Tapestry, Inc. Common Stock 2026 Q4 Earnings Call

Good morning. Thank you for joining us. With me today to discuss our fourth quarter and full-year results, our strategies, and our 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 that this conference call will involve certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 statement. 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.

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.

Good morning. Thank you, Christina, and welcome everyone. Fiscal 2026 was a defining year for Tapestry. We meaningfully exceeded expectations, achieving the three-year revenue, operating margin, and earnings-per-share commitments we established at our Investor Day two years ahead of plan. We delivered strong growth and record results while continuing to invest in our brands, our people, and the capabilities that will shape our future. More important than what we accomplished is what we've built. Through intentional choices, disciplined execution, and a deep understanding of the consumer, we have built a stronger, more focused organization who every day bring our amplify strategy to life, delivering creativity, value, and relevance at scale, strengthening our connections with consumers. These efforts continue to compound, extending our competitive advantage while driving durable growth and long-term shareholder value.

In a world where consumer expectations, technology, and competitive dynamics continue to evolve, the combination of our direct consumer relationships, data-driven decision-making, global scale, and agile operating model has become increasingly valuable and differentiated. With that, let me touch on some highlights for the year. We achieved revenue of $8 billion, growing 17% on a pro forma constant currency basis, expanded operating margin by 340 basis points to over 23%, and increased earnings per share by 38% to $7.05. Growth was fueled by customer acquisition as we welcomed 11 million new customers to our brands, led by Gen Z. Importantly, we accelerated growth in our core leather goods category with AUR and unit growth. Luxury leather goods remains one of the most attractive categories within the consumer space because of its enduring demand, compelling economics, and significant runway for growth.

In addition, we delivered broad-based, double-digit growth across key regions, gaining share and expanding the market. Our agile, direct-to-consumer-led operating model drove double-digit revenue growth and increasing profitability across both digital and stores. Further, Tapestry is committed to embracing AI to enhance the magic of our people and our brands. To that end, we continue to build proprietary technology and AI capabilities that differentiate how we operate and empower our teams. During the year, we secured our first AI patent, building on our previously patented data fabric technology. Together, they reflect our culture of innovation and more than a decade of investment in data, decision intelligence, and enterprise technology. Overall, our fiscal year 2026 results demonstrate the power of our approach to brand building.

We continue to win with consumers at the point of market entry, welcoming younger customers who transact at higher AURs, have stronger retention, and influence purchasing behavior across generations. This reinforces our confidence that our greatest opportunities lie ahead. Now moving to our results by brand. Coach delivered another strong quarter with constant currency revenue growth of 14% and increasing profitability. This capped an exceptional year and reinforced the enduring strength of our iconic 85-year-old brand. Several factors underscore the durability of our growth. We drove new customer acquisition around the world, welcoming over 2 million new consumers in the quarter and nearly 9 million for the full year. Growth was led by Gen Z, whose influence extended across generations. At the same time, existing customers continued to drive strong sales.

Underpinning these results is Coach's consumer-led approach, consistently translating deep consumer insights into action to build lasting emotional connections with the brand. Our core leather goods assortment continued to lead in Q4, with handbag AUR increasing at a mid-teens rate and unit volumes roughly in line with the prior year, both consistent with expectations and our deliberate strategy to prioritize brand health and reduce promotions. For the year, handbag AUR rose mid-teens and units increased low double digits, demonstrating the multifaceted nature of our growth. Looking ahead, we continue to see opportunity to grow both AUR and units while staying true to the values and the value proposition that define Coach. Further, our strong results continued across key geographies in the fourth quarter, including North America up 10%, Greater China rising 30%, and Europe increasing 25%, highlighting the global resonance of the brand.

