chain. We plan to bring this format to additional locations in North America by fiscal year-end.
Joanne Crevoiserat: And as we've discussed, we've also brought more focus to the assortment, reducing handbag styles by 40% this holiday, allowing us to stand behind our big ideas with clarity and intention while supporting a reduction in promotional activity, an increase in full price selling, and handbag AUR growth. These actions are consistent with our commitment to building a healthier brand. Finally, touching on our third strategic pillar to maximize compelling omni-channel consumer experiences. A critical part of this work involves removing deselection barriers with cohesive messaging that elevates the brand and builds desire. As part of this work, we tested updates to the visual experience and merchandising in 10 locations. These stores experienced a lift in conversion in ADT and outperformed the balance of the chain. We plan to bring this format to additional locations in North America by fiscal year-end.
Speaker #4: styles by This allowing us to holiday , behind our stand big ideas with clarity and intention . While supporting a promotional reduction in activity and increase in full price selling and order growth consistent with our .
Speaker #4: Our handbags demonstrate this commitment to building a healthier brand. Finally, on our third strategic touchpoint pillar to maximize compelling omnichannel consumer experiences, a critical part of this work involves removing deselection barriers with messaging that elevates the brand and creates cohesive desire.
Speaker #4: As part of this work, we tested updates to the visual experience and merchandising in ten locations. These stores experienced a lift in conversion and ADT, and outperformed the balance of the chain.
Speaker #4: We plan to bring this additional North America by locations in fiscal year end . Overall , we are strengthening the at Kate Spade fundamentals to drive profitable growth .
Speaker #4: We plan to bring this additional North America by locations in fiscal year end . Overall , we are strengthening the at Kate Spade fundamentals to drive profitable sustainable , This is a brand with heritage , distinctive positioning and meaningful long term disciplined execution .
Joanne Crevoiserat: Overall, we are strengthening the fundamentals at Kate Spade to drive sustainable, profitable growth. This is a unique brand with heritage, distinctive positioning, and meaningful long-term opportunities. With disciplined execution, the benefit of continued learnings from Coach's success and Tapestry's brand-building capabilities, we're acting with focus to realize the brand's full and significant potential. In closing, Tapestry achieved another record quarter, and we raised our outlook for the year, showcasing the power of our amplified growth agenda and that our structural advantages are enduring. As we move forward, we do so with momentum and confidence. We have the strategy, capabilities, and team in place to drive growth and value creation for years to come. I'll now turn it over to Scott.
Joanne Crevoiserat: Overall, we are strengthening the fundamentals at Kate Spade to drive sustainable, profitable growth. This is a unique brand with heritage, distinctive positioning, and meaningful long-term opportunities. With disciplined execution, the benefit of continued learnings from Coach's success and Tapestry's brand-building capabilities, we're acting with focus to realize the brand's full and significant potential. In closing, Tapestry achieved another record quarter, and we raised our outlook for the year, showcasing the power of our amplified growth agenda and that our structural advantages are enduring. As we move forward, we do so with momentum and confidence. We have the strategy, capabilities, and team in place to drive growth and value creation for years to come. I'll now turn it over to Scott.
Speaker #4: with The benefit of learnings from continued Koch's success and Tapestry Inc building brand We're capabilities . acting with focus to the realize brand's full and significant potential closing .
Speaker #4: , tapestry achieved In another record quarter raised outlook for the and we year , showcasing the our our amplified power of growth And that our structural advantages are enduring as we move forward .
Speaker #4: We do so with momentum and confidence. We have the strategy, capabilities, and team in place to drive growth and value creation for years to come.
Speaker #4: I'll now turn it over to Scott.
Scott Roe: Thanks, Joanne, and good morning, everyone. In Q2, we outperformed expectations across revenue, operating income, and earnings, delivering record sales and EPS. In the quarter, on an adjusted basis, we achieved pro forma revenue growth of 18%, led by 25% growth at Coach. We expanded operating margin by 390 basis points, and we delivered earnings per share of $2.69, an increase of 34% versus last year. Turning to the details of the second quarter, I'll begin with a discussion of revenue trends on a pro forma constant currency basis. Sales increased 18% compared to the prior year and outperformed our expectations. These results reflect strong global momentum. By region, North America sales increased 17% compared to the prior year, ahead of plan and led by 27% growth at Coach, driving share gains.
Scott Roe: Thanks, Joanne, and good morning, everyone. In Q2, we outperformed expectations across revenue, operating income, and earnings, delivering record sales and EPS. In the quarter, on an adjusted basis, we achieved pro forma revenue growth of 18%, led by 25% growth at Coach. We expanded operating margin by 390 basis points, and we delivered earnings per share of $2.69, an increase of 34% versus last year. Turning to the details of the second quarter, I'll begin with a discussion of revenue trends on a pro forma constant currency basis. Sales increased 18% compared to the prior year and outperformed our expectations. These results reflect strong global momentum. By region, North America sales increased 17% compared to the prior year, ahead of plan and led by 27% growth at Coach, driving share gains.
Speaker #5: Joanne , Thanks , and good morning , everyone . In Q2 , we outperformed expectations across revenue , operating income and earnings , delivering record sales and EPs in the on an adjusted basis , we achieved quarter forma revenue pro growth of 18% , led by 25% growth at coach .
Speaker #5: We operating margin expanded by 390 basis points , and we delivered earnings per share $2.69 , an increase of of 34% versus year Turning details of the to the second quarter , .
Speaker #5: Begin with the last discussion of revenue trends on a pro forma constant currency basis. Sales increased 18% compared to the year, and outperformed our prior expectations.
Speaker #5: These results reflect global strong momentum by region. North America sales increased 17% compared to the prior year, ahead of plan and led by 27% growth at Coach, driving share gains.
Scott Roe: Importantly, we did this while expanding both gross and operating margins in the region. In Europe, revenue grew 22% above last year, driven by strength in our direct business and reflecting market share gains in the region. Strong new customer acquisition, particularly among Gen Z and increased local consumer spending, continued to fuel our momentum. Given our market positioning and low penetration, we see significant opportunities for further growth in this large and attractive market. In Greater China, revenue outperformed our expectations, increasing 34%, driven by broad-based growth across channels and continued market share gains. Digital was a notable contributor, with Coach ranking as a top-performing brand over the Double Eleven period. Our results reflect the impact of our steadfast strategies and investments, and we are well-positioned to drive sustained momentum in this key region.
Scott Roe: Importantly, we did this while expanding both gross and operating margins in the region. In Europe, revenue grew 22% above last year, driven by strength in our direct business and reflecting market share gains in the region. Strong new customer acquisition, particularly among Gen Z and increased local consumer spending, continued to fuel our momentum. Given our market positioning and low penetration, we see significant opportunities for further growth in this large and attractive market. In Greater China, revenue outperformed our expectations, increasing 34%, driven by broad-based growth across channels and continued market share gains. Digital was a notable contributor, with Coach ranking as a top-performing brand over the Double Eleven period. Our results reflect the impact of our steadfast strategies and investments, and we are well-positioned to drive sustained momentum in this key region.
Speaker #5: Importantly , we did expanding both this while gross and operating margins in the region . In Europe , revenue grew 22% above last year , driven by strength in our direct business and reflecting market share gains in the region .
Speaker #5: Strong new customer acquisition , particularly Gen Z among and increased local consumer continued spending , to fuel our given our market positioning and low penetration , significant growth large attractive market we see and opportunities in Greater China , revenue outperformed our expectations , increasing driven by broad based growth 34% , channels and continued market share gains .
Speaker #5: Digital was a notable contributor, with Coach ranking as a top-performing brand over the Double 11 period. Our results reflect the impact of our steadfast strategies and investments, and we are well positioned to drive momentum in this key region.
Scott Roe: In Other Asia, revenue increased 12%, led by growth primarily in Australia and South Korea. In Japan, sales declined 6%, as expected, driven by an intentional pullback in promotions. Now touching on revenue by channel for the quarter. We delivered gains across channels, fueled by direct-to-consumer growth of 17% compared to the prior year. This included an increase in digital of approximately 20% and a mid-teens percentage increase in global brick-and-mortar sales, with all channels at strong and increasing profitability. Moving down the P&L, we continued to drive healthy margin expansion versus the prior year, delivering the second quarter gross margin of 75.5%, 110 basis points above prior year. This was driven by operational expansion of approximately 250 basis points, as well as a benefit from the divestiture of Stuart Weitzman of 50 basis points.
Scott Roe: In Other Asia, revenue increased 12%, led by growth primarily in Australia and South Korea. In Japan, sales declined 6%, as expected, driven by an intentional pullback in promotions. Now touching on revenue by channel for the quarter. We delivered gains across channels, fueled by direct-to-consumer growth of 17% compared to the prior year. This included an increase in digital of approximately 20% and a mid-teens percentage increase in global brick-and-mortar sales, with all channels at strong and increasing profitability. Moving down the P&L, we continued to drive healthy margin expansion versus the prior year, delivering the second quarter gross margin of 75.5%, 110 basis points above prior year. This was driven by operational expansion of approximately 250 basis points, as well as a benefit from the divestiture of Stuart Weitzman of 50 basis points.
Speaker #5: In other Asia . Revenue increased 12% , led by growth primarily Australia and sustained South Korea and in sales declined 6% as expected , Japan , driven by an intentional in pullback promotions .
Speaker #5: Now, on revenue by channel for the quarter, we saw gains across delivered channels fueled by direct-to-consumer growth of 17% compared to the prior year.
Speaker #5: included an This increase in digital of approximately 20% and a mid-teens percentage increase in global brick and mortar sales , with all channels strong at and increasing profitability .
Speaker #5: Moving down the PNL , we continued to drive healthy margin expansion versus the year , delivering prior a second quarter gross margin of 75.5% , 110 basis points above prior year This was .
Speaker #5: Driven by operational expansion of approximately 250 basis points, as well as a benefit from the divestiture of Stuart Weitzman of 50 basis points.
Scott Roe: These benefits fully offset a negative tariff and duty impact of 190 basis points, which included approximately 140 basis point impact on Coach's gross margin and a 520 basis point impact on Kate Spade's gross margin. Overall, our strong gross margin remains a core element of our value creation model, supported by our agile supply chain, which delivers craftsmanship at scale, a core competitive advantage of Tapestry. Turning to SG&A, expenses rose by 8% and leveraged by 270 basis points, reflecting our focused approach to reinvest in the business, notably in marketing, which represents 11% of sales, while maintaining strong operational discipline. So taken together, operating margin expanded 390 basis points in the quarter, driving profit expansion of 31% over the prior year, which was ahead of expectations.
Scott Roe: These benefits fully offset a negative tariff and duty impact of 190 basis points, which included approximately 140 basis point impact on Coach's gross margin and a 520 basis point impact on Kate Spade's gross margin. Overall, our strong gross margin remains a core element of our value creation model, supported by our agile supply chain, which delivers craftsmanship at scale, a core competitive advantage of Tapestry. Turning to SG&A, expenses rose by 8% and leveraged by 270 basis points, reflecting our focused approach to reinvest in the business, notably in marketing, which represents 11% of sales, while maintaining strong operational discipline. So taken together, operating margin expanded 390 basis points in the quarter, driving profit expansion of 31% over the prior year, which was ahead of expectations.
Speaker #5: These benefits fully offset a negative and tariff duty impact of 190 basis points , which included approximately 140 basis on coach's point gross margin and a 520 basis point impact Kate gross margin .
Speaker #5: Overall , our strong gross remains margin core element of our value creation model , supported by our agile supply chain , which delivers craftsmanship scale .
Speaker #5: A core at competitive Spade's advantage tapestry . Turning to expenses SG&A rose by 8% and by leveraged 270 basis points , reflecting focused our approach to reinvest in the business , notably in marketing , which represents 11% of sales .
Speaker #5: While maintaining strong operational discipline . So , together , operating margin taken expanded 390 basis points in the quarter profit , driving expansion of prior 31% over the year , which was ahead of expectations .
Scott Roe: Our Q2 EPS of $2.69 grew 34% over the prior year, also exceeding our guidance. Now, turning to shareholder returns. Starting with our dividend, our board of directors declared a quarterly cash dividend of $0.40 per common share, representing $81 million in dividend payments for the quarter. Additionally, during the Q2, we spent $400 million to repurchase approximately 3.6 million shares for a total of $900 million, or approximately 8.3 million shares repurchased at an average stock price of $109 year to date. In fiscal 2026, we now expect to return $1.5 billion or 100% of expected Adjusted Free Cash Flow to shareholders through dividends and share repurchases.
Scott Roe: Our Q2 EPS of $2.69 grew 34% over the prior year, also exceeding our guidance. Now, turning to shareholder returns. Starting with our dividend, our board of directors declared a quarterly cash dividend of $0.40 per common share, representing $81 million in dividend payments for the quarter. Additionally, during the Q2, we spent $400 million to repurchase approximately 3.6 million shares for a total of $900 million, or approximately 8.3 million shares repurchased at an average stock price of $109 year to date. In fiscal 2026, we now expect to return $1.5 billion or 100% of expected Adjusted Free Cash Flow to shareholders through dividends and share repurchases.
Speaker #5: And our second quarter EPs of $2.69 grew 34% over the prior year . Also exceeding our guidance . Now , turning to shareholder returns , starting with our dividend .
Speaker #5: Our board of directors declared a quarterly cash dividend $0.40 per common share , representing $81 million in dividend payments for the quarter Additionally , .
