Executive Summary

Record Q2 revenue of $2.20B (+5% YoY) and non-GAAP diluted EPS of $2.00, both ahead of internal outlook; GAAP diluted EPS was $1.38 . Gross margin expanded 280 bps YoY to 74.4% on operational improvements and lower freight .
Coach drove the quarter: +10% constant-currency revenue growth with ~270 bps gross margin expansion; Europe +42% cc, Greater China returned to growth (+2% cc), North America +4% .
Guidance raised: FY25 revenue >$6.85B (~3% growth), operating margin +~100 bps YoY, EPS $4.85–$4.90, adjusted FCF ~$1.2B; share count reduced to ~223M on ASR; tax lowered to 17–18% .
Strategic actions: $2B ASR executed (28.4M initial shares delivered), quarterly dividend $0.35; definitive agreement to sell Stuart Weitzman to Caleres for $105M in cash (expected summer 2025 close) .
Beat drivers: ~$0.30 EPS beat vs internal outlook from operations (+$0.17), ASR tailwind (+$0.08), lower tax (+$0.08); reported EPS impacted by $120M loss on debt extinguishment tied to terminated Capri merger .

What Went Well and What Went Wrong

What Went Well

Coach demand and pricing power: broad-based handbag growth with mid-teens AUR gains, driven by Tabby family and new “New York” pillars (Brooklyn, Empire); Coach gross margin set a second-quarter record, with operating margin >33% at brand level .
Geographic outperformance: Europe +42% cc, Other Asia +11% cc, North America +4%; Greater China returned to growth (+2% cc) with improved traffic and brick-and-mortar trends .
Cash generation and capital return: Q2 operating cash flow $506M and adjusted FCF ~$890.9M; accelerated $2B ASR and maintained $0.35 dividend .
- CEO: “Our success is clearly reflected in… record quarterly revenue and adjusted earnings per share… we raised our outlook for the year…” .

What Went Wrong

Kate Spade top line declined 10% YoY as management executes a multiquarter brand reset (SKU reduction, lower promotions, upper-funnel investment) with near-term margin expansion but sales pressure .
Stuart Weitzman revenue −16% cc, softness in Greater China and North America direct; wholesale shipments declined on timing, though POS grew >20% .
Reported EPS headwind from Capri transaction unwind: $120M loss on debt extinguishment (GAAP EPS −$0.62 impact), flipping FY25 below-the-line from net interest income to ~+$35M net interest expense due to new bond issuance and lower cash post-ASR .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Billions)	$2.0845	$1.5075¹	$2.1954
GAAP Diluted EPS ($)	$1.39	$1.02	$1.38
Non-GAAP Diluted EPS ($)	$1.63	—	$2.00
Gross Margin (%)	71.6%	—	74.4%
Operating Margin (%) (GAAP)	21.5%	—	22.4%
Operating Margin (%) (Non-GAAP)	22.8%	—	24.9%
Net Income ($USD Millions, GAAP)	$322.3	$186.6	$310.4

Q1 2025 revenue derived as 1H FY25 ($3,702.9M) minus Q2 2025 ($2,195.4M) .

Segment revenue breakdown (Q2 2025 vs prior year):

Segment	Q2 2024 Revenue ($MM)	Q2 2025 Revenue ($MM)	Reported YoY Change
Coach	$1,541.9	$1,709.3	+11%
Kate Spade	$460.4	$416.4	−10%
Stuart Weitzman	$82.2	$69.7	−15%
Total Tapestry	$2,084.5	$2,195.4	+5%

Selected KPIs and cash metrics (Q2 2025 unless noted):

KPI	Value
New customers acquired in North America (Q2)	~2.7 million
Direct-to-consumer sales growth YoY (Q2)	+4%
Operating cash flow (Q2)	$506.0M
Adjusted free cash flow (Q2)	$890.9M
Inventory (quarter-end)	$937.3M
Cash, equivalents & short-term investments	$1.003B
Total borrowings	$2.6808B (total debt)
Net debt	~$1.7B
Leverage ratio (gross debt/TTM Adj. EBITDA)	1.6x
Dividend declared	$0.35 per share, payable Mar 24, 2025
ASR initial delivery	28.4M shares on Nov 26, 2024

Non-GAAP adjustments (Q2): Pre-tax −$198M; net income −$140M; diluted EPS −$0.62 due to acquisition-related costs including debt extinguishment .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	>$6.75B; ~+1%–2% YoY (reported & cc)	>$6.85B; ~+3% YoY (reported; ~50 bps FX headwind)	Raised
Operating Margin Expansion	FY 2025	>+50 bps YoY	~+100 bps YoY	Raised
Net Interest	FY 2025	~+$20M net interest income	~+$35M net interest expense	Lowered (below-the-line)
Tax Rate	FY 2025	~19%	~17%–18%	Lowered
Diluted Shares	FY 2025	~238M	~223M	Lowered (ASR impact)
EPS (Non-GAAP)	FY 2025	$4.50–$4.55	$4.85–$4.90	Raised
Adjusted Free Cash Flow	FY 2025	~$1.1B	~$1.2B	Raised
CapEx + Cloud	FY 2025	~$190M	~*$170M	Lowered
Q3 EPS	Q3 2025	—	~$0.85	New disclosure
Tariffs assumption	FY 2025	—	Embedded additional 10% U.S. tariff on China imports, immaterial impact	New disclosure

