Record Earnings and Elevated Guidance: Coach and Direct Channels Win (TPR Q3 2026 Earnings Call)

By Dr. Graph | Updated on May 26, 2026 | earnings

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Tapestry achieved record third quarter performance, acquiring over 2.4 million new customers globally as robust direct-to-consumer momentum across major brands fueled double-digit sales expansion. Driven by strong consumer engagement and successful Gen Z acquisition, the stellar results enabled management to raise the company's full-year revenue and earnings outlook.

Amplify Strategy Drives Standout Performance and Exceptional Profit Expansion

Tapestry achieved pro forma revenue growth of 23% at constant currency, exceeding corporate expectations. Significant operating leverage drove an operating margin expansion of 490 basis points. Consequently, net income rose sharply, which resulted in a 62% increase in earnings per share compared to the prior year.

Increased Financial Outlook Underpins Robust Long Term Capital Allocation Priorities

Driven by strong operational momentum, management raised its full-year revenue guidance to the area of $7.95 billion. The elevated outlook is supported by expected full-year earnings per share of $6.95, representing growth of over 35% versus last year.

Reflecting high confidence in consistent cash generation, Tapestry increased its capital return plans. CFO Scott Roe stated: "In fiscal '26, we now expect to return approximately $1.6 billion or approximately 100% of our expected adjusted free cash flow to shareholders through dividends and share repurchases."

Coach Core Assortment Powers High Growth Channels as Kate Spade Focuses on Margins

Coach achieved outstanding brand resonance, highlighted by a 29% constant currency revenue increase. This performance was driven by the core leather goods assortment, where unit volumes grew over 20% alongside higher average unit retail. Brand execution was supported by top-of-funnel marketing investments, which rose by approximately half versus the prior year.

Geographically, Coach achieved robust demand across major regions, led by a 58% sales increase in Greater China and a 27% rise in North America. Meanwhile, kate spade revenue declined 11% due to a strategic pullback in promotional activities, even as the brand added hundreds of thousands of new customers.

Strong Consumer Relevancy Positions Coach for Accelerated Multi Year Brand Milestones

Responding to questions from BTIG analyst Robert Drbul, CEO Joanne Crevoiserat stated that Tapestry is on track to deliver its long-term Investor Day targets two years ahead of schedule. Further, responding to Wells Fargo analyst Irwin Boruchow, Coach President Todd Kahn expressed elevated conviction in the brand's expressive luxury positioning. Kahn emphasized that Coach is well positioned to become a $10 billion brand over time, supported by a massive addressable market and an annual marketing spend approaching $1 billion.

Frequently Asked Questions

What drove Tapestry's gross margin expansion in the third quarter?

Tapestry achieved a gross margin of 76.9% in the quarter. Profitability was driven by 190 basis points of operational expansion and a 70 basis point benefit from the Stuart Weitzman divestiture, which successfully offset a negative tariff and duty headwind of 180 basis points.

What is the gross leverage ratio of Tapestry at the end of the quarter?

Tapestry ended the third quarter with a gross debt to adjusted EBITDA leverage ratio of 1.1x. This leverage ratio is more than a full turn below the company's long-term target, reflecting a highly disciplined capital structure.

How is the projected capital return of Tapestry structured for the fiscal year?

Under the company's capital allocation priorities, the projected return of capital includes over $300 million in dividend payments and $1.3 billion in share repurchases. This return is supported by robust cash flows and the Board's dividend commitment.

What were Tapestry's cash flows and inventory levels at the end of the third quarter?

Adjusted free cash flow was an inflow of $229 million, while quarterly capital expenditures and cloud computing costs were $50 million. Inventory levels at the end of the quarter were down modestly on a reported basis, excluding the Stuart Weitzman brand.