Speaker #5: During the second quarter, we spent $400 million to repurchase approximately 3.6 million shares. For the quarter, we repurchased a total of $900 million, or approximately 8.3 million shares, at an average stock price of $109.
Speaker #5: Year to date . In fiscal we now expect 26 , to $1.5 billion , return or expected 100% of adjusted free cash flow to shareholders through dividends repurchases .
Scott Roe: This includes over $300 million in dividend payments for an annual rate of $1.60 per share, as well as $1.2 billion in share repurchases, which is an increase from our prior outlook of $1.0 billion. Our significant return of capital to shareholders is a testament to our strong organic business and robust cash flow generation, and underscores our confidence in the future. Now, before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities, which are unchanged. We have two foundational commitments. First, to invest in our brands and business to support long-term sustainable growth, and to return capital to shareholders via our dividend, with the goal, over time, to increase the dividend at least in line with earnings growth.
Scott Roe: This includes over $300 million in dividend payments for an annual rate of $1.60 per share, as well as $1.2 billion in share repurchases, which is an increase from our prior outlook of $1.0 billion. Our significant return of capital to shareholders is a testament to our strong organic business and robust cash flow generation, and underscores our confidence in the future. Now, before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities, which are unchanged. We have two foundational commitments. First, to invest in our brands and business to support long-term sustainable growth, and to return capital to shareholders via our dividend, with the goal, over time, to increase the dividend at least in line with earnings growth.
Speaker #5: This includes and share over $300 million in dividend payments for an annual rate of $1.60 per share , as well as $1.2 billion in share repurchases , which is an increase from our prior outlook of 1.0 billion .
Speaker #5: Our significant return of capital to a shareholders is testament to our organic strong robust cash flow generation and underscores our confidence in the future .
Speaker #5: And now, before turning to the details of our balance sheet and cash flows, I'd like to reiterate our capital allocation priorities, which are unchanged.
Speaker #5: We two foundational have commitments . First , to our brands and business to invest in support term long sustainable growth and to capital to via shareholders our return With the goal over time to increase the dividend at least in line with earnings growth dividend .
Scott Roe: Beyond these two foundational commitments, our robust cash flow generation provides us with balance sheet flexibility for value creation. This includes the opportunity for share repurchase activity under our previously announced $3 billion share repurchase authorization. And finally, utilizing our rigorous Four-Eyed Lens framework, we consistently evaluate opportunities for strategic portfolio management. Importantly, and as previously communicated, before moving forward with any acquisitions, we will ensure Coach remains strong and Kate Spade has returned to sustainable top-line growth. These clear capital allocation priorities are underpinned by our firm commitment to a solid investment-grade rating and maintaining our long-term gross leverage target of below 2.5 times. Now, turning to the details of our balance sheet and cash flows. We ended the quarter with nearly $1.1 billion in cash and investments, and total borrowings of $2.4 billion.
Scott Roe: Beyond these two foundational commitments, our robust cash flow generation provides us with balance sheet flexibility for value creation. This includes the opportunity for share repurchase activity under our previously announced $3 billion share repurchase authorization. And finally, utilizing our rigorous Four-Eyed Lens framework, we consistently evaluate opportunities for strategic portfolio management. Importantly, and as previously communicated, before moving forward with any acquisitions, we will ensure Coach remains strong and Kate Spade has returned to sustainable top-line growth. These clear capital allocation priorities are underpinned by our firm commitment to a solid investment-grade rating and maintaining our long-term gross leverage target of below 2.5 times. Now, turning to the details of our balance sheet and cash flows. We ended the quarter with nearly $1.1 billion in cash and investments, and total borrowings of $2.4 billion.
Speaker #5: . Beyond these two foundational commitments , our robust cash flow generation provides us with balance sheet flexibility for value creation . This includes the opportunity for share repurchase activity under our announced $3 billion share repurchase authorization previously .
Speaker #5: And finally , utilizing our rigorous Fourier lens framework , we consistently evaluate opportunities for strategic portfolio management Importantly , and as previously . communicated before moving forward with any acquisitions , we will ensure coach remains .
Speaker #5: And Kate Spade has strongly returned to line sustainable top. These clear capital allocation priorities are underpinned by our firm commitment to a solid investment-grade rating and maintaining our long-term gross leverage target of below two and a half times.
Speaker #5: turning Now , to the details of our balance sheet and cash flows . We ended the quarter with nearly $1.1 billion in cash and investments , and total borrowings of $2.4 billion .
Scott Roe: Together, this represents a net debt of $1.3 billion. At quarter end, our gross debt to adjusted EBITDA leverage ratio was 1.2 times more than a full turn below our long-term target. Adjusted free cash flow for the quarter was an inflow of $1.0 billion, and CapEx and cloud computing costs were $54 million. Inventory levels at quarter end were 4% below prior year on a reported basis, and up mid-single digits, excluding the impact of Stuart Weitzman. As we enter the second half of the fiscal year, our inventory continues to be current and well-positioned globally and by brand. For fiscal 2026, we continue to expect inventory levels to be down modestly year over year on a reported basis.
Scott Roe: Together, this represents a net debt of $1.3 billion. At quarter end, our gross debt to adjusted EBITDA leverage ratio was 1.2 times more than a full turn below our long-term target. Adjusted free cash flow for the quarter was an inflow of $1.0 billion, and CapEx and cloud computing costs were $54 million. Inventory levels at quarter end were 4% below prior year on a reported basis, and up mid-single digits, excluding the impact of Stuart Weitzman. As we enter the second half of the fiscal year, our inventory continues to be current and well-positioned globally and by brand. For fiscal 2026, we continue to expect inventory levels to be down modestly year over year on a reported basis.
Speaker #5: Together , this represents a net debt of $1.3 billion at quarter end . Our gross debt to adjusted EBITDA leverage ratio was 1.2 than a full turn below our long term target times more .
Speaker #5: Adjusted free cash flow for the quarter was an inflow of 1.0 billion , and CapEx and cloud computing costs were $54 million . Inventory levels at quarter end were 4% below prior year on a reported basis , and up mid-single digits , excluding the impact of Stuart Weitzman .
Speaker #5: As we enter the second half of the fiscal year, our inventory continues to be current and well positioned globally, and by brand.
Speaker #5: For fiscal we continue to 26 , expect levels to be down modestly inventory reported year on a enter basis . to our guidance for fiscal 26 , which is Now , moving non-GAAP basis and excludes the Stuart impact of Weitzman fiscal from 26 expectations with the critical holiday period behind us , we are raising our full year guidance , incorporating our Q2 outperformance and a stronger outlook .
Scott Roe: Now, moving to our guidance for fiscal 2026, which is provided on a non-GAAP basis and excludes the impact of Stuart Weitzman from fiscal 2026 expectations. With the critical holiday period behind us, we are raising our full year guidance, incorporating our Q2 outperformance and a stronger second-half outlook. Now, turning to the details. For the fiscal year, we expect revenue of over $7.75 billion, representing pro forma growth of approximately 15% on a nominal basis or 14% constant currency, with FX planned to be a 70 basis point tailwind. Touching on sales details by region at constant currency on a pro forma basis. In North America, we now expect revenue to increase low double digits. In Europe, we expect growth in the area of 20%. In Greater China, we now expect to achieve over 25% growth versus the prior year.
Scott Roe: Now, moving to our guidance for fiscal 2026, which is provided on a non-GAAP basis and excludes the impact of Stuart Weitzman from fiscal 2026 expectations. With the critical holiday period behind us, we are raising our full year guidance, incorporating our Q2 outperformance and a stronger second-half outlook. Now, turning to the details. For the fiscal year, we expect revenue of over $7.75 billion, representing pro forma growth of approximately 15% on a nominal basis or 14% constant currency, with FX planned to be a 70 basis point tailwind. Touching on sales details by region at constant currency on a pro forma basis. In North America, we now expect revenue to increase low double digits. In Europe, we expect growth in the area of 20%. In Greater China, we now expect to achieve over 25% growth versus the prior year.
Speaker #5: Now , second half turning to the for the fiscal year , we expect revenue details over of of approximately 15% on a nominal basis or 14% constant with FX planned to currency be a 70 basis point .
Speaker #5: Tailwind on sales details by, at constant region pro forma basis in North America, we now expect increase low double-digit revenue to digits.
Speaker #5: In Europe , we expect growth in the area of 20% and Greater China . expect to achieve over 25% growth versus the prior year .
Scott Roe: In Japan, we're forecasting a high single-digit decline, and in Other Asia, we now anticipate low double-digit gains. By brand, this guidance incorporates high teens % growth at Coach. At Kate Spade, we continue to embed a high single-digit decline in revenue for the year, with sequential improvement planned for the second half. In addition, our outlook assumes operating margin expansion of approximately 180 basis points. We now anticipate gross margin to increase in the area of 20 basis points, a meaningful improvement from our prior outlook and completely mitigating the impact of tariffs. This assumes operational gross margin expansion of roughly 180 basis points, due primarily to improvements in AUR. Further, we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman.
Scott Roe: In Japan, we're forecasting a high single-digit decline, and in Other Asia, we now anticipate low double-digit gains. By brand, this guidance incorporates high teens % growth at Coach. At Kate Spade, we continue to embed a high single-digit decline in revenue for the year, with sequential improvement planned for the second half. In addition, our outlook assumes operating margin expansion of approximately 180 basis points. We now anticipate gross margin to increase in the area of 20 basis points, a meaningful improvement from our prior outlook and completely mitigating the impact of tariffs. This assumes operational gross margin expansion of roughly 180 basis points, due primarily to improvements in AUR. Further, we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman.
Speaker #5: In we're Japan , forecasting a high digit single decline . And in other Asia , we now anticipate low double digit gains by .
Speaker #5: And brand , this guidance teens percentage incorporates high growth coach at at Kate Spade , we continue to embed a high single digit decline in revenue for the with sequential improvement the planned for second half .
Speaker #5: In addition, our outlook assumes an operating margin expansion of approximately 180 basis points. We now expect gross margin to increase in the area of 20 basis points.
Speaker #5: A meaningful improvement from our prior outlook and completely mitigating the impact of tariffs . This assumes operational gross margin expansion of roughly 180 basis points due primarily to improvements in our .
Speaker #5: Further , we expect to realize a 60 basis point structural tailwind to gross margin from the disposition of Stuart Weitzman . These planned margin drivers are now expected to fully offset 200 basis point nearly headwind from incremental tariff duties , and as well as an FX headwind of 20 basis points a on Sunday , we expect leverage roughly of 160 basis our prior favorable to points , outlook .
Scott Roe: These planned margin drivers are now expected to fully offset a nearly 200 basis point headwind from incremental tariff and duties, as well as an FX headwind of 20 basis points. On SG&A, we expect leverage of roughly 160 basis points, favorable to our prior outlook. This reflects our diligent expense control, partially offset by ongoing growth-focused investments. To this end, we expect marketing as a percentage of sales to increase around 130 basis points versus last year, approaching 12% of revenue. We also realized a 20 basis point benefit to expenses from the sale of Stuart Weitzman. For some texture on operating profit by brand, we anticipate Coach will expand its operating margin, even with tariff pressure and continued brand investments.
Scott Roe: These planned margin drivers are now expected to fully offset a nearly 200 basis point headwind from incremental tariff and duties, as well as an FX headwind of 20 basis points. On SG&A, we expect leverage of roughly 160 basis points, favorable to our prior outlook. This reflects our diligent expense control, partially offset by ongoing growth-focused investments. To this end, we expect marketing as a percentage of sales to increase around 130 basis points versus last year, approaching 12% of revenue. We also realized a 20 basis point benefit to expenses from the sale of Stuart Weitzman. For some texture on operating profit by brand, we anticipate Coach will expand its operating margin, even with tariff pressure and continued brand investments.
Speaker #5: This our reflects diligent expense control , partially offset by ongoing focused growth investments . To this end , we expect marketing as a percentage of sales to increase around 130 basis points versus last year , approaching 12% of revenue .
Speaker #5: We also realized a 20 basis point benefit to expenses from the sale of Stuart Weitzman, for some texture on operating profit by brand.
Speaker #5: We anticipate coach expand its operating will margin even with tariff pressure , and continued brand investments at Spade , we Kate continue to expect a modest profit loss , given outsized the tariff impacts and brand investments .
Scott Roe: At Kate Spade, we continue to expect a modest profit loss, given the outsized tariff impacts and brand investments, as previously mentioned. Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $65 million. The tax rate is expected to be approximately 17%, and our weighted average diluted share count for the year is forecasted to be approximately 211 million shares, which includes the expectation for $1.2 billion in share repurchases. Taken together, we now expect EPS to be $6.40 to $6.45, representing growth over 25% compared to last year and well ahead of our prior outlook of $5.45 to $5.60. Moving on, we anticipate adjusted free cash flow in the area of $1.5 billion.
Scott Roe: At Kate Spade, we continue to expect a modest profit loss, given the outsized tariff impacts and brand investments, as previously mentioned. Moving to below-the-line expectations for the year, net interest expense is expected to be approximately $65 million. The tax rate is expected to be approximately 17%, and our weighted average diluted share count for the year is forecasted to be approximately 211 million shares, which includes the expectation for $1.2 billion in share repurchases. Taken together, we now expect EPS to be $6.40 to $6.45, representing growth over 25% compared to last year and well ahead of our prior outlook of $5.45 to $5.60. Moving on, we anticipate adjusted free cash flow in the area of $1.5 billion.
