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Tapestry, Inc. TPR reported impressive second-quarter fiscal 2026 results that exceeded the Zacks Consensus Estimate for revenues and earnings. The company delivered year-over-year growth in its top and bottom lines, and also raised its fiscal 2026 guidance.
The company showcased broad-based growth in the fiscal second quarter, with the Coach brand driving momentum through strong consumer engagement, especially among Gen Z. Tapestry emphasized global gains, with notable strength in North America, Europe and China, supported by product innovation and digital expansion. TPR’s direct-to-consumer model and agile supply chain remain central to its strategy for long-term, sustainable growth across a dynamic retail landscape.
As a result, TPR shares have risen about 10% yesterday as investors reacted to the robust quarterly results and a higher outlook.
Tapestry reported adjusted earnings of $2.69 a share for the fiscal second quarter, which surpassed the Zacks Consensus Estimate of $2.20 and increased 34% from the prior-year period.
Net sales were $2,502.4 million, beating the consensus estimate of $2,310 million. Also, net sales reflected a 14% year-over-year increase both on a nominal basis and on a constant-currency basis.
Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote
The divestiture of Stuart Weitzman was completed on Aug. 4, 2025. Excluding the impact of Stuart Weitzman, pro forma net sales increased 18% on a nominal basis and constant-currency basis. Foreign exchange had a positive impact of roughly 10 basis points for the quarter, driven by the depreciation of the U.S. Dollar.
In the fiscal second quarter, the company acquired more than 3.7 million new customers globally, driven by an increased share of Gen Z consumers from the prior year.
Direct-to-consumer revenues increased 17% year over year on a pro-forma basis, solid digital growth of nearly 20% and mid-teens percentage growth in global brick and mortar sales, expanded profitability across channels and sturdy execution and data-driven insights.
For the quarter, Coach's net sales were $2.14 billion, beating the Zacks Consensus Estimate of $1.95 billion. This marked a 25% year-over-year increase on both a reported basis and on a constant-currency basis.
Kate Spade’s sales were $360 million, lagging the consensus estimate of $368 million, representing a 14% decline on both a reported basis and a constant-currency basis from the prior-year period.
On a pro-forma basis, sales in North America increased 17% year over year to $1.72 billion. Sales in Greater China improved 35% to $343.1 million.
In Japan, sales decreased 9% year over year to $128.3 million, while revenues from Other Asian markets rose 11% to $125.8 million. European markets continued to show strong momentum, with a 27% increase in revenues to $159.1 million. Revenues in the Other region came in at $30.7 million, up 23% year over year.
The consolidated adjusted gross profit was $1.89 billion, up 16% from $1.63 billion in the year-ago period. Also, the adjusted gross margin expanded 110 basis points to 75.5%, driven by operational improvements of roughly 250 basis points and a 50-basis-point benefit from the divestiture of Stuart Weitzman, partly offset by a 190-basis-point negative impact of tariffs and duties.
The company reported an adjusted operating income of $719.8 million, up 31% from $548.2 million in the year-ago period. Meanwhile, the adjusted operating margin increased 390 basis points to 28.8%, including a 90-basis-point positive impact of the divestiture of Stuart Weitzman.
Adjusted selling, general and administrative expenses totaled $1.17 billion, up 8.3% from $1.08 billion in the year-ago period. As a percentage of net sales, this metric declined 270 basis points year over year to 46.7%.
As of the end of the fiscal second quarter, the company operated 330 Coach stores and 188 Kate Spade stores in North America. Internationally, the store count stood at 619 for Coach and 165 for Kate Spade.
TPR ended the quarter with cash, cash equivalents and short-term investments of $1.08 billion, long-term debt of $2.38 billion and stockholders’ equity of $551.2 million.
The operating cash flow for the fiscal second quarter came in at inflow of $1.08 billion, with an adjusted free cash flow of an inflow of $1.04 billion. Capital expenditure and cloud computing implementation costs amounted to $54 million in the reported quarter compared with $39 million in the prior year. For fiscal 2026, management anticipates CapEx and cloud computing costs to be $200 million. It expects about 60% of the expenditure with respect to store openings, renovations and relocations, with 40% mainly related to its ongoing IT and digital investments.
In the quarter, this Zacks Rank #2 (Buy) company returned approximately $400 million to shareholders through share repurchases, buying back nearly 3.6 million shares of common stock at an average cost of about $112 per share. The company’s board has declared a quarterly cash dividend of 40 cents per share payable March 23, 2026, to shareholders of record as of March 6, 2026. In fiscal 2026, it continues to expect an annual dividend of $1.60 per share.
