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TAPESTRY, INC. (TPR)·Q3 2025 Earnings Summary

Executive Summary

  • Record Q3: Revenue $1.585B (+7% reported; +8% CC), non‑GAAP EPS $1.03; gross margin 76.1% (+140 bps). Outperformance driven by Coach (+13% reported; +15% CC) and 9% CC growth in direct-to-consumer .
  • Clear beat and raise: Q3 topped S&P Global consensus on revenue ($1.585B vs $1.528B*) and EPS ($1.03 vs $0.88*); FY25 EPS raised to “around $5.00” with revenue to ~$6.95B and FCF to ~$1.3B .
  • Margin quality and mix: Highest quarterly gross margin in 15+ years (76.1%) on operational drivers (AUR, AUC) and disciplined promos; Coach gross margin reached 79% in the quarter .
  • Catalysts: Continued Coach momentum and brand heat, raised FY25 outlook, tariff mitigation (limited China sourcing; actions already taken), and ongoing $2B ASR plus dividend ($0.35/qtr) underpin capital return (>100% of FY25 adj FCF) .
    Values retrieved from S&P Global for consensus figures.

What Went Well and What Went Wrong

What Went Well

  • Coach strength: Brand revenue +13% reported (+15% CC) with mid‑teens handbag AUR growth; management: “Coach delivered another standout performance…driving 15% top line gains” .
  • Margins: Company gross margin 76.1% (+140 bps YoY) and record in 15+ years; CFO cited operational outperformance; Coach gross margin ~79% in Q3 .
  • DTC and digital: DTC +9% CC, digital up mid‑teens with ~30% of revenue at accretive margins; CEO emphasized agile DTC model as “clear differentiator” .

What Went Wrong

  • Kate Spade pressure: Brand revenue -13% reported (-12% CC); management focused on reset (reduced promos/style counts, brand heat) acknowledging multiquarter journey -.
  • Japan and category softness: Japan revenue -8% reported (-2% CC); broader category pressure in China, though TPR outperformed and grew low‑single digits there .
  • Inventory up YoY and tariff overhang: Inventory $874M vs $824M prior year (excludes $87M SW held-for-sale); tariffs embedded but called immaterial for FY25; supply chain mitigations in place .

Financial Results

Consolidated results by quarter

MetricQ1 FY25Q2 FY25Q3 FY25
Revenue ($M)1,507.5 2,195.4 1,584.6
Gross Margin %75.3% 74.4% 76.1%
Operating Margin % (GAAP)16.7% 22.4% 16.0%
Operating Margin % (non‑GAAP)18.9% 24.9% 17.5%
Diluted EPS (GAAP, $)0.79 1.38 0.95
Diluted EPS (non‑GAAP, $)1.02 2.00 1.03

Q3 FY25 vs S&P Global consensus

MetricActualS&P Global Consensus*Beat/Miss
Revenue ($M)1,584.6 1,527.9*Bold beat
EPS (non‑GAAP, $)1.03 0.8799*Bold beat
EBITDA ($M)310.3 [functions.GetEstimates]291.9*Bold beat
Values retrieved from S&P Global for consensus figures.

Q3 FY25 segment revenue (reported YoY and CC YoY)

Brand ($M)RevenueYoY % (Rpt)YoY % (CC)
Coach1,293.513%15%
Kate Spade244.9(13%)(12%)
Stuart Weitzman46.2(18%)(17%)
Total1,584.67%8%
Region ($M)RevenueYoY % (Rpt)YoY % (CC)
North America951.79%9%
Greater China278.93%5%
Japan138.2(8%)(2%)
Other Asia93.911%14%
Europe92.932%35%
Other29.0(9%)(9%)

KPIs and balance sheet (Q3 FY25)

KPIValue
DTC revenue growth (CC)+9%
Digital growthMid‑teens %; ~30% of revenue at accretive margins
Gross margin76.1% (+140 bps YoY)
Operating margin (non‑GAAP)17.5%
New customers acquired (NA)>1.2M; ~2/3 Gen Z & Millennials
Adjusted FCF (quarter)$134.6M
Cash & ST investments / Total borrowings~$1.1B / ~$2.7B; net debt ~$1.6B; leverage 1.6x
Inventory$874M (excl. $87M SW held-for-sale) vs $824M prior year

Guidance Changes

MetricPeriodPrevious Guidance (Feb 6)Current Guidance (May 8)Change
RevenueFY25“Over $6.85B” “~$6.95B” Raised
Operating marginFY25+~100 bps YoY +~100 bps YoY Maintained
Net interestFY25~$35M expense ~$25M expense Lower expense (improved)
Tax rateFY25~17%–18% ~17.5% Tightened
Diluted sharesFY25~223M ~223M Maintained
EPS (non‑GAAP)FY25$4.85–$4.90 “Around $5.00” Raised
Adjusted FCFFY25~$1.2B ~$1.3B Raised