Speaker #5: previously As mentioned , moving to below the line expectations for Net the interest expense is expected to be approximately $65 million . The tax rate is expected to be approximately 17% , average diluted share count weighted for the year is forecasted to be approximately 211 million shares , includes the expectation for $1.2 billion in share repurchases .
Speaker #5: Taken together , we now expect EPs to be representing $6.40 to $6.45 , growth over 25% compared to last year and well ahead of our prior outlook of Moving on .
Speaker #5: $5.45 to $5.60 . anticipate adjusted free cash flow in the area of $1.5 billion . And finally , we expect and cloud computing costs to be CapEx in the area of $200 million .
Scott Roe: Finally, we expect CapEx and cloud computing costs to be in the area of $200 million. We anticipate about 60% of the spend related to store openings, renovations, and relocations, with the balance primarily related to our ongoing IT and digital investments. Touching on the shaping of the back half of the year, for context, we raised our second half outlook based on the momentum in the business. We expect total pro forma revenue to increase at a low double-digit rate in the back half, which represents over 20% growth on a two-year stack basis, in line with the first half. This embeds mid-teens growth versus prior year at Coach in the second half, or over 30% growth on a two-year stack basis, consistent with the first half.
Scott Roe: Finally, we expect CapEx and cloud computing costs to be in the area of $200 million. We anticipate about 60% of the spend related to store openings, renovations, and relocations, with the balance primarily related to our ongoing IT and digital investments. Touching on the shaping of the back half of the year, for context, we raised our second half outlook based on the momentum in the business. We expect total pro forma revenue to increase at a low double-digit rate in the back half, which represents over 20% growth on a two-year stack basis, in line with the first half. This embeds mid-teens growth versus prior year at Coach in the second half, or over 30% growth on a two-year stack basis, consistent with the first half.
Speaker #5: We 60% of the spend related to store openings , renovations , and relocations with the balance primarily related to our anticipate about ongoing IT and digital investments touching on the shaping of the back half of the year for we context , our raised second half outlook based on the the momentum in business .
Speaker #5: expect We total pro forma revenue to increase at a low double digit rate in the back half , which represents growth on a two year stack over basis .
Speaker #5: In line with the first half . This embeds mid-teens growth versus prior year at coach in the , or over 30% growth on a two year stack basis consistent with the first half .
Scott Roe: At Kate Spade, we're continuing to incorporate a mid- to high single-digit decline in the second half compared to the prior year. For Q3 specifically, our sales trends to date remain strong and support the higher outlook we've given today. From a modeling standpoint, we've incorporated a total sales increase in the area of 14% on a pro forma constant currency basis. FX is planned to be more than 150 basis points benefit to nominal sales. By brand, Coach is planned up high teens on a constant currency basis versus prior year, while Kate Spade is expected to decline high single digits. Turning to operating margin for the quarter, we expect expansion in the area of 70 basis points, with over 150 basis points of SG&A leverage, offsetting a decline in gross margin due entirely to tariff-related headwinds.
Scott Roe: At Kate Spade, we're continuing to incorporate a mid- to high single-digit decline in the second half compared to the prior year. For Q3 specifically, our sales trends to date remain strong and support the higher outlook we've given today. From a modeling standpoint, we've incorporated a total sales increase in the area of 14% on a pro forma constant currency basis. FX is planned to be more than 150 basis points benefit to nominal sales. By brand, Coach is planned up high teens on a constant currency basis versus prior year, while Kate Spade is expected to decline high single digits. Turning to operating margin for the quarter, we expect expansion in the area of 70 basis points, with over 150 basis points of SG&A leverage, offsetting a decline in gross margin due entirely to tariff-related headwinds.
Speaker #5: At Kate Spade, we're continuing to incorporate a mid- to high-single-digit decline in the second half compared to the prior year.
Speaker #5: For Q3 our , specifically , sales trends to date remain strong and support the higher outlook we've given today . And from a modeling standpoint , we've incorporated a total sales increase in the area of 14% on a pro forma currency basis , FX is planned to be more than point benefit to nominal by brand sales 150 basis is planned up high constant currency prior basis versus teens on a year .
Speaker #5: While Kate is expected to decline high single digits . operating Turning to margin for the quarter , we expect expansion in the area of 70 basis points with over 150 basis , offsetting a gross points of margin due entirely tariff to headwinds .
Scott Roe: Q3 EPS is forecasted to be approximately $1.25, an increase of over 20%, including a tax rate of roughly 14%. So in closing, we delivered another record-breaking quarter, highlighted by strong top and bottom line growth. From this position of strength, we raised our outlook for the year, a clear reflection of our proven strategies and our disciplined and consistent execution. Moving forward, our business is strong, and we have competitive and structural advantages to fuel durable growth and sustainable value creation for years to come. I'd now like to open it up for your questions.
Scott Roe: Q3 EPS is forecasted to be approximately $1.25, an increase of over 20%, including a tax rate of roughly 14%. So in closing, we delivered another record-breaking quarter, highlighted by strong top and bottom line growth. From this position of strength, we raised our outlook for the year, a clear reflection of our proven strategies and our disciplined and consistent execution. Moving forward, our business is strong, and we have competitive and structural advantages to fuel durable growth and sustainable value creation for years to come. I'd now like to open it up for your questions.
Speaker #5: Q3 forecasted to be approximately $1.25 , an EPs is over 20% , increase of including a tax rate of roughly 14% . So , in closing , we delivered another record breaking quarter , highlighted strong top by and bottom line growth from this of position strength , we raised our outlook for the year a clear reflection of our proven strategies and our disciplined and consistent execution .
Speaker #5: Moving forward, our business is strong, and we have competitive and structural advantages that fuel durable growth and sustainable value creation for years to come.
Speaker #5: I'd now like to open it up questions for your .
Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. Thank you. Our first question comes from Matthew Boss of J.P. Morgan. Please go ahead. Your line is open.
Operator: Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. Thank you. Our first question comes from Matthew Boss of J.P. Morgan. Please go ahead. Your line is open.
Speaker #2: Thank If you . ask a press Star you'd like to One on your keypad to leave the queue at any time . Press star two .
Speaker #2: Once again , that To ask is star one . a question and we'll pause for moment to allow a chance to everyone queue join the .
Speaker #2: Thank you . Our first question from Matthew , boss of J.P. comes Morgan . Please go ahead . line is Your open .
Matthew Boss: Thanks, and congrats on a great quarter and this morning's material beat and raise.
Matthew Boss: Thanks, and congrats on a great quarter and this morning's material beat and raise.
Speaker #6: And congrats on, thanks—a great quarter. And this morning's material beat and raise.
Joanne Crevoiserat: Thanks, Matt.
Joanne Crevoiserat: Thanks, Matt.
Matthew Boss: So your fiscal 2026 earnings guide of $6.40 to $6.45, it's 15% or $0.80 higher than your forecast just three months back, roughly 22% operating margin, that's roughly 2 years ahead of your Investor Day timeline. So Joanne, what are you seeing today that gives you confidence in this delivery? And what do you see as the path to continued or ongoing revenue and margin drivers from here?
Matthew Boss: So your fiscal 2026 earnings guide of $6.40 to $6.45, it's 15% or $0.80 higher than your forecast just three months back, roughly 22% operating margin, that's roughly 2 years ahead of your Investor Day timeline. So Joanne, what are you seeing today that gives you confidence in this delivery? And what do you see as the path to continued or ongoing revenue and margin drivers from here?
Speaker #4: Matt Thanks , .
Speaker #6: So your fiscal 26 earnings guide of 640 to 6 4,515% , or $0.80 higher than your forecast , just three months , back roughly 22% operating That's roughly Investor your two years ahead of Day margin .
Speaker #6: timeline . So , Joanne , what are seeing you today that gives you confidence in this delivery ? And what do you see as the to path or ongoing and margin drivers from here continued
Speaker #6: timeline . So , Joanne , what are seeing you today that gives you confidence in this delivery ? And what do you see as the to path or ongoing and margin drivers from here continued revenue ?
Joanne Crevoiserat: Well, thanks, Matt, and good morning. This was truly a standout quarter, but it reflects the power of our strategies, our brands, and our business model. The results we're delivering reflect our systemic approach to building our brands and our business for healthy and sustainable growth. Our efforts, as you can see, are compounding. These are outcomes of the work we've been doing methodically over years. It starts with deeply understanding our consumer and then bringing the magic, or in Tapestry fashion, bringing the magic and the logic together to deliver compelling product and experiences to consumers, and then investing to scale our efforts. That's driving customer acquisition, which is strong around the world, and that's what's driving our business today.
Matthew Boss: Well, thanks, Matt, and good morning. This was truly a standout quarter, but it reflects the power of our strategies, our brands, and our business model. The results we're delivering reflect our systemic approach to building our brands and our business for healthy and sustainable growth. Our efforts, as you can see, are compounding. These are outcomes of the work we've been doing methodically over years. It starts with deeply understanding our consumer and then bringing the magic, or in Tapestry fashion, bringing the magic and the logic together to deliver compelling product and experiences to consumers, and then investing to scale our efforts. That's driving customer acquisition, which is strong around the world, and that's what's driving our business today.
Speaker #4: thanks , Matt , Well , and good morning . was truly a This it reflects standout quarter , but strategies , our the brands and business model .
Speaker #4: The power of our results were delivering our reflect systemic approach to building our brands and our business for healthy and sustainable growth , and our efforts , as you can see , are compounding .
Speaker #4: These are outcomes we've been doing methodically over of the work years . It starts with deeply understanding our bringing the then magic . Or in tapestry fashion , consumer and magic and the logic together to bringing the deliver compelling product experiences to and consumers .
Speaker #4: And then investing to our efforts . And scale that's driving customer acquisition , which is strong world . And around the that's what's business today driving our not only are we .
Joanne Crevoiserat: And not only are we delivering healthy growth with expanding operating margins, as you pointed out, we're also increasing our marketing investments that are driving new customer acquisition, both for today, but also for the future. So what gives us confidence in the future is that our strategies and our execution are working. We outlined in our Investor Day last September, we have a massive TAM with low share, and we're applying these disciplines around the world. We see a tremendous opportunity into the future to drive consistent and durable growth. In this momentum we have, we're confident in our capabilities, our brands, and our team, and the financial outcomes are evident in our Q2 results, but I'll turn it to Scott to unpack what that means for our outlook.
Matthew Boss: And not only are we delivering healthy growth with expanding operating margins, as you pointed out, we're also increasing our marketing investments that are driving new customer acquisition, both for today, but also for the future. So what gives us confidence in the future is that our strategies and our execution are working. We outlined in our Investor Day last September, we have a massive TAM with low share, and we're applying these disciplines around the world. We see a tremendous opportunity into the future to drive consistent and durable growth. In this momentum we have, we're confident in our capabilities, our brands, and our team, and the financial outcomes are evident in our Q2 results, but I'll turn it to Scott to unpack what that means for our outlook.
Speaker #4: healthy growth with And expanding , delivering operating margins , as you pointed we're also marketing increasing our that are driving new investments customer both for today , but out , acquisition , for the .
Speaker #4: future So what gives us confidence in the future is strategies and our are that our working , execution and we outlined Investor Day September , at our a Tam massive with low applying we have share , these the world .
Speaker #4: future So what gives us confidence in the future is strategies and our are that our working , execution and we outlined Investor Day September , at our a Tam massive with low applying we have share , these and we're disciplines around We see a tremendous opportunity into the future to drive durable and growth .
Speaker #4: And this momentum we have, confident in our capabilities and our brands and team, and the financial outcomes are evident in our second quarter results.
Speaker #4: turn it to Scott to unpack what that means for our outlook But I'll .
Scott Roe: Yeah, thanks, Joanne, and thanks for the question, Matt. You know, I would just say this is a moment we've prepared for. So we've been known for operational discipline for quite a while, but what you see in the results in Q2 and in the outlook for the year is a new gear of growth. And when you add growth on top of this operational discipline, what you have is a really powerful machine. Just a few highlights I would point out. So thanks for the recap. $0.80 EPS increase, that's 15% over the prior guide, and $0.50 of that is the beat in Q2, but importantly, we also took up the second half by $0.30. That's really based on the top line, right? So we took, again, the beat in Q2 on the top line and increased the second half.
Todd Kahn: Yeah, thanks, Joanne, and thanks for the question, Matt. You know, I would just say this is a moment we've prepared for. So we've been known for operational discipline for quite a while, but what you see in the results in Q2 and in the outlook for the year is a new gear of growth. And when you add growth on top of this operational discipline, what you have is a really powerful machine. Just a few highlights I would point out. So thanks for the recap. $0.80 EPS increase, that's 15% over the prior guide, and $0.50 of that is the beat in Q2, but importantly, we also took up the second half by $0.30. That's really based on the top line, right? So we took, again, the beat in Q2 on the top line and increased the second half.
Speaker #5: thanks , Yeah , And thanks for the question , Joanne . Matt . You I would just say this is a moment we've prepared for .
Speaker #5: So we've been known for operational discipline for quite a while . But what you see in the know , in Q2 in the and for the year is a new gear of outlook results growth .
Speaker #5: And when add growth on top of this operational discipline , what you have is a really powerful machine . Just you few a highlights .
Speaker #5: I would thanks out . for the point So recap . 80 cent EPs increase . That's 15% over the prior guide . And 50 of that is the beat in Q2 .
Speaker #5: But importantly , we also took up the second half by $0.30 . And that's really based on the top line , right ? So we took again the beat in on the top line .