Coach is bringing new consumers into the category and growing the market. Given the strength of the brand and our large addressable market, we continue to see a clear path to Coach becoming a $10 billion brand. Now, to cover our fourth quarter results in more detail. Our creative teams continue to execute with clarity and purpose, delivering product innovation that is resonating with consumers. Our icons continued to outperform, consistent with our strategy with broad-based strength across the assortment. The New York family, including Brooklyn, Empire, and Chelsea, along with the Tabby and Teri families, drove strong Gen Z acquisition and reinforced Coach's leadership in its core category with a robust innovation pipeline ahead. Structurally, we concentrate product innovation behind core families that build over time while remaining disciplined in our pursuit of growth. More broadly, our results reflect the strategic choices we've made to strengthen the brand.

Perhaps the most significant has been our One Coach strategy. By deliberately blurring the traditional industry lines between retail and outlet channels, bringing collection product at full price into outlet, and unifying our digital experience through a single coach.com, we've aligned our approach with how consumers shop today, creating a stronger, more consistent global expression of the brand. This has driven customer acquisition, higher AURs, and growth around the world. Next, turning to footwear. We delivered high teens growth in the quarter with increasing demand from Gen Z. Sneakers continued to fuel the growth driven by the success of the Soho family, along with continued strength of Margot. 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. Turning to marketing. Our strategic investments continued to generate compounding benefits this quarter.

We increased marketing spend by approximately 20% versus the prior year, with a continued shift toward top-of-funnel brand building to support sustained customer acquisition. Coach's Explore Your Story campaign continued to resonate, supporting increased unaided awareness and reinforcing Coach's top-of-mind presence among Gen Z. Building on this momentum, we launched &Coach, a campaign co-created with Gen Z that celebrates moments of becoming and the confidence a Coach bag can champion along the way. Additionally, our partnerships extended Coach's reach into new communities and cultural conversations as we launched the second season of our WNBA partnership, strengthening the brand's connection at the intersection of fashion, sports, and culture. Collectively, these actions are reinforcing Coach's cultural relevance and driving customer acquisition. More importantly, they strengthen a competitive advantage, a deep understanding of the consumer, and an ability to consistently translate those insights into demand creation at scale.

Finally, we deepen consumer engagement through distinctive brand experiences. We continued to roll out our expressive luxury store concept globally. These stores are driving higher traffic and longer dwell times, particularly among Gen Z consumers, supporting our plan to expand the concept to impact approximately 80% of our traffic by fiscal year 2030. In addition, Coach Play continues to serve as both a destination for consumers and a source of inspiration for our broader store strategy. New Coach Play locations in Chicago, Atlanta, and Le Marais in Paris are helping build brand desire with our target consumers. Together, these investments reflect our conviction that physical retail remains one of our most powerful opportunities to express the brand as consumers invite us into their world to share important moments in their life, extending the connection well beyond a transaction.

In closing, my confidence in the future of Coach is grounded in the combination of an iconic brand, a deep understanding of today's consumer, and an organization that continues to thoughtfully steward and evolve the brand, preserving what makes it distinctive while ensuring it remains relevant for new generations of consumers. I believe that combination positions Coach for continued leadership, meaningful growth, and long-term value creation. Turning to Kate Spade. Our strategy for Kate Spade has been deliberate and phased, streamlining the business, solidifying the foundation, and positioning the brand to scale. At its core, that means building greater brand desire and relevance to drive sustainable, profitable growth. In fiscal year 2026, we remain disciplined in executing that strategy, making choices that improve the quality of the business.

Although top-line progress was more gradual than we planned, our experience has given us greater clarity on where consumers are responding, where our investments are driving results, and where we need to focus going forward. Turning to our strategic pillars and fourth quarter results. First, we are committed to fueling brand desirability supported by marketing. During the fourth quarter, we focused on increasing the reach and relevance of our full-funnel marketing activities, which resulted in higher brand consideration among Gen Z in our latest U.S. brand health tracker. In addition, our first creator-led YouTube campaign drove an increase in purchase intent well ahead of the platform benchmark, showing traction in our work. We also know that we need more consumers to engage with our content, as unaided brand awareness more broadly has not yet improved, and this is a key part of driving acquisition and ultimately growth.