For fiscal 2026, the company expects to return $1.5 billion to shareholders, which is nearly 100% of its anticipated adjusted free cash flow, via dividends and share repurchases. This represents an increase from its prior view of $1.3 billion. Tapestry now anticipates buying back about $1.2 billion in common stock in the current fiscal year under its existing stock repurchase authorization, reflecting an increase from its prior outlook of $1.0 billion.
Management raised the second-half outlook, thanks to its business momentum. It expects total pro forma revenues to increase at a low double-digit rate in the back half, accounting for more than20% growth on a two-year stack basis, remaining in line with the first half. This reflects mid-teens growth year over year at Coach in the second half or more than 30% growth on a two-year stack basis, consistent with the first half. At Kate Spade, the company continues to expect a mid- to high single-digit decrease in the second half compared with the prior year.
For Q3, the company’s sales trends to date have been strong, supporting the raised outlook. From a modeling standpoint, total sales are likely to increase in the area of 14% on a pro forma constant-currency basis. FX is expected to be more than 150 basis point benefit to nominal sales. By brand, Coach is likely to come up high teens on a constant currency basis year over year, while Kate Spade is forecast to decline in the high single digits. Tapestry expects operating margin expansion of 70 basis points with more than 150 basis points of SG&A leverage in the third quarter, offsetting lower gross margin owing to tariff-related woes. Q3 EPS is envisioned to be approximately $1.25, reflecting a rise of above 20%, including a tax rate of roughly 14%.
TPR increased its fiscal 2026 outlook, which is given on a non-GAAP basis. The company now expects revenues of more than $7.75 billion, representing about 11% growth year over year on a reported basis. Excluding Stuart Weitzman, pro forma revenues are likely to grow about 15% on a nominal basis and 14% in constant currency. Foreign currency is projected to be a 70-basis point tailwind to revenues. Earlier, management had forecast revenues of $7.3 billion, an increase of 7-8% on a pro forma, nominal basis.
The company now projects operating margin expansion of roughly 180 basis points from the prior year compared with an increase in the area of 50 basis points guided earlier. Given the strength in the underlying business, TPR expects to more than offset tariff and duty headwind of nearly 200 basis points, leading to gross margin expansion and SG&A leverage in fiscal 2026. It anticipates gross margin to jump 20 basis points, assuming operational gross margin expansion of roughly 180 basis points, mainly due to improvements in AUR. It expects to realize a 60-basis point structural tailwind to gross margin from the disposition of Stuart Weitzman. On SG&A, it expects to leverage 160 basis points, backed by expense control, somewhat offset by constant growth-focused investments. Also, marketing as a percentage of sales, is likely to increase about 130 basis points, approaching 12% of revenues.
Earnings per share are now envisioned to be $6.40-$6.45, representing growth of above 25% year over year. This exceeded the previous guidance of $5.45-$5.60, an increase of 7-10% year over year. The adjusted free cash flow for fiscal 2026 is projected to be $1.5 billion, up from $1.3 billion guided earlier. Net interest expense is projected to be approximately $65 million and a tax rate of about 17% for fiscal 2026. TPR expects a weighted average share count of approximately 211 million shares compared with the previous guidance of 212 million shares.
At constant currency on a pro forma basis, revenues in North America are expected to increase in the low double digits. In Europe, revenues are likely to grow 20%, while in Greater China, the metric is expected to achieve above 25% growth year over year. In Japan, management forecasts a high single-digit decline and in other Asia, the metric is likely to grow in the low double digits. By brand, revenues are likely to grow in the high teens percentage at Coach. At Kate Spade, revenues are likely to witness a high single-digit decline in the fiscal year, with sequential improvement expected for the second half.
As the company entered the second half of the fiscal year, inventory has been well-positioned globally and by brand. For fiscal 2026, management continues to anticipate inventory levels to be down modestly year over year on a reported basis.
We note that shares of this New York-based company have surged 38.1% in the past three months compared with the industry’s 20.4% growth.
Some other top-ranked stocks are American Eagle Outfitters, Inc. AEO, Deckers Outdoor Corporation DECK and Boot Barn Holdings, Inc. BOOT.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year sales indicates growth of 3.1%, from the year-ago period’s reported figure. AEO has a trailing four-quarter average earnings surprise of 35.1%.
Deckers is a major designer, producer and brand manager of innovative, niche footwear and accessories. The company currently sports a Zacks Rank of 1.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 7.9% and 8.5%, respectively, from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 36.9%.
Boot Barn, operating as a lifestyle retail chain related to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 4.9%, on average.
The Zacks Consensus Estimate for Boot Barn’s current fiscal-year earnings and sales indicates growth of 26.5% and 16.3%, respectively, from the year-ago period’s reported figures.
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This article originally published on Zacks Investment Research (zacks.com).
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