Scott Roe: So now at 14% constant currency growth for the year, we've got a balance on a two-year stack, first half versus second half, based on the confidence we see in the future. And not only are we incorporating, double-digit top line growth and operating margin with the investments in marketing that we mentioned, but also importantly, in this outlook, we're, we're increasing our gross margin guide. So that means we've fully mitigated the impacts of tariffs this year based on the, on the, actions that we've taken and the strong AUR gains. And lastly, when you put all that earnings and growth together, it's a cash machine.
Todd Kahn: So now at 14% constant currency growth for the year, we've got a balance on a two-year stack, first half versus second half, based on the confidence we see in the future. And not only are we incorporating, double-digit top line growth and operating margin with the investments in marketing that we mentioned, but also importantly, in this outlook, we're, we're increasing our gross margin guide. So that means we've fully mitigated the impacts of tariffs this year based on the, on the, actions that we've taken and the strong AUR gains. And lastly, when you put all that earnings and growth together, it's a cash machine.
Speaker #5: And increased the second half . So now at 14% constant Q2 growth for the year , we've got a balance on a two year stack .
Speaker #5: First half versus second half . Based on the confidence we see in the future . And not only are we incorporating double digit top growth and margin with the line we mentioned , that also importantly in this investments in outlook , but we're we're increasing our gross guide .
Speaker #5: So that means margin mitigated the fully impacts of tariffs this year based on the on the actions that we've taken and the strong we've order gains .
Speaker #5: And lastly , that when you put all earnings and growth together , it's a machine . So $1.5 billion . cash 200 million better than we .
Scott Roe: So $1.5 billion, that's $200 million better than we guided last quarter, and we're returning all of that $200 million, 100% of our free cash flow, back to you, the shareholders, via additional repurchases. And I think that just speaks to the strength of the model and frankly, our confidence in the future. But here's the best part: We're not done. You asked about the future. Think of this new guide, fiscal 2026, as the base, the rebaseline for growth going forward. We've established mid-single-digit revenue and double-digit earnings, EPS, as our baseline. That's our floor. And with that, we see expanding gross margins and operating margins from here. Why? Global opportunities led by international, that's accretive to margins. Gross margin expansion driven by AUR and AUC.
Todd Kahn: So $1.5 billion, that's $200 million better than we guided last quarter, and we're returning all of that $200 million, 100% of our free cash flow, back to you, the shareholders, via additional repurchases. And I think that just speaks to the strength of the model and frankly, our confidence in the future. But here's the best part: We're not done. You asked about the future. Think of this new guide, fiscal 2026, as the base, the rebaseline for growth going forward. We've established mid-single-digit revenue and double-digit earnings, EPS, as our baseline. That's our floor. And with that, we see expanding gross margins and operating margins from here. Why? Global opportunities led by international, that's accretive to margins. Gross margin expansion driven by AUR and AUC.
Speaker #5: That's Did last quarter . And returning we're all of 200,000,100% of that our free cash flow to back to you . The shareholders via additional repurchases .
Speaker #5: think that speaks to And I the strength of the model . And frankly , our confidence in the future . But here's the best part .
Speaker #5: not We're done . You about the asked future of . Think this guide , new fiscal 26 , as the base . The growth going rebaseline for forward .
Speaker #5: established And mid-single digit revenue and double digit earnings . EPs as our baseline . That's our floor . And with that , we see gross margins and operating margins from Why here .
Speaker #5: global opportunities international . led by That's by margins . Gross margin leverage accretive to and on the lower based , SG&A driven AUC expansion growth we see discipline while investing operational back in we're marketing .
Scott Roe: SG&A leverage based on the growth we see, operational discipline while we're investing back in marketing. So this new gear of growth with operational discipline, from our standpoint, yields exceptional TSR as you look forward.
Todd Kahn: SG&A leverage based on the growth we see, operational discipline while we're investing back in marketing. So this new gear of growth with operational discipline, from our standpoint, yields exceptional TSR as you look forward.
Speaker #5: So this new era of growth with operational discipline , from our standpoint , yields TSR as exceptional you look forward .
Operator: Congrats again. Best of luck.
Operator: Congrats again. Best of luck.
Speaker #6: Congrats again . luck Best of .
Joanne Crevoiserat: Thanks, Matt.
Joanne Crevoiserat: Thanks, Matt.
Scott Roe: Thanks, Matt.
Scott Roe: Thanks, Matt.
Operator: Thank you.
Operator: Thank you.
Speaker #4: Matt Thanks , .
Speaker #7: Thank you
Operator: We'll now move on to Brooke Roach with Goldman Sachs. Your line is now open.
Operator: We'll now move on to Brooke Roach with Goldman Sachs. Your line is now open.
Speaker #2: We'll now move on
Speaker #2: to Brooke Roach with . Goldman Sachs . is now Your line open .
Brooke Roach: Good morning, Scott and Joanne. Thank you for taking our question. What gives you confidence that the Coach brand can sustain its strong growth momentum in North America, particularly as you begin to cycle very tough comparisons?
Brooke Roach: Good morning, Scott and Joanne. Thank you for taking our question. What gives you confidence that the Coach brand can sustain its strong growth momentum in North America, particularly as you begin to cycle very tough comparisons?
Speaker #8: Good morning, Scott and Joanne. Thank you for taking our question. What gives you confidence that the Coach brand can sustain its strong growth momentum in North America, particularly as you begin to cycle very tough comparisons?
Joanne Crevoiserat: Yeah, maybe I'll have Todd jump in.
Joanne Crevoiserat: Yeah, maybe I'll have Todd jump in.
Speaker #8: ? Yeah , maybe
Speaker #4: I'll have Todd jump in .
Todd Kahn: Thanks. I'm happy to take this question. I'm very confident in our growth momentum in North America and all over the world, and my confidence is grounded in facts and experience. I appreciate that there was some concern about our ability to comp the double-digit growth in the quarter, but not only did we comp the comp in the most critical holiday period, we did it the right and sustainable way, with lower promotions, exceptional margins, and a 40% increase in marketing, which is primarily designed to create desirability for the brand in the future, not simply in the quarter. We were able to achieve these results because of the exceptional talents and passion of the seasoned Coach teams around the world. Every day, they drive the business and are focused on our consumers.
Todd Kahn: Thanks. I'm happy to take this question. I'm very confident in our growth momentum in North America and all over the world, and my confidence is grounded in facts and experience. I appreciate that there was some concern about our ability to comp the double-digit growth in the quarter, but not only did we comp the comp in the most critical holiday period, we did it the right and sustainable way, with lower promotions, exceptional margins, and a 40% increase in marketing, which is primarily designed to create desirability for the brand in the future, not simply in the quarter. We were able to achieve these results because of the exceptional talents and passion of the seasoned Coach teams around the world. Every day, they drive the business and are focused on our consumers.
Speaker #9: Hey , I'm happy to take this question . I'm very confident in our growth momentum in North America and all over the world .
Speaker #9: confidence my grounded And in and experience . facts some concern about our there was ability to comp the digit double quarter the , but not we only did comp the comp in the most holiday period , we we did it the sustainable right and way with promotions , exceptional margins , and a 40% increase in marketing , which is lower designed to create desirability for the brand in the simply future , not in the quarter .
Speaker #9: We were able to achieve results because of these exceptional and passionate teams, the talents of our coaches around the world. Every day, they drive the business and are focused on our consumers.
Todd Kahn: It is their efforts that will deliver our $10 billion ambition in the future at best-in-class margins. Now, let me turn, and let's look at what I call our confidence performance indicators, or CPIs. First, we introduced at our Investor Day, and Joanne mentioned earlier, we look at the TAM very differently. It's not just about swapping dollars from other brands, but the number of consumers we can bring into Coach and the category, and we're clearly doing that. When you examine the TAM through that lens, in North America, our market share is single digits, and globally, it's below 1%. Second, our focus on acquisition, particularly with Gen Z and soon Gen Alpha. Not only are we winning with them, but they provide our brand with a heat halo that positively affects all other ages.
Todd Kahn: It is their efforts that will deliver our $10 billion ambition in the future at best-in-class margins. Now, let me turn, and let's look at what I call our confidence performance indicators, or CPIs. First, we introduced at our Investor Day, and Joanne mentioned earlier, we look at the TAM very differently. It's not just about swapping dollars from other brands, but the number of consumers we can bring into Coach and the category, and we're clearly doing that. When you examine the TAM through that lens, in North America, our market share is single digits, and globally, it's below 1%. Second, our focus on acquisition, particularly with Gen Z and soon Gen Alpha. Not only are we winning with them, but they provide our brand with a heat halo that positively affects all other ages.
Speaker #9: It is their efforts that will deliver our $10 billion ambition in the future . best . In class At margins let me turn let's and look at what I call our confidence performance indicators , or KPIs .
Speaker #9: First , we . Investor Day and Now Joanne introduced at our mentioned at the we look earlier , Tam differently . very It's not just about dollars from other brands , but the number of swapping consumers bring into coach and the we can category .
Speaker #9: And we're doing clearly that when you examine the Tam through lens in that America , our market share is digits single , and globally it's 1% .
Speaker #9: below Second , our focus on acquisition , Gen Z Gen and Alpha particularly with , not winning with we them only are they provide , but our brand heat halo .
Speaker #9: with a That positively affects all other ages when we talk about . So gaining 2.9 million consumers in the quarter , the highest in if we simply hold retention rates , it will our history , compounding benefit in the future .
Todd Kahn: So when we talk about gaining 2.9 million consumers in the quarter, the highest in our history, if we simply hold retention rates, it will have a compounding benefit in the future. Third, our growth is overwhelmingly coming from our core category, women's leather goods. That said, it is extremely balanced across families and brand codes that can be built on and amplified, with no single family accounting for more than 10% of our sales. Fourth, AUR and units equally contributed to the quarter. Our AUR today is where the brand was 15 years ago and 5 to 10x below traditional European luxury. That said, we are clear-eyed in our sweet spot of the $200 to $500 price point to ensure we can continue to attract young consumers. On units, we have significant runway.
Todd Kahn: So when we talk about gaining 2.9 million consumers in the quarter, the highest in our history, if we simply hold retention rates, it will have a compounding benefit in the future. Third, our growth is overwhelmingly coming from our core category, women's leather goods. That said, it is extremely balanced across families and brand codes that can be built on and amplified, with no single family accounting for more than 10% of our sales. Fourth, AUR and units equally contributed to the quarter. Our AUR today is where the brand was 15 years ago and 5 to 10x below traditional European luxury. That said, we are clear-eyed in our sweet spot of the $200 to $500 price point to ensure we can continue to attract young consumers. On units, we have significant runway.
Speaker #9: Third, growth is overwhelmingly coming from the category of women's leather goods. Our core is extremely balanced across families. Codes can be built on an idea that can be amplified—no single one.
Speaker #9: Third , growth is our overwhelmingly coming from category women's leather goods said , our core it is extremely balanced across and families . codes be built on an that can amplified no with That sales 10% of our .
Speaker #9: Fourth order units and equally contributed to the quarter . Our today is where the brand order 15 years ago , and 5 to 10 x below traditional European luxury That said , .
Speaker #9: are clear our in sweet spot of the 2 to $500 price eyed point to ensure we can continue to attract young consumers units , we have significant runway .
Todd Kahn: We are still below our pre-pandemic levels, 20% globally and 25% in North America. So to wrap it all up, our CPIs are strong and gives us the confidence that we will deliver long-term healthy growth into the future.
Todd Kahn: We are still below our pre-pandemic levels, 20% globally and 25% in North America. So to wrap it all up, our CPIs are strong and gives us the confidence that we will deliver long-term healthy growth into the future.
Speaker #9: are We still below our levels , pre-pandemic 20% and globally 25% in North America on . So to all wrap it up , our KPIs are gives and us the confidence that we will deliver term long healthy the future growth into .
Joanne Crevoiserat: Great. Thanks so much.
Brooke Roach: Great. Thanks so much.
Speaker #8: Thanks so
Todd Kahn: Thank you.
Todd Kahn: Thank you.
Speaker #8: much .
Operator: Thank you. We'll now move on to Ike Boruchow with Wells Fargo Securities. Your line is now open.
Operator: Thank you. We'll now move on to Ike Boruchow with Wells Fargo Securities. Your line is now open.
Speaker #9: Thank you
Speaker #2: We'll now
Speaker #2: on move to strong Wells Boruchow Fargo with Securities . Your line is now open
Ike Boruchow: Hey, everyone. Congrats on my end as well. Maybe for Scott, two regional questions. First, China, 25% plus from low double, pretty impressive. Can you elaborate on the strength and outperformance you're seeing in that region? Is it share? Is it category? Is it both? And then I wanted to also ask, even though you know you didn't raise it, Europe holding at 20%, it's still pretty impressive, and there's actually several brands that have been reporting that have been talking down Europe a little bit, given what they've been seeing recently. Can you just comment on what you're seeing in the European market, how you're bucking the trend, and just how you're kind of viewing the macro in that region? Thanks.
Ike Boruchow: Hey, everyone. Congrats on my end as well. Maybe for Scott, two regional questions. First, China, 25% plus from low double, pretty impressive. Can you elaborate on the strength and outperformance you're seeing in that region? Is it share? Is it category? Is it both? And then I wanted to also ask, even though you know you didn't raise it, Europe holding at 20%, it's still pretty impressive, and there's actually several brands that have been reporting that have been talking down Europe a little bit, given what they've been seeing recently. Can you just comment on what you're seeing in the European market, how you're bucking the trend, and just how you're kind of viewing the macro in that region? Thanks.