Notes: Guidance excludes one‑time SW divestiture costs; embeds tariff expectations (immaterial FY25); and excludes Capri impacts .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Gross margin driversRecord Q2 gross margin; drivers AUR and AUC; promo discipline -Highest quarterly gross margin in 15+ years; operational outperformance; Coach ~79% Improving
Coach brand heatQ2: Tabby/Brooklyn/New York families; mid‑teens AUR; Lyst top 5 -Double‑digit leather goods; mid‑teens AUR; broad‑based global strength Strong/ongoing
Kate Spade resetQ2: reduce promos/style counts, brand campaign pivot; multiquarter journey -Revenue -12% CC; margin expansion; continued brand heat investments -Transitional
China and regional mixQ2: China returned to growth; Europe +42% CC -China +5% CC; Europe +35% CC; Japan soft Mixed; China improves
DTC/digital executionQ2: high‑single digit digital; ~1/3 sales digital DTC +9% CC; digital mid‑teens; ~30% revenue digital Improving
Tariffs/supply chainQ2: 10% China tariff embedded, immaterial; limited China sourcing 145% China/10% rest-of-world assumptions; immaterial FY25; mitigations in place Managed risk
Capital returnsQ2: $2B ASR; dividend $1.40 ASR ongoing; >$2B returns in FY25 Ongoing

Management Commentary

  • CEO framing: “Our record third quarter results outperformed expectations… demonstrating the power of consistent brand building… We are confident in our future and the meaningful opportunity to deliver durable growth and shareholder value.” .
  • CFO on margins: “We delivered a gross margin of 76.1%, representing our highest quarterly gross margin in over 15 years… driven by operational outperformance.” .
  • Coach President on brand heat: “We achieved a 79% gross margin this last quarter, probably the highest… in Coach’s history for the third quarter.” .
  • Tariffs/mitigation: “Incremental tariffs are expected to have an immaterial impact on fiscal ’25… pulled forward inventory… optimized global manufacturing footprint… working with suppliers to mitigate costs.” .
  • Portfolio actions: SW sale to Caleres expected to close summer 2025; sharpen focus on largest value creation opportunities .

Q&A Highlights

  • Sustainability of Coach momentum: Management emphasized structural advantages (brand heat, DTC model, agile supply chain, compelling value) and ability to “adapt and win in any environment” .
  • Tariff sensitivity: ~$900M of COGS imported into U.S.; a hypothetical 10% tariff implies $90M unmitigated, with offset from AUR and supply chain actions; FY25 impact immaterial .
  • AUR and units: Mid‑teens handbag AUR growth with intent to also grow units over time as new customers are onboarded at higher AUR and promos are reduced .
  • Channel strategy: “One Coach” blurring full‑price and outlet at consistent price points to meet consumers where they shop (e.g., Tabby, Soho sneaker) .
  • China outlook: Continued outperformance vs pressured market; growth across channels and city tiers; no observed anti‑American sentiment in TPR’s data; targeting low single‑digit growth FY25 .

Estimates Context

  • Q3 FY25 beats: Revenue $1,584.6M vs $1,527.9M*; non‑GAAP EPS $1.03 vs $0.8799*; EBITDA $310.3M vs $291.9M* .
  • Q2 FY25 also beat: Revenue $2,195.4M vs $2,109.9M*; non‑GAAP EPS $2.00 vs $1.7479* .
  • Implication: Two straight quarters above consensus, coupled with raised FY25 guidance, likely prompt upward estimate revisions for revenue, EPS, and FCF; management flagged higher marketing in 2H but maintained GM expansion as the key driver .
    Values retrieved from S&P Global for consensus figures.

Key Takeaways for Investors

  • Beat-and-raise quarter with high-quality margin expansion and broad‑based growth ex‑Kate Spade; Coach momentum remains the core driver .
  • Guidance raised across revenue, EPS, and FCF; net interest outlook improved; tariff impacts modeled as immaterial in FY25 .
  • Structural strengths (AUR, AUC, DTC, agile supply chain) underpin record gross margins; CFO reiterates continued GM expansion as the flywheel for investment and growth .
  • Kate Spade is in a deliberate reset (reduced promos, tighter assortment, brand media) with near‑term top‑line pressure but improving gross margins—an execution watch item -.
  • Capital returns (>100% of adj FCF via ASR + dividend) and leverage at 1.6x provide support; SW divestiture focuses portfolio and simplifies execution .
  • Regional mix is favorable (Europe strength; China modest growth; Japan softness); continued momentum in digital (~30% of sales) and DTC KPIs (new customer acquisition) sustain LT growth .
  • Near‑term trading: Positive skew given operational momentum and raised FY guide; monitor tariffs implementation cadence, Kate Spade brand KPIs, and Japan softness for potential volatility .

Additional Relevant Press Releases (context within Q3 FY25)

  • Sale of Stuart Weitzman to Caleres (definitive agreement; anticipated summer 2025 close); referenced in results and call as a portfolio focus action .

Values retrieved from S&P Global for consensus figures.