TPR

Tapestry, Inc. (TPR) - Q2 Fiscal 2026 10-Q Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended December 27, 2025 (Second Quarter of Fiscal 2026). Tapestry, Inc. operates as a house of iconic accessories and lifestyle brands, primarily Coach and kate spade new york. Following the completion of the Stuart Weitzman Business Divestiture on August 4, 2025, the Company now reports two segments: Coach and Kate Spade. The Company is executing its "Amplify" 2028 growth strategy, focusing on emotional consumer connections, fashion innovation, global growth, and organizational agility.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 14.0% in Q2 and 13.6% for the six months ended December 27, 2025. On a constant currency basis, excluding the Stuart Weitzman divestiture, sales grew 17.7% in Q2 and 16.8% for the six-month period.
• Segment Performance:
  • Coach: Net sales increased 25.3% in Q2, driven by DTC growth in North America, Greater China, and Europe. Operating margin expanded to 39.5%.
  • Kate Spade: Net sales decreased 13.6% in Q2 due to lower DTC sales. Operating margin contracted to 4.5% from 16.4% in the prior year, impacted by tariffs and deleverage of fixed costs.
• Margin Expansion: Gross margin improved 110 basis points in Q2 to 75.5%, driven by pricing and brand mix, partially offset by a 190 basis point negative impact from tariffs. Operating margin improved 620 basis points to 28.6%.
• One-Time Items: The prior year period included a $120.1 million loss on extinguishment of debt related to the terminated Capri Acquisition. The current period had no such loss. The current period included $13.9 million in pre-tax charges related to the Stuart Weitzman divestiture and organizational efficiency.
• Capital Allocation: The Company repurchased $900.0 million of common stock in the first six months of FY2026. A new $3.0 billion share repurchase program was authorized in September 2025.

Guidance, Outlook, Risks, and Unusual Items

• Guidance: The filing does not provide specific numerical guidance for the full fiscal year 2026. Management expects total fiscal 2026 capital expenditures and cloud computing costs to be approximately $200.0 million.
• Tariff Impact: New tariffs and the removal of the de minimis exemption negatively impacted gross margin by approximately 190 basis points in Q2 and 140 basis points for the six months. Management is taking actions to mitigate these costs.
• Tax Rate: The effective tax rate increased to 19.5% in Q2 (from 10.1% in the prior year) primarily due to the impact of Pillar Two Global Anti-Base Erosion Rules and discrete items.
• Risks: Key risks include international trade disputes, currency fluctuations, the ability to execute the "Amplify" strategy, and potential impairment of Kate Spade goodwill and intangible assets if profitability trends decline. Two putative securities class actions regarding the terminated Capri Acquisition remain pending.
• Divestiture: The Stuart Weitzman Business was sold for $105.0 million, resulting in a total pre-tax loss of $22.6 million (recognized over FY2025 and FY2026).

Investor Verification Checklist

• Coach vs. Kate Spade Divergence: Verify the sustainability of Coach's 25% sales growth against Kate Spade's 13.6% decline and margin compression.
• Tariff Mitigation: Assess management's specific strategies to offset the 190 basis point gross margin hit from tariffs in the remainder of the fiscal year.
• Capital Structure: Confirm the status of the $2.34 billion remaining share repurchase authorization and the Company's ability to maintain leverage ratios under the Amended Revolving Credit Facility.
• Impairment Risk: Monitor Kate Spade's operating performance closely, as the filing notes potential interim impairment tests if profitability trends decline.
• Legal Contingencies: Track the status of the securities class actions related to the terminated Capri Acquisition.