Speaker #10: Hey . on my Congrats end as Maybe for Scott . Two regional questions . First , China 25% plus low double . impressive .
Speaker #10: everyone .
Speaker #10: Pretty Can you elaborate on strength in our the you're seeing in that region from . Is it share . Is it category . Is it both .
Speaker #10: then I wanted to also ask And even you didn't raise though holding at 20% . It's still pretty impressive . And there's actually several brands that have been reporting that have been talking down Europe a little bit .
Speaker #10: Given what they've been seeing recently . just comment on what you're seeing in the European Can you market , how you're bucking the trend and just how you're kind of viewing the macro in that region ?
Speaker #10: Thanks .
Joanne Crevoiserat: Hey, Ike, it's Joanne. Maybe I'll jump in here and talk about strategically how we're thinking about international. As we talked about in our investor day, our international markets represent considerable opportunity for us. And I think what you're seeing around the world is the global resonance of our brand and the effectiveness of our regional execution. We have teams on the ground, and we're building capabilities. So to your point, we did accelerate in China in the quarter. You know, China continues to represent long-term opportunity for our brand. We performed well ahead of our expectations, but we're also well outpacing the industry in China.
Joanne Crevoiserat: Hey, Ike, it's Joanne. Maybe I'll jump in here and talk about strategically how we're thinking about international. As we talked about in our investor day, our international markets represent considerable opportunity for us. And I think what you're seeing around the world is the global resonance of our brand and the effectiveness of our regional execution. We have teams on the ground, and we're building capabilities. So to your point, we did accelerate in China in the quarter. You know, China continues to represent long-term opportunity for our brand. We performed well ahead of our expectations, but we're also well outpacing the industry in China.
Speaker #4: Hey , Ike , it's Joanne . Maybe I'll here jump in and talk about we're thinking about international . As we strategically how about in our Investor Day , our international opportunity represent considerable us .
Speaker #4: And I think what you're seeing the world around is the global resonance of our brand . And the effectiveness of our regional execution .
Speaker #4: We teams on the ground and we're building have your point , we did capabilities . accelerate in China in the quarter you . know , We , China represent long term opportunity continues to brand .
Speaker #4: We performed well ahead of our expectations , but we're also well for our outpacing the in industry China . So I'll pause I'll there for a second and say what is driving our and our share gain ?
Joanne Crevoiserat: I'll pause there for a second and say what is driving our growth and our share gains, significant share gains in the market, is new customer acquisition, which is being led by Gen Z. So a consistent theme around the world. We are seeing growth across channels in China. Digital led the growth, which means we're meeting our customer where they are on the ground. And to your point, our updated guidance, we do expect over 25% growth for this year. We are growing share, but again, it continues to represent a significant long-term opportunity for us. And I'll touch on Europe, but then I'm gonna toss it to Todd to give you a little bit of color of how we bring this to life, because I think that's important. Europe is a consistent story, right?
Joanne Crevoiserat: I'll pause there for a second and say what is driving our growth and our share gains, significant share gains in the market, is new customer acquisition, which is being led by Gen Z. So a consistent theme around the world. We are seeing growth across channels in China. Digital led the growth, which means we're meeting our customer where they are on the ground. And to your point, our updated guidance, we do expect over 25% growth for this year. We are growing share, but again, it continues to represent a significant long-term opportunity for us. And I'll touch on Europe, but then I'm gonna toss it to Todd to give you a little bit of color of how we bring this to life, because I think that's important. Europe is a consistent story, right?
Speaker #4: growth gains in the share market is new customer acquisition , being led which is by Gen Z . So a Significant consistent around theme across channels growth in China , digital led the growth , which we're meeting means where are they on the ground .
Speaker #4: And to point , our your our expect over . 25% growth for We do growing are We year . But again , it share .
Speaker #4: this represent a significant long term continues to us . And I'll touch on Europe . But then I'm going to toss it to Todd to opportunity give you a little bit of color of how we bring this to life , because I think that's important .
Joanne Crevoiserat: We have an opportunity to grow penetration in Europe. It's low penetration for us today, and we see long-term opportunity to continue to build our penetration in Europe. And we're taking the same strategies of doing diligent and disciplined brand building, and attracting a local consumer. That's who's driving our growth, and it's a young consumer again. And, you know, the tactics and execution on the ground in each of these regions has been at a very high level, getting to know their customers, and then, as I say, bringing that magic and logic together to deliver compelling product and experiences. But maybe, Todd, you can add a little color on how that's coming to life.
Joanne Crevoiserat: We have an opportunity to grow penetration in Europe. It's low penetration for us today, and we see long-term opportunity to continue to build our penetration in Europe. And we're taking the same strategies of doing diligent and disciplined brand building, and attracting a local consumer. That's who's driving our growth, and it's a young consumer again. And, you know, the tactics and execution on the ground in each of these regions has been at a very high level, getting to know their customers, and then, as I say, bringing that magic and logic together to deliver compelling product and experiences. But maybe, Todd, you can add a little color on how that's coming to life.
Speaker #4: Europe is a consistent story, right? We have an opportunity to grow penetration in Europe. It's low penetration for us today and we see a long-term opportunity to continue to build our penetration in Europe.
Speaker #4: And, along with taking the same strategies, we're doing diligent and disciplined brand building and attracting a local consumer. That's who's driving our growth—it's a young consumer again.
Speaker #4: . And you know , the And tactics and execution on the ground in each of these regions has been at a very high level .
Speaker #4: Getting to know their customers . And then , as I bringing say , that magic and logic together to deliver compelling product and experiences .
Speaker #4: But you can add maybe , Todd , a little color on how life that's coming to .
Todd Kahn: Thanks, Joanne. Let's go around the world in 60 seconds. But first, China, as Joanne said. First, let's remember, we're building on an incredible base. We've been there for over two decades. We have hundreds of stores. We are very close to the Chinese consumer. We integrate our marketing campaigns to make sure they're responsive to the Chinese consumer needs. And I do think what continues to resonate is the idea that our value and values cut through. And then our relevancy, most recently, we did a collaboration with Clot, a very cool streetwear brand in China, that reinforced all of those attributes of Coach. So we feel very good. You'll see us re-up more marketing in China in a very targeted city approach, not, you know, not global across all of China, but very tactical.
Todd Kahn: Thanks, Joanne. Let's go around the world in 60 seconds. But first, China, as Joanne said. First, let's remember, we're building on an incredible base. We've been there for over two decades. We have hundreds of stores. We are very close to the Chinese consumer. We integrate our marketing campaigns to make sure they're responsive to the Chinese consumer needs. And I do think what continues to resonate is the idea that our value and values cut through. And then our relevancy, most recently, we did a collaboration with Clot, a very cool streetwear brand in China, that reinforced all of those attributes of Coach. So we feel very good. You'll see us re-up more marketing in China in a very targeted city approach, not, you know, not global across all of China, but very tactical.
Speaker #9: Thanks , Joanne . Let's go world in 60s . around the But first , as said Joanne , first , remember we're let's incredible base .
Speaker #9: We've been there for over two decades . We have of stores . We are hundreds very close to the Chinese consumer . We integrate our marketing campaigns to sure they're make responsive to the Chinese consumer needs .
Speaker #9: And I do think what continues to resonate is the idea that our values cut through , and then our relevancy . Most recently , value and we did a collaboration with clot , a very cool streetwear brand in China that reinforced all of those attributes of coach .
Speaker #9: So we feel very good . us re-up more marketing in China in a very You'll see targeted city , not not global across all of but China , very tactical .
Todd Kahn: We measure it, and we see it works, and then it gives us the confidence to put more money in. In Europe, it's such a fun and terrific story. Our team in Europe is doing a sensational job. When you really look at Europe, we talk about Europe, but realistically, we're in England and a little bit elsewhere. So the opportunity to continue to expand, France is gonna be our next big push. There, we're doing things in so many right ways. We see a big wholesale opportunity. So, you know, I think you know from Joanne, Scott, and myself, we don't really like key money, and we don't like buying temples for real estate. So we love the approach of going into youthful neighborhoods where the stores can make money and/or wholesale and digital.
Todd Kahn: We measure it, and we see it works, and then it gives us the confidence to put more money in. In Europe, it's such a fun and terrific story. Our team in Europe is doing a sensational job. When you really look at Europe, we talk about Europe, but realistically, we're in England and a little bit elsewhere. So the opportunity to continue to expand, France is gonna be our next big push. There, we're doing things in so many right ways. We see a big wholesale opportunity. So, you know, I think you know from Joanne, Scott, and myself, we don't really like key money, and we don't like buying temples for real estate. So we love the approach of going into youthful neighborhoods where the stores can make money and/or wholesale and digital.
Speaker #9: measure it and we And we it works . then And see it gives confidence to put more us the money in in Europe , it's it's such a story .
Speaker #9: terrific Our team in Europe a sensational job . And when you really look at Europe , we about talk Europe . But fun and we're realistically in England and a little bit elsewhere .
Speaker #9: So the the opportunities to continue to expand France is going to be our next big push . And doing things we're so in many right We see a ways .
Speaker #9: big wholesale opportunity . So you know , I think , you Joanne Scott and know , from myself , we don't like ki money and we don't like buying temples for real estate .
Speaker #9: So, we love the going-into approach of youthful neighborhoods, where they can make stores money. And, or wholesale digital, and that approach is winning.
Todd Kahn: That approach is winning. And again, what is so important, the consumer sees the value of our offering, and ultimately, I think it'll allow us to grow for many years in more and more countries in Europe.
Todd Kahn: That approach is winning. And again, what is so important, the consumer sees the value of our offering, and ultimately, I think it'll allow us to grow for many years in more and more countries in Europe.
Speaker #9: And again , what is so important to consumer sees the value offering and of our ultimately , I think it will allow us to grow for many years in more and more countries in Europe .
Ike Boruchow: Thanks, guys.
Ike Boruchow: Thanks, guys.
Speaker #10: Thanks .
Operator: ... Thank you. We'll now move on to Rick Patel with Raymond James. Your line is now open.
Operator: ... Thank you. We'll now move on to Rick Patel with Raymond James. Your line is now open.
Speaker #2: Thank you . We'll now on to Rick move Patel with Raymond Your line James . open is now .
Rick Patel: Thank you. Good morning, and I'll add my congrats as well. Can you provide a little more detail around AUR and the opportunities going forward? How do we think about the benefit from pricing, and is there anything to flag in terms of sales mix towards larger bags or certain quality materials that could be a swing factor, for AUR moving forward?
Rick Patel: Thank you. Good morning, and I'll add my congrats as well. Can you provide a little more detail around AUR and the opportunities going forward? How do we think about the benefit from pricing, and is there anything to flag in terms of sales mix towards larger bags or certain quality materials that could be a swing factor, for AUR moving forward?
Speaker #11: Good morning . And Thank you . congrats as well . Can you little more detail around order provide a the opportunities going forward ?
Speaker #11: How I'll add my about the think pricing , and is anything to flag there in terms of sales benefit from larger bags or certain quality materials ?
Speaker #11: be a That could factor for swing forward
Joanne Crevoiserat: I'll just hit the top of the waves, but let Todd talk about what's really driving AUR growth at Coach. But AUR at Tapestry is about driving healthy growth. We are driving healthy growth. We're driving AUR growth in the quarter. We've been doing that consistently, and it's a function of brand heat and the investments we're making in our brands, the innovation we're delivering, and the quality that we deliver. I think the value proposition of our brands is unmatched in the marketplace. So AUR for us is not just a reaction to cost. It really is thoughtful about how we deliver a strong value proposition to consumers. At the end of the day, AUR is a math equation. It's how the consumer votes, right?
Joanne Crevoiserat: I'll just hit the top of the waves, but let Todd talk about what's really driving AUR growth at Coach. But AUR at Tapestry is about driving healthy growth. We are driving healthy growth. We're driving AUR growth in the quarter. We've been doing that consistently, and it's a function of brand heat and the investments we're making in our brands, the innovation we're delivering, and the quality that we deliver. I think the value proposition of our brands is unmatched in the marketplace. So AUR for us is not just a reaction to cost. It really is thoughtful about how we deliver a strong value proposition to consumers. At the end of the day, AUR is a math equation. It's how the consumer votes, right?
Speaker #4: I'll
Speaker #4: just hit the top waves , but let Todd talk about ? what's really our growth at Coach . But our about at tapestry driving growth healthy is are , and we healthy growth .
Speaker #4: driving We're driving growth . our In the quarter , been doing we've consistently , and it's a function of brand heat . And the we're investments making in brands .
Speaker #4: driving We're driving growth . our In the quarter , been doing we've consistently , and it's a function of brand heat . And the we're investments making in our The we're delivering innovation quality that we deliver .
Speaker #4: I think the value proposition of our brands is unmatched in and the the . So for us is not marketplace reaction to cost .
Speaker #4: It is just a thoughtful how we really strong value about proposition to deliver a consumers . And at the end of the day , or is a math equation , it's how consumer votes .
Joanne Crevoiserat: AUR is the average unit retail of where they're placing their dollars, and we continue to stay close to consumers to make sure we understand and leverage those insights into the product and experiences we're delivering, and we're seeing our customers respond. New customers are coming in at higher AUR, so we're driving healthy growth, and we've got a great innovation pipeline to keep it going. But Todd, do you want to touch on that?
Joanne Crevoiserat: AUR is the average unit retail of where they're placing their dollars, and we continue to stay close to consumers to make sure we understand and leverage those insights into the product and experiences we're delivering, and we're seeing our customers respond. New customers are coming in at higher AUR, so we're driving healthy growth, and we've got a great innovation pipeline to keep it going. But Todd, do you want to touch on that?