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
AI/price analytics	Emphasis on data/analytics; structural GM drivers AUR/AUC	“Using AI for price elasticity… more sophisticated trade-offs”	Strengthening capability
Supply chain agility	Navigating Red Sea disruptions; modest impact	Agile supply chain underpinning margin/AUR gains	Persistent advantage
Tariffs/macro	Macro prudence; baseline guidance	FY25 embeds +10% China import tariff; immaterial impact given limited China manufacturing	Managed risk
Product performance	Tabby strong; New York family launched; AUR mid-single digit	Tabby doubled YoY; New York exceeded expectations; mid-teens AUR; Lyst top products	Accelerating
Regional trends	Europe +26% (Q4), +27% (Q1); China −10% (Q4), −5% (Q1)	Europe +42%; Greater China +2%; North America +4%	Improving mix
Kate Spade strategy	New CEO; margin expansion; need for brand heat	Multiquarter reset: reduce SKUs, lower promos, extend brand campaign; −10% revenue	Early-stage turnaround
Portfolio management	Capri deal uncertainty; buyback optionality	ASR executed; definitive sale of Stuart Weitzman to Caleres	Active optimization

Management Commentary

CEO on the quarter and outlook: “record quarterly revenue and adjusted earnings per share… we raised our outlook for the year… strategic investments to extend our competitive advantages and power durable growth” .
CFO on beat attribution: “~$0.17… operational outperformance, $0.08… share repurchase, $0.08… favorable tax rate” .
Coach brand leader on sustainability: “Strong growth in revenue and profitability at Coach is sustainable… multiple focused platforms… attracting younger consumers” .
CEO on Kate Spade reset: “multiquarter journey… streamline and invest to build brand heat; reduce style counts >15% by fall; decrease promotional activity” .

Q&A Highlights

Coach momentum sustainability: Management cited cultural shift, consumer insights, Gen Z acquisition, and multiyear gross margin runway; brand operating margin >33% .
Kate Spade turnaround: Near-term sales pressure with margin expansion; highest percentage increase in brand building spend to rebuild relevance and icons; multiquarter timeline .
China trajectory: Return to growth; confidence in distribution expansion beyond tier-1 cities; value-positioned luxury resonates with younger consumers .
Units vs AUR: Near-term growth led by AUR; unit growth seen as incremental upside with customer acquisition and category expansion .
Guidance phasing: H2 revenue +~3% reported; Q3 EPS ~$0.85; SG&A growth modestly above sales in H2 with heavier Q3 investments .

Estimates Context

Wall Street consensus (S&P Global Capital IQ) for Q2 2025 EPS and revenue was unavailable due to SPGI rate limits; therefore, estimate comparisons are omitted. Values retrieved from S&P Global.

Key Takeaways for Investors

Beat-and-raise quarter anchored by Coach’s pricing power and new product platforms; strong gross margin control continues to be the core earnings driver .
Guidance quality improved: higher revenue, margin, EPS and FCF despite below-the-line swing from net interest income to expense, reflecting disciplined operations and ASR impact .
Strategic portfolio actions should refocus execution: sale of Stuart Weitzman simplifies priorities, enabling resources toward Coach momentum and Kate Spade reset .
Capital return is a core catalyst: $2B ASR underway, dividend maintained; reduced share count supports EPS accretion in FY25 .
China stabilization plus Europe acceleration diversify growth, reducing reliance on North America while leveraging value-oriented luxury positioning .
Kate Spade presents a self-help story: expect continued brand-building investments and SKU/pricing discipline; near-term sales headwinds balanced by margin expansion .
Near-term trading: Focus on delivery against raised FY guide and Q3 phasing (EPS ~$0.85); watch AUR sustainability, China traffic trends, and marketing ROI; monitor tariff impacts (management expects immaterial FY25 effect) .

Appendix: Additional Details

Q2 gross margin expansion: +260 bps operational, +20 bps freight; FX −30 bps to sales mix .
Debt extinguishment and tax: $120M loss recognized; Q2 reported tax rate 10.1%, non-GAAP 17.1% .
Regional revenue (Q2 2025): North America $1,513.4M (+4%); Greater China $272.8M (+3% reported, +2% cc); Europe $129.3M (+45% reported, +42% cc) .

TAPESTRY, INC. (TPR)·Q2 2025 Earnings Summary