Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tapestry Inc (TPR, Financial) reported record third-quarter results, with revenue gains of 8% at constant currency, surpassing expectations.
• The Coach brand achieved a 15% revenue growth, driven by strong consumer engagement and product innovation.
• Tapestry Inc (TPR) acquired over 1.2 million new customers in North America, with a significant portion being Gen Z and millennials.
• Digital sales grew at a mid-teens rate, representing approximately 30% of total revenue, indicating strong omnichannel performance.
• The company increased its fiscal year 2025 earnings outlook, projecting earnings per share in the area of $5, consistent with long-term targets.

Negative Points

• Kate Spade's revenue declined by 12% at constant currency, indicating challenges in brand repositioning and market conditions.
• The company faces an increasingly complex external environment, including potential impacts from tariffs and global trade dynamics.
• Japan sales declined by 2%, highlighting regional challenges in the Asia market.
• Despite strong performance, Tapestry Inc (TPR) remains cautious about the rapidly shifting market and has taken a conservative approach to future outlooks.
• The company is undergoing a strategic reset for Kate Spade, which may take time to yield sustainable growth.

Q & A Highlights

Q: What's driving the exceptional performance at the Coach brand, and can it sustain this momentum in a dynamic environment? A: Joanne Crevoiserat, CEO, highlighted the power of Tapestry's business model and structural advantages, such as strong emotional connections with consumers, high margins, a direct-to-consumer model, and an agile supply chain. These factors have contributed to the brand's success and ability to adapt and win in various environments. The company is on track to deliver $5 in earnings per share, consistent with targets set at the 2022 Investor Day.

Q: How will tariffs impact Tapestry's 2026 outlook, and what mitigation strategies are in place? A: Scott Roe, CFO, stated that while specific guidance for 2026 will be provided later, Tapestry has taken actions to mitigate tariff impacts, such as optimizing their supply chain and leveraging strategic supplier relationships. The company has a history of AUR gains, which, combined with cost mitigation strategies, gives confidence in maintaining margins.

Q: Can you elaborate on the new customer acquisition and retention metrics driving growth in North America? A: Joanne Crevoiserat, CEO, emphasized the focus on acquiring new and younger consumers, particularly Gen Z and millennials, which is crucial for long-term growth. The company has seen increased retention rates among Gen Z consumers at Coach, indicating strong brand loyalty and potential for sustained growth.

Q: How is Tapestry managing gross margin improvements, and what are the drivers behind AUR growth? A: Scott Roe, CFO, explained that gross margin improvements are driven by operational efficiencies, including AUR and AUC gains. The company focuses on delivering compelling value and innovation, which supports AUR growth. Todd Kahn, CEO of Coach, added that the brand's heat and innovation pipeline contribute to sustained AUR increases.

Q: How is Tapestry balancing unit growth and AUR increases at Coach, and what is the strategy for maintaining momentum across channels? A: Todd Kahn, CEO of Coach, noted that while AUR has grown significantly, the focus remains on sustainable brand growth without excessive promotions. The One Coach strategy blurs lines between channels, offering consistent pricing and product availability, which resonates with consumers and supports long-term growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.