Speaker #4: Right ? Order is the average unit of where of they're retail placing their dollars , continue and we stay close to to to make sure we consumers understand and leverage those insights into the product .
Speaker #4: And and experiences . We're delivering . And we're seeing our customers respond . New customers are in at higher orders . We're coming driving healthy growth , and we've got a great innovation to keep it pipeline going .
Speaker #4: But want to that ?
Todd Kahn: Sure. Thank you. Again, all the things that Joanne said are so relevant. But when you go down one more level, first, let's talk about our sweet spot, that $200 to $500 range. That's a lot of range to continue to take price where it makes sense. We also are constantly animating product, and that animation, we do it in a way that the consumer sees the value, and that's how we get it. This is not a march up to just increase AURs on like-for-like 10%, 10%, 10%, which we've seen other people do, and we know what happens there. So our task is to really always reflect back on value. We also benefit from mix. Mix is a big driver here. You've heard me talk about our One Coach strategy.
Todd Kahn: Sure. Thank you. Again, all the things that Joanne said are so relevant. But when you go down one more level, first, let's talk about our sweet spot, that $200 to $500 range. That's a lot of range to continue to take price where it makes sense. We also are constantly animating product, and that animation, we do it in a way that the consumer sees the value, and that's how we get it. This is not a march up to just increase AURs on like-for-like 10%, 10%, 10%, which we've seen other people do, and we know what happens there. So our task is to really always reflect back on value. We also benefit from mix. Mix is a big driver here. You've heard me talk about our One Coach strategy.
Speaker #9: Sure . you again . All the Thank
Speaker #9: That, Joanne, is so relevant. And you said things, but when we go down one more level, touch on the $200 to $500 range.
Speaker #9: That's a lot of first. Let's talk range to continue to price where it makes sense. We also are constantly animating product take, and that animation, we do it in a way that the consumer sees the value, and.
Speaker #9: we get that's how This a to march up just orders the like increase on for 10% , like 10% , 10% , which we've seen other people know what do .
Speaker #9: happens there . So our task is to always really reflect back on value . We also benefit from mix . Mix is a big here .
Speaker #9: You've heard me talk driver about our one coach strategy . Bringing collection outlet into stores raises a . We a really seeing also are interesting phenomenon , which is our customer .
Todd Kahn: Bringing collection product into outlet stores raises AURs. We also are seeing a really interesting phenomenon, which is, our customer, they may come in, buy a Teri as their first bag. Their next bag is often a higher AUR bag opportunity. Because they've had such a great experience with Coach, they are aspiring to be even better, and that is so powerful for us. But there are two things that are important truths that I want to make sure everybody realizes. One, we are not going to compromise our value, to drive AUR. We will always ensure that the value of the product is there. Similarly, we're not going to artificially drive units through promotion. That balance is how we achieve optimal results consistently over many quarters and years.
Todd Kahn: Bringing collection product into outlet stores raises AURs. We also are seeing a really interesting phenomenon, which is, our customer, they may come in, buy a Teri as their first bag. Their next bag is often a higher AUR bag opportunity. Because they've had such a great experience with Coach, they are aspiring to be even better, and that is so powerful for us. But there are two things that are important truths that I want to make sure everybody realizes. One, we are not going to compromise our value, to drive AUR. We will always ensure that the value of the product is there. Similarly, we're not going to artificially drive units through promotion. That balance is how we achieve optimal results consistently over many quarters and years.
Speaker #9: They may come in buy a Terry as their first back . Their next bag is often a higher order bag opportunity because such a great they've had experience with coach .
Speaker #9: They are to aspiring be even better and is that so powerful for us . But there's two things that are important I truths that want to make sure everybody realizes .
Speaker #9: One , not going are to compromise our to value to drive or we will always ensure that the value of the product is there we're not .
Speaker #9: Going to artificially, similarly, drive units through promotion—that balance is how we achieve optimal results consistently over many years and quarters.
Rick Patel: Thank you very much.
Rick Patel: Thank you very much.
Todd Kahn: Thank you.
Todd Kahn: Thank you.
Speaker #11: you very . Thank .
Speaker #11: much
Speaker #9: you Thank
Operator: Thank you. We'll move now to Adrienne Yih with Barclays. Your line is now open.
Operator: Thank you. We'll move now to Adrienne Yih with Barclays. Your line is now open.
Speaker #2: you . Thank We'll move now to Adrian Yee with Barclays . Your line is now open .
Adrienne Yih: Great. Thank you very much. Huge congratulations. Really powerful. The really kind of the message that's coming through here very clearly is that the model itself and the 10, 15 years of discipline is actually your moat. And so Joanne, with that, having said that, it seems like you've always been sort of forward on your forward foot in terms of what's coming next and where to invest. So from an IT perspective, how are you harnessing sort of the power of AI? How much of the CapEx IT is in these AI foundational investments, and how quickly can you see sort of some of the demand side payback, not necessarily the cost side efficiency?
Adrienne Yih: Great. Thank you very much. Huge congratulations. Really powerful. The really kind of the message that's coming through here very clearly is that the model itself and the 10, 15 years of discipline is actually your moat. And so Joanne, with that, having said that, it seems like you've always been sort of forward on your forward foot in terms of what's coming next and where to invest. So from an IT perspective, how are you harnessing sort of the power of AI? How much of the CapEx IT is in these AI foundational investments, and how quickly can you see sort of some of the demand side payback, not necessarily the cost side efficiency?
Speaker #12: Great . Thank you very much . Huge congratulations . Really powerful in the really that's the message coming through here . kind of Very clearly is that the itself model and the ten , 15 years of discipline is actually your moat .
Speaker #12: And so , Joanne , with that , having said that , it seems like you've always been sort of forward on your forward foot of what's next in terms to invest .
Speaker #12: from an coming perspective , how are you the power of AI ? How much CapEx harnessing it is in these AI of the foundational investments , and how quickly can sort of some of the demand side payback , not necessarily the cost side efficiency .
Adrienne Yih: And then for Todd, the Kisslock I saw was back in stock in January, and then you mentioned that no product families are more than 10%. So really, I guess my question is, what's coming for newness this year, and how do you instill this culture of innovation, right, without letting any of these particular franchises get bigger than 10%? A lot of times, we kind of get risk-averse when we're doing a little bit too well. So just, you know, what have you instilled in the entire, you know, creative organization that allows you to unleash that creativity? Thank you.
Adrienne Yih: And then for Todd, the Kisslock I saw was back in stock in January, and then you mentioned that no product families are more than 10%. So really, I guess my question is, what's coming for newness this year, and how do you instill this culture of innovation, right, without letting any of these particular franchises get bigger than 10%? A lot of times, we kind of get risk-averse when we're doing a little bit too well. So just, you know, what have you instilled in the entire, you know, creative organization that allows you to unleash that creativity? Thank you.
Speaker #12: And then for Todd , the kislak I saw was back in stock in January . And then you mentioned that no families are more product than 10% .
Speaker #12: really , I guess my So what's coming question this for And how do you instill this , this culture of newness without innovation any of letting these particular franchises get bigger than 10% ?
Speaker #12: A lot of times we kind of get risk when we're averse doing a little bit too well . So just the entire organization that to instilled in that creative unleash allows you creativity ?
Speaker #12: What have you—thank you.
Joanne Crevoiserat: Thanks, Adrienne. Great question on AI, and I assumed I was going to get a question on AI today. So I would say this is something that, as you mentioned, it's a competitive advantage for Tapestry. We are a direct-to-consumer business. We have a lot of data, and we've been working on harnessing that data and leveraging tools. So we're already applying AI tools across the value chain, from product development, as you know, to inventory management, to pricing, to marketing. AI tools are embedded, and what we've been focused on at Tapestry is putting the tools in the hands of the decision-makers in our organization, which is so critically important, and that is where I think that is the moat. To have our teams understand, trust, and leverage those tools and those insights to make better decisions at Tapestry.
Joanne Crevoiserat: Thanks, Adrienne. Great question on AI, and I assumed I was going to get a question on AI today. So I would say this is something that, as you mentioned, it's a competitive advantage for Tapestry. We are a direct-to-consumer business. We have a lot of data, and we've been working on harnessing that data and leveraging tools. So we're already applying AI tools across the value chain, from product development, as you know, to inventory management, to pricing, to marketing. AI tools are embedded, and what we've been focused on at Tapestry is putting the tools in the hands of the decision-makers in our organization, which is so critically important, and that is where I think that is the moat. To have our teams understand, trust, and leverage those tools and those insights to make better decisions at Tapestry.
Speaker #4: Thanks , Great Adrian . question on AI . And I assumed I was going to get a question on today . AI So I would say is this that , as you mentioned , it's it's a competitive advantage for tapestry .
Speaker #4: We are direct to consumer business . We have of a lot we've been working data . And on that harnessing data and tools .
Speaker #4: So we're applying tools across the leveraging value AI chain from product you know , to development , as pricing inventory are AI tools to management to marketing , embedded we've been .
Speaker #4: what And focused on at tapestry is putting the tools in the hands of the decision makers in our organization , which is so critically important .
Speaker #4: And is where I think that is the moat to have our that understand , trust it , teams and leverage those tools and those insights to make better decisions .
Joanne Crevoiserat: You're right, it does drive efficiency, but it's also driving growth. We've invested for many years in these capabilities. In fact, we have a patented data fabric. So this is not new to Tapestry. I do think it's a competitive advantage. What that does is it positions us well to adopt new technology, and our teams are insatiably curious. They're testing and learning with these tools, and it is driving more efficiency, but it's also driving creativity, and I'll give you just a couple of quick examples. We have designers that are leveraging AI. They'll do a sketch. So there is still a human and a need for design eye, right? They do a sketch, but what AI helps is they can iterate on that sketch. They can do color multipliers, they can make design tweaks much faster than we could in the past.
Joanne Crevoiserat: You're right, it does drive efficiency, but it's also driving growth. We've invested for many years in these capabilities. In fact, we have a patented data fabric. So this is not new to Tapestry. I do think it's a competitive advantage. What that does is it positions us well to adopt new technology, and our teams are insatiably curious. They're testing and learning with these tools, and it is driving more efficiency, but it's also driving creativity, and I'll give you just a couple of quick examples. We have designers that are leveraging AI. They'll do a sketch. So there is still a human and a need for design eye, right? They do a sketch, but what AI helps is they can iterate on that sketch. They can do color multipliers, they can make design tweaks much faster than we could in the past.
Speaker #4: At tapestry . And you're right , it does drive efficiency , but it's also driving growth . we've And invested for years in many these fact , we capabilities .
Speaker #4: patented data In this is not new to tapestry . fabric . think it's So a competitive advantage . What that does is it positions us well to adopt new technology .
Speaker #4: And our are teams insatiably curious . They're testing and learning with these tools , and it is more driving efficiency . it's But also driving creativity .
Speaker #4: And I'll give you just a couple of quick examples . We have designers that are leveraging do a sketch . So there AI .
Speaker #4: is still a and a need for human They'll design . I write , a sketch , sketch , but AI they do a helps is they can iterate on that sketch .
Speaker #4: They can do color multipliers , they can make design tweaks much faster than we could in the past . So the the process of speed in design , inception and the idea through samples getting working it through our process increases , speed and when increases in our supply and that chain , product development timeline that leads to better outcomes for our consumers and drives our growth , we're also using it in marketing to consumer insights and on content ideate creation based on those insights .
Joanne Crevoiserat: So the speed in the process of design inception and the idea through getting samples and working it through our process increases. When speed increases in our supply chain and that product development timeline, that leads to better outcomes for our consumers and drives our growth. We're also using it in marketing to harness consumer insights and ideate on content creation based on those insights. Again, human in the loop. That human creativity and translation of the insights to creative content is important, but these AI engines are helping us speed up the process of creating AIs, do some testing, learn faster, and that speed is paying off in content creation as well.
Joanne Crevoiserat: So the speed in the process of design inception and the idea through getting samples and working it through our process increases. When speed increases in our supply chain and that product development timeline, that leads to better outcomes for our consumers and drives our growth. We're also using it in marketing to harness consumer insights and ideate on content creation based on those insights. Again, human in the loop. That human creativity and translation of the insights to creative content is important, but these AI engines are helping us speed up the process of creating AIs, do some testing, learn faster, and that speed is paying off in content creation as well.
Speaker #4: Again , human in the loop that human creativity and translation of the insights to creative is content important . But these AI engines are helping us speed up the process of creating AI .
Speaker #4: Do some testing , learn faster , and that speed is paying content off in creation tools are These well . and our new teams are aggressively learning , and we'll see where testing and takes us .
Joanne Crevoiserat: These tools are new, and our teams are aggressively testing and learning, and we'll see where it takes us, but we are well positioned to continue to drive with AI tools and with data.
Joanne Crevoiserat: These tools are new, and our teams are aggressively testing and learning, and we'll see where it takes us, but we are well positioned to continue to drive with AI tools and with data.
Speaker #4: We are well positioned to continue to drive with AI tools and with data.
Operator: Fantastic.
Adrienne Yih: Fantastic.
Scott Roe: Maybe just a quick, just a quick build, Adrienne, too. You asked about the investment. So of our $200 million of CapEx, we said, over half of that was related to our stores, and the remainder is in technology. That's not a real big number in a company that our size. It's because of what Joanne said. A lot of that tech debt is behind us, and we have the foundation. It's more of a change management philosophy, opportunity for us, as opposed to a big investment challenge in terms of adopting AI. Sorry, Todd, go over to you.
Scott Roe: Maybe just a quick, just a quick build, Adrienne, too. You asked about the investment. So of our $200 million of CapEx, we said, over half of that was related to our stores, and the remainder is in technology. That's not a real big number in a company that our size. It's because of what Joanne said. A lot of that tech debt is behind us, and we have the foundation. It's more of a change management philosophy, opportunity for us, as opposed to a big investment challenge in terms of adopting AI. Sorry, Todd, go over to you.
Speaker #12: Fantastic .
Speaker #5: Maybe just a quick just a quick build . Adrian , to about the So you asked of investment . 200 million of CapEx , we said over half of that was related to our stores and the is in technology .
Speaker #5: That's not a real big remainder number in a company that our size . It's because of what Joanne said . A lot of that tech debt is behind us .
Speaker #5: And we have the foundation . So it's more of a change management philosophy opportunity for us as to a big opposed challenge in terms of adopting AI .
Speaker #5: Sorry , Todd , go over to you
Todd Kahn: No worries. You know, one of the most pleasurable aspects of my job is to sit with Stuart, our creative director, our merchants, and see what's coming. The last night, I did a walkthrough for future product. It's just so good. You'll see it, some of it next week, at our runway show, which is where we push the envelope, new ideas, new innovation comes about. What I love and what you've seen over the last, probably almost dozen shows, is the commercial aspect of our shows, taking down ideas from runway and making them big commercial ideas, is how we're winning on product.
Todd Kahn: No worries. You know, one of the most pleasurable aspects of my job is to sit with Stuart, our creative director, our merchants, and see what's coming. The last night, I did a walkthrough for future product. It's just so good. You'll see it, some of it next week, at our runway show, which is where we push the envelope, new ideas, new innovation comes about. What I love and what you've seen over the last, probably almost dozen shows, is the commercial aspect of our shows, taking down ideas from runway and making them big commercial ideas, is how we're winning on product.
Speaker #9: worries investment know , one of the most pleasurable
Speaker #9: my . is to You sit with Stuart , our creative director , our merchants aspects of , and see what's coming . And the last .
Speaker #9: for future product . It's just so good . You'll see it . of it Some next week at our show , which is where we push the envelope .
Speaker #9: New new ideas , No innovation comes about what I . love and And what you've seen over the last probably almost dozen shows is the commercial our aspect of shows .
Speaker #9: Taking down ideas from runway and making them big commercial ideas is how we're winning product . And on and the Stuart merchants are incredibly focused on making sure it's relevant to a timeless Gen Z consumer .
Todd Kahn: Stuart and the merchants are incredibly focused on making sure it's relevant to a timeless Gen Z consumer, while at the same time, putting it through the lens of, "Is it Coach?" We don't just chase trends. Quite honestly, our team creates trends, and they're doing that with this consumer in mind. And this is the essence of what we've been saying probably 25 years now, balancing logic and magic. It's really good. If you like the Kiss Lock, you're going to love some of the new sizes that's coming in. I'm probably saying more than Stuart wants me to say at this point, but it's really good.
Todd Kahn: Stuart and the merchants are incredibly focused on making sure it's relevant to a timeless Gen Z consumer, while at the same time, putting it through the lens of, "Is it Coach?" We don't just chase trends. Quite honestly, our team creates trends, and they're doing that with this consumer in mind. And this is the essence of what we've been saying probably 25 years now, balancing logic and magic. It's really good. If you like the Kiss Lock, you're going to love some of the new sizes that's coming in. I'm probably saying more than Stuart wants me to say at this point, but it's really good.
Speaker #9: same While at time putting it through the of lens is it coach ? don't just We chase trends . Quite honestly , our team creates trends and they're doing that this with consumer in And mind .
Speaker #9: this is the essence of what we've been Probably saying . 25 years now . Balancing logic and magic . It's really . If you like good kiss lock , you're going to love the some of the new sizes that's coming in .
Speaker #9: I'm probably saying more than Stuart wants me to say at this point , but it's really good
Operator: Fantastic. Congrats again.
Adrienne Yih: Fantastic. Congrats again.
Todd Kahn: Thank you.
Todd Kahn: Thank you.
Speaker #12: Congrats again
Operator: Thank you. We'll move now to Bob Drbul with BTIG. Your line is now open.
Operator: Thank you. We'll move now to Bob Drbul with BTIG. Your line is now open.
Speaker #12: .
Speaker #9: Thank .
Speaker #13: You .
Speaker #13: .
Speaker #2: Thank you. We'll move—fantastic. Now to Bob Dobell with BTIG. Bob, your line is now open.
Bob Drbul: Hi, good morning. I think this is for Todd, but generally, are you seeing any signs of demand slowdown in some of your signature styles, like Tabby and Brooklyn, especially as you-- you know, if there's competitor silhouettes that have been launched? And, you know, can you just talk a little more about your innovation? Do you think that it's strong enough to drive incremental growth from where we are?
Robert Drbul: Hi, good morning. I think this is for Todd, but generally, are you seeing any signs of demand slowdown in some of your signature styles, like Tabby and Brooklyn, especially as you-- you know, if there's competitor silhouettes that have been launched? And, you know, can you just talk a little more about your innovation? Do you think that it's strong enough to drive incremental growth from where we are?
Speaker #14: Hi . Good morning . I think this is for Todd . But generally are you seeing any signs of demand some of slowdown in your signature Tabby and styles like Brooklyn , as if there's you you especially competitor silhouettes that have launched been and , you know , can little more talk a you just about your innovation ?
Speaker #14: Do you it's strong enough to think that drive incremental growth from where we are
Todd Kahn: Yeah. Thanks, thanks, Bob. That's a, that's a good follow-up question to the one I just got. You know, it's really interesting. Some of you have followed us for a long time. There was a period of time where maybe one silhouette or one colorway was pervasive. That's not the case today. Today, we are so well-balanced, and it was interesting. We were hindsighting literally earlier this week with our merchants and global buyers on the results of the last quarter, and we were looking at the future buys for the balance of this year and into next year. And when we honed in on Tabby, the New York Family, and Teri, I looked at the team a little mischievously, and I said, "TNT equals explosive growth." That's where we are. That's what you'll see.
Todd Kahn: Yeah. Thanks, thanks, Bob. That's a, that's a good follow-up question to the one I just got. You know, it's really interesting. Some of you have followed us for a long time. There was a period of time where maybe one silhouette or one colorway was pervasive. That's not the case today. Today, we are so well-balanced, and it was interesting. We were hindsighting literally earlier this week with our merchants and global buyers on the results of the last quarter, and we were looking at the future buys for the balance of this year and into next year. And when we honed in on Tabby, the New York Family, and Teri, I looked at the team a little mischievously, and I said, "TNT equals explosive growth." That's where we are. That's what you'll see.
Speaker #9: Thanks . Bob . That's a good follow up
Speaker #9: Thanks , ? Yeah . question to the one I just got . You know , it's really interesting have followed some of you .
Speaker #9: us for a long time . There was a You period of time where maybe one or one colorway was That's not the pervasive .
Speaker #9: case silhouette today . Today we well are so balanced . And was it interesting . We hindsight literally . were Earlier this week with our merchants and global buyers the on results of the last quarter , and we were looking at the buys for the balance of this year and into for next year .
Speaker #9: future And when we in on homed tabby , the New York family and Terry , I looked at the team a little I mischievously and said , T and T explosive growth .
Speaker #9: future And when we in on homed tabby , the New York family and Terry , I looked at the team a little I mischievously and said , T and T explosive equals That's where we are .
Todd Kahn: These are icons that will continue to fuel what we're doing.
Todd Kahn: These are icons that will continue to fuel what we're doing.
Speaker #9: That's what see . you'll icons that are continue These to will fuel we're what doing .
Bob Drbul: Thank you.
Robert Drbul: Thank you.
Speaker #14: Thank you .
Operator: Thank you. We'll now move on to Dana Telsey with Telsey Advisory Group. Your line is now open. Ms. Telsey, your line is now open. Please proceed with your question. We'll move on to Mark Altschwager with Baird. Your line is now open.
Operator: Thank you. We'll now move on to Dana Telsey with Telsey Advisory Group. Your line is now open. Ms. Telsey, your line is now open. Please proceed with your question. We'll move on to Mark Altschwager with Baird. Your line is now open.
Speaker #2: Thank you . We'll now move on to Dana Telsey with Telsey Advisory Group . Your line is now open . line is Telsey your now Please proceed with your open .
Speaker #2: question . We'll move on to Mark Altschwager with Baird . Your line is now open .
Mark Altschwager: Great, thank you for taking the question. Congrats on the amazing results here. Scott, just on gross margin, can you talk about what's driving the outperformance on the operational side, and how you're thinking about the opportunity there in the back half of the year? The guidance seems to incorporate maybe a bit of conservatism there, given the first half results, but trying to better understand some of the puts and takes and the timing. Thank you.
Mark Altschwager: Great, thank you for taking the question. Congrats on the amazing results here. Scott, just on gross margin, can you talk about what's driving the outperformance on the operational side, and how you're thinking about the opportunity there in the back half of the year? The guidance seems to incorporate maybe a bit of conservatism there, given the first half results, but trying to better understand some of the puts and takes and the timing. Thank you.
Speaker #15: you for Great . Thank taking the question the amazing . results . Congrats on Here Just on gross , Scott . margin , about can you talk what's the driving outperformance on the operational side and how you're about the thinking opportunity there in the back half of the year ?
Speaker #15: guidance seems to incorporate The maybe a bit of there , conservatism results . given the first half But but trying to better understand some of the puts and takes and the Thank timing .
Speaker #15: you .
Scott Roe: Yeah, sure. Thanks for the question, Mark. Operational improvements, as we call them, are really driving the gross margin outperformance. So what does that mean? AUR is the biggest, is the biggest part of that. Also, we do have mitigating actions in the supply chain. Frankly, most of those start to accelerate as we get into next year. There are some mitigating actions related to tariffs that we see this year, but the lion's share that next year. And maybe I'll just give you a little bit of shaping, but before I do, let's not bury the lead. We just took up our outlook for gross margin year-over-year this year, fully offsetting the impact of tariffs on a full year basis.
Scott Roe: Yeah, sure. Thanks for the question, Mark. Operational improvements, as we call them, are really driving the gross margin outperformance. So what does that mean? AUR is the biggest, is the biggest part of that. Also, we do have mitigating actions in the supply chain. Frankly, most of those start to accelerate as we get into next year. There are some mitigating actions related to tariffs that we see this year, but the lion's share that next year. And maybe I'll just give you a little bit of shaping, but before I do, let's not bury the lead. We just took up our outlook for gross margin year-over-year this year, fully offsetting the impact of tariffs on a full year basis.
Speaker #5: Yeah , sure . Thanks for the question mark . Operational improvements . As we as we call them , or really driving the margin gross So what does that outperformance .
Speaker #5: mean ? Is the biggest is the biggest part that . Also we do have mitigating actions in supply chain . the Frankly most of those start to accelerate as we get into next year .
Speaker #5: are There some mitigating actions related to tariffs that we year , see this the share of that year and next maybe but lion's you a little bit of just give shaping .
Speaker #5: before I do , let's not But bury lead . the We just took up our for gross outlook margin year year , fully over year .
Speaker #5: offsetting the impact of tariffs on a full year This basis . And as we've said since Liberation Day , right . There's going to quarter by timing quarter be .
Scott Roe: As we've said since Liberation Day, right, there's gonna be quarter by quarter timing that's gonna be a little noisy and messy, and we see that both in the guide for this year and as we think about going forward. The reason for that is, we, at the time that the tariffs were imposed, you have inventory on hand, which needs to sell through, and then the tariffed goods, as they come in, it takes a while for them to sell through. So we'll see the majority of that tariff impact for this year start to hit in the second half, specifically in Q3 and Q4, a little bit into next year, and then you start to comp those impacts, and then again, compounding AUR gains, along with some of the mitigating actions which accelerate next year.
Scott Roe: As we've said since Liberation Day, right, there's gonna be quarter by quarter timing that's gonna be a little noisy and messy, and we see that both in the guide for this year and as we think about going forward. The reason for that is, we, at the time that the tariffs were imposed, you have inventory on hand, which needs to sell through, and then the tariffed goods, as they come in, it takes a while for them to sell through. So we'll see the majority of that tariff impact for this year start to hit in the second half, specifically in Q3 and Q4, a little bit into next year, and then you start to comp those impacts, and then again, compounding AUR gains, along with some of the mitigating actions which accelerate next year.
Speaker #5: going to little noisy be a messy . And That's we see and the both in guide for And as we that this year .
Speaker #5: think forward and about going that is we at the time that the tariffs were imposed , you have inventory on hand , which needs to sell through .
Speaker #5: And then the tariff goods as in . takes a It while for them to sell they come we'll see the through . So majority of that tariff impact for this year start to hit in the second half .
Speaker #5: Specifically in and Q3 Q4 . A little bit into year . And then and then you start to clump those and then again , impacts gains , along over with some of the mitigating actions which accelerate next year .
Scott Roe: So all those things together give us the confidence this year to give a full year guide of an increase in gross margin, and also have the confidence to say next year, even off that base, we have confidence that we'll be able to continue to increase our gross margins as we look at fiscal 2027 and beyond.
Scott Roe: So all those things together give us the confidence this year to give a full year guide of an increase in gross margin, and also have the confidence to say next year, even off that base, we have confidence that we'll be able to continue to increase our gross margins as we look at fiscal 2027 and beyond.
Speaker #5: So all those things confidence together give us the year to this guide of an year increase in gross give a full also margin and have the confidence to say next year , off , even that base , we have confidence that we'll be able continue to increase to our margins as we gross look at fiscal 27 and beyond .
Mark Altschwager: Thank you.
Mark Altschwager: Thank you.
Speaker #15: Thank you .
Operator: Thank you. We'll now move on to Michael Binetti with Evercore ISI. Your line is now open.
Operator: Thank you. We'll now move on to Michael Binetti with Evercore ISI. Your line is now open.
Speaker #2: you . Thank move We'll now on to Michael Binetti with ISI . Evercore Your line is now open .
Michael Binetti: Hey, thanks, guys. Thanks. Let me add my congrats on this. Just, I'm just curious on the units versus AUR. You know, there was a lot of quarters in a row where the total growth at Coach looked exactly like the AUR growth in the mid-teens, and then last quarter, we saw the unit contribution; it looks like increased to about mid-singles, and now we're here in the mid-teens. Can you just talk to us a little bit about what's driven that acceleration and what you see as durable there? And then, I guess, Scott, looking out at the long-term model, you know, earlier, someone mentioned you're getting close to your earnings guidance for 2028, and the year is 2026 right now. I think 2028 was guided to about $4.2 billion in SG&A.
Michael Binetti: Hey, thanks, guys. Thanks. Let me add my congrats on this. Just, I'm just curious on the units versus AUR. You know, there was a lot of quarters in a row where the total growth at Coach looked exactly like the AUR growth in the mid-teens, and then last quarter, we saw the unit contribution; it looks like increased to about mid-singles, and now we're here in the mid-teens. Can you just talk to us a little bit about what's driven that acceleration and what you see as durable there? And then, I guess, Scott, looking out at the long-term model, you know, earlier, someone mentioned you're getting close to your earnings guidance for 2028, and the year is 2026 right now. I think 2028 was guided to about $4.2 billion in SG&A.
Speaker #16: Thanks , guys . Let me add my Hey . on congrats this . Just I'm just curious on the versus a you know , there was a lot of where the at growth quarters in a looked exactly like growth your at mid-teens , and then last units quarter we saw the like increased to contribution looks about mid unit now we're here in the mid-teens .
Speaker #16: Can you mid just singles . talk to And what's driven that acceleration . And what you see as durable . There . And then I guess Scott looking out at the long term model , you know , earlier someone mentioned you're getting close to your earnings for guidance the year .
Speaker #16: Is 2026 right now , 28 in 28 was I think guided to about 4.2 billion in SG&A . You'll get close year . But you this , say is know now guided to about 54% of revenues .
Michael Binetti: You'll get close this year, but, you know, SG&A is now guided to about 54% of revenues. Do we, should we still think about SG&A as 55% of revenues on a higher base in 2028? Or as we move to this new revenue level, is there potential to show better leverage in the out years versus the plan?
Michael Binetti: You'll get close this year, but, you know, SG&A is now guided to about 54% of revenues. Do we, should we still think about SG&A as 55% of revenues on a higher base in 2028? Or as we move to this new revenue level, is there potential to show better leverage in the out years versus the plan?
Speaker #16: Should still think we about at a revenues on a 55% of base in 28 or move this new as we revenue level , is there a potential to show better leverage in the out ?
Speaker #16: plan years versus the
Scott Roe: Yeah, do you want me to start with the sec-
Todd Kahn: Yeah, do you want me to start with the sec-
Speaker #5: Yeah . second ? Yeah , I'll take the the exciting part first , Todd , and then I'll give you the more pedestrian part .
Speaker #5: You want me to
Michael Binetti: Yeah.
Michael Binetti: Yeah.
Scott Roe: Yeah, I'll, I'll take the exciting part first, Todd, and then I'll give you the, the more pedestrian part. Just kidding, of course.
Scott Roe: Yeah, I'll, I'll take the exciting part first, Todd, and then I'll give you the, the more pedestrian part. Just kidding, of course.
Michael Binetti: I'll tell you why it's not pedestrian.
Todd Kahn: I'll tell you why it's not pedestrian.
Speaker #5: Just kidding . Of course , a lot of units are not . Having fun . So yeah , you know , Michael , I'm not we're not going give to new guidance right now .
Scott Roe: So, yeah, you know, Michael, I'm not – we're, we're not gonna give new guidance right now, as you can imagine. I appreciate your recognition that we are, we are moving ahead. And I just point you back to one, one thing that I would – I hope is evident now, is we found a new gear of growth, right? And as you think about how you think about Tapestry, how you think about this model, we've definitely moved into a higher echelon of growth. We talked about mid-single digits being our floor, and we're certainly moving or performing ahead of that. What it means for the future, I think you should take confidence, but we're not gonna... I'm not gonna get into giving specifics.
Scott Roe: So, yeah, you know, Michael, I'm not – we're, we're not gonna give new guidance right now, as you can imagine. I appreciate your recognition that we are, we are moving ahead. And I just point you back to one, one thing that I would – I hope is evident now, is we found a new gear of growth, right? And as you think about how you think about Tapestry, how you think about this model, we've definitely moved into a higher echelon of growth. We talked about mid-single digits being our floor, and we're certainly moving or performing ahead of that. What it means for the future, I think you should take confidence, but we're not gonna... I'm not gonna get into giving specifics.
Speaker #5: can imagine , I As you appreciate your to recognition that we are we are moving ahead and and I just point you back to one one thing that I would , I hope evident is is we found a new gear of growth .
Speaker #5: Right. And as you think about how you think about Tapestry, how you think about this model, we've definitely moved into a higher echelon of growth.
Speaker #5: talked about We mid-single digits being our floor , and we're certainly performing or that . And what it means for the future . I think you should take ahead of we're not going to I'm not going to get into giving specifics moving as it relates to SGA .
Scott Roe: As it relates to SG&A, I will say this: as we continue to grow with the operational discipline that we have in this organization, we would expect to continue to leverage in all non-growth enhancing parts of the P&L. So there will be leverage, as you think about going forward with the accelerated growth. We also have said consistently, we intend to keep investing back into the business and specifically in marketing. So do I expect leverage over time? Yes. In terms of what that looks like, we'll give you shaping as we get to the end of this year and look into next year.
Scott Roe: As it relates to SG&A, I will say this: as we continue to grow with the operational discipline that we have in this organization, we would expect to continue to leverage in all non-growth enhancing parts of the P&L. So there will be leverage, as you think about going forward with the accelerated growth. We also have said consistently, we intend to keep investing back into the business and specifically in marketing. So do I expect leverage over time? Yes. In terms of what that looks like, we'll give you shaping as we get to the end of this year and look into next year.
Speaker #5: this as will say we continue to grow . With the operational discipline that we have in this organization , we would expect to continue to leverage in all Non-growth enhancing of the parts PNL .
Speaker #5: there will be So leverage as you think about forward with the accelerated growth . We also have said consistently , we going keep investing back into the business and specifically intend to in marketing .
Speaker #5: So do I expect over leverage time ? Yes . In terms that looks like , of what we'll you shaping as we as we get to the end of this year look into next year .
Michael Binetti: Okay.
Michael Binetti: Okay.
Scott Roe: Yeah.
Scott Roe: Yeah.
Todd Kahn: When we look at unit growth, you know, in handbags, they were both mid-teens, and we feel very good about that. Again, it goes back to this customer acquisition engine that we're driving. So that's driving units. We're not churning units on promotion, and that creates much more sustainable long-term growth for us. That's why, that's why I point out that unit count from FY 2019 is still materially down. So if you think about the math for a minute, 2.9 million new customers in a quarter. Again, retention rates, one of the things we've talked about, I'm giving you conservative guidance that the retention rates stay the same. What we're seeing with the younger customers, they actually are coming back a little bit more frequently. So that is a good news.
Speaker #16: Okay .
Todd Kahn: When we look at unit growth, you know, in handbags, they were both mid-teens, and we feel very good about that. Again, it goes back to this customer acquisition engine that we're driving. So that's driving units. We're not churning units on promotion, and that creates much more sustainable long-term growth for us. That's why, that's why I point out that unit count from FY 2019 is still materially down. So if you think about the math for a minute, 2.9 million new customers in a quarter. Again, retention rates, one of the things we've talked about, I'm giving you conservative guidance that the retention rates stay the same. What we're seeing with the younger customers, they actually are coming back a little bit more frequently. So that is a good news.
Speaker #13: Yeah .
Speaker #16: And when ,
Speaker #9: When we and look at unit growth , in you know , they were both mid-teens handbags , and we feel very good about that .
Speaker #9: goes back to customer acquisition Again , it we're driving engine that . So that's driving unit . We're not churning units on And promotion .
Speaker #9: that's creates much more sustainable long term growth for . That's that's why I pointed out that count from FY us materially down . So if you think about the for a minute , 2.3 million new , math 2.9 million new customers in a quarter , retention , again rates .
Speaker #9: One of the things we've talked about , I'm giving a conservative guidance that the retention rates stay the same . the younger seeing with actually are coming back a little customers , they bit more frequently .
Todd Kahn: But even if you take the conservative retention rate, as we keep acquiring more and more customers, and they maintain the retention rate, our unit count will go up. Then you take opportunities like, that's one of the things we like about footwear. The frequency of footwear purchases is higher than handbags. So if we get them in through a handbag, they like footwear. Our productivity in our stores go up, our unit count goes up, and overall connectivity with our customer and the brand is sustainable for a long period of time. So we've got a lot of room to go on units, but remember the two truisms I said: We're not gonna drive artificially units through promotions. We're gonna keep playing our game successfully over time, and I think that's how we'll win.
Todd Kahn: But even if you take the conservative retention rate, as we keep acquiring more and more customers, and they maintain the retention rate, our unit count will go up. Then you take opportunities like, that's one of the things we like about footwear. The frequency of footwear purchases is higher than handbags. So if we get them in through a handbag, they like footwear. Our productivity in our stores go up, our unit count goes up, and overall connectivity with our customer and the brand is sustainable for a long period of time. So we've got a lot of room to go on units, but remember the two truisms I said: We're not gonna drive artificially units through promotions. We're gonna keep playing our game successfully over time, and I think that's how we'll win.
Speaker #9: So good news . But even that is a if you take the conservative rate , retention keep as we acquiring more and more they and maintain rate , our customers retention count will go up .
Speaker #9: Then you take opportunities like that's one of the things we footwear . like about The of frequency purchases is footwear than higher So handbags .
Speaker #9: if we get in them through handbag , they like a footwear . Our productivity in our stores go Our unit count up . up goes overall , and connectivity with our customer and the brand is sustainable for a long time .
Speaker #9: period of So we've got a lot to go of room Unit , but remember , the two truisms on . I said , we're not going to drive artificially units through promotions .
Speaker #9: We're going to keep playing our game successfully over time. And I think we'll win how we will.
Speaker #9: that's All right
Operator: All right, guys. Love it. Thank you so much, and congrats again on the quarter.
Michael Binetti: All right, guys. Love it. Thank you so much, and congrats again on the quarter.
Speaker #16: guys , love it . Thank you so much . And congrats again on the quarter .
Todd Kahn: Thank you.
Todd Kahn: Thank you.
Operator: Thanks, Michael.
Scott Roe: Thanks, Michael.
Operator: Thank you. That concludes our Q&A. I will now turn it over to Joanne Crevoiserat for some concluding remarks.
Operator: Thank you. That concludes our Q&A. I will now turn it over to Joanne Crevoiserat for some concluding remarks.
Speaker #5: Thanks Thank you . Michael .
Speaker #2: Thank you . concludes our Q&A . will turn it over to I Joanne Crevoiserat That concluding remarks .
Joanne Crevoiserat: Thanks, Leo. As we shared this morning, our outperformance reflects the power of Tapestry, the result of deliberate strategies and disciplined execution over time that are driving our growth today and position us for the future. I especially wanna thank our exceptional global teams. This performance is yours, and it reflects the creativity and passion you bring for our customers every day. With strong fundamentals and momentum, we're moving forward with confidence, and we're focused on delivering sustainable growth and long-term shareholder value. Thank you for your interest in Tapestry and for joining us today.
Joanne Crevoiserat: Thanks, Leo. As we shared this morning, our outperformance reflects the power of Tapestry, the result of deliberate strategies and disciplined execution over time that are driving our growth today and position us for the future. I especially wanna thank our exceptional global teams. This performance is yours, and it reflects the creativity and passion you bring for our customers every day. With strong fundamentals and momentum, we're moving forward with confidence, and we're focused on delivering sustainable growth and long-term shareholder value. Thank you for your interest in Tapestry and for joining us today.
Speaker #4: Thanks, Leo. We shared this morning our results. As outperformance reflects the power of Tapestry, the result of deliberate, disciplined execution.
Speaker #4: strategies and Over time that are driving today . And the future . growth And I especially position us for want to thank our exceptional global This performance is yours and it reflects the teams .
Speaker #4: creativity and passion you our bring for every customers day with strong fundamentals and We're momentum . moving forward with confidence and we're on delivering sustainable growth and term long value .
Speaker #4: Thank you for your interest in tapestry and joining us focused for today .
Operator: This concludes Tapestry's earnings conference call. We thank you for your participation.
Operator: This concludes Tapestry's earnings conference call. We thank you for your participation.
