TPR Q4 2025: Guides mid-single-digit revenue, mid-high EPS growth
- Strong Brand Momentum & New Customer Acquisition: Executives highlighted robust acceleration at Coach with 1,000,000 new North American customers in Q4—with nearly 70% being Gen Z and millennials—demonstrating effective brand positioning and strong long‐term growth prospects.
- Margin Expansion Despite Tariff Headwinds: Management noted that, even with increased tariff pressures (approximately 160 basis points), disciplined operational execution and pricing strategies have enabled continued gross and operating margin expansion, underpinning a resilient profitability profile.
- Data-Driven Pricing & Omnichannel Growth: The team emphasized leveraging a data-driven pricing strategy and enhancing omnichannel initiatives—including planned growth in physical store count—to boost AUR and overall revenue, positioning the business for sustainable expansion.
- Tariff headwinds and de minimis phase-out: The sudden exit from de minimis benefits forces previously duty‐free shipments to incur tariffs, leading to an increased cost structure and approximately 160 basis points of margin headwind, which could strain profitability if mitigation strategies lag.
- Pressure on margins due to execution risks: Although Coach is performing well, the overall operating margins face potential downward pressure from a mix of increased tariffs, higher marketing expenses, and phased margin deterioration in the second half, potentially hurting near-term profitability.
- Reliance on Coach's brand performance: The company’s growth and profitability heavily depend on sustaining momentum at Coach. Any slowdown in attracting or retaining young consumers, potentially due to competitive pressures or changes in consumer sentiment, could adversely impact overall results.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2026 | $6.95 billion, 4% growth | Expected to approach $7.2 billion, mid‐single digit growth | raised |
Operating margin | FY 2026 | Expansion of approximately 100 bps | Expansion expected | no change |
Gross margin | FY 2026 | Expansion due to AUR/AUC improvements | Expected to decline by 70 bps | lowered |
SG&A expenses | FY 2026 | Expected to increase above the pace of revenue growth | 100 bps of expense leverage with marketing up by 80 bps to >11% of revenue | no change |
Net interest expense | FY 2026 | $25 million | $65 million | raised |
Tax rate | FY 2026 | Approximately 17.5% | Approximately 18% | raised |
Weighted average diluted share count | FY 2026 | Approximately 223 million shares | Approximately 213 million shares | lowered |
EPS | FY 2026 | Around $5 | $5.30 to $5.45 | raised |
Adjusted free cash flow | FY 2026 | Approximately $1.3 billion | Approximately $1.3 billion | no change |
Capital expenditures and cloud computing costs | FY 2026 | Approximately $160 million | Approximately $200 million | raised |
Dividend | FY 2026 | no prior guidance | $1.60 per share, with a 14% increase in the quarterly dividend | no prior guidance |
Share repurchases | FY 2026 | no prior guidance | Over $1 billion returned, including $800 million in share repurchases | no prior guidance |
Regional revenue growth (North America) | FY 2026 | no prior guidance | Mid‐single‐digit growth | no prior guidance |
Regional revenue growth (Europe) | FY 2026 | no prior guidance | Approximately 20% growth | no prior guidance |
Regional revenue growth (Greater China) | FY 2026 | no prior guidance | High single‐digit growth | no prior guidance |
Regional revenue growth (Japan) | FY 2026 | no prior guidance | High single‐digit decline | no prior guidance |
Regional revenue growth (Other Asia) | FY 2026 | no prior guidance | High single‐digit growth | no prior guidance |
Brand revenue growth (Coach) | FY 2026 | no prior guidance | High single‐digit growth | no prior guidance |
Brand revenue growth (Kate Spade) | FY 2026 | no prior guidance | High single‐digit decline with sequential improvement expected in H2 | no prior guidance |
Revenue (quarterly) | Q1 FY26 | no prior guidance | Expected to grow by low double digits, with a 70 bps FX tailwind | no prior guidance |
Gross margin (quarterly) | Q1 FY26 | no prior guidance | Anticipated to increase by approximately 100 bps | no prior guidance |
Operating margin (quarterly) | Q1 FY26 | no prior guidance | Expected to expand by roughly 80 bps | no prior guidance |
EPS (quarterly) | Q1 FY26 | no prior guidance | Forecasted to grow by more than 20%, reaching approximately $1.25 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Consistent Brand Momentum & New Customer Acquisition | Q1 discussions highlighted purpose‐led campaigns (“Unlock Your Courage”), strong Gen Z and millennial acquisition, and robust new customer growth | Q4 emphasized record revenue gains, innovative product launches (e.g., Tabby, Cherry Bag Charm) and even higher new customer counts with 70% from Gen Z/Millennials | Consistent positive momentum with an increased focus on digital engagement and product innovation driving even stronger Gen Z/Millennial acquisition in Q4 |
Sustained Margin Expansion & Profitability Strategies | Q1 detailed gross and operating margin improvements (e.g., 280bp gross expansion and 90bp operating lift) with strategic SG&A investments | Q4 reported a record 76.3% gross margin, 140bp improvement, and continued operational leverage via AUR growth and supply chain optimization | Continued focus on margin expansion with Q4 showing enhanced operational performance and more aggressive margin-improvement strategies compared to Q1 |
Recurring Tariff Headwinds & De Minimis Phase-Out Impacts | Q1 had only brief mentions of tariff management with no specifics on de minimis impacts | Q4 provided detailed insights on tariff headwinds (e.g., $160 million impact, 230bp margin drag) and emphasized the accelerated phase-out of de minimis exemptions | An increased emphasis on and deeper discussion of tariff-related cost pressures in Q4 compared to the minimal discussion in Q1 |
Evolving Pricing Strategies: Data-Driven Pricing, AI for Price Elasticity & Over-reliance on AUR | Q1 focused mainly on reduced discounting and the impact of new product introductions on AUR | Q4 emphasized AUR growth with a focus on premium pricing and storytelling, while Q2 (previous period) introduced data-driven pricing and AI for price elasticity | The topic evolved from a basic focus on reducing discounts (Q1) to incorporating AI and data-driven insights in Q2, with Q4 maintaining AUR emphasis but with a less explicit focus on AI, suggesting a maturing pricing strategy |
Channel Strategy Transition: Omnichannel & Digital Growth vs. Physical Store Adjustments | Q1 highlighted omnichannel engagement with strong digital revenue (over 25% of revenue) offsetting mild declines in physical sales | Q4 reiterated the dual focus: robust digital growth (mid-teens percentage increases) alongside strategic physical store expansion in key regions (e.g., North America) | A consistent commitment to an omnichannel strategy across periods, with evolving investments that balance digital expansion and profitable physical store adjustments |
International Expansion & Greater China Exposure (Opportunities and Risks) | Q1 showed mixed international performance—with strong European growth (27%) and modest gains in Other Asia, but a slight decline in Greater China | Q4 reported accelerated revenue growth in Greater China (22% in China, 12% in Europe) and an optimistic outlook across regions | An improving international narrative: while early periods were mixed, Q4 demonstrates enhanced regional performance and greater confidence in the growth potential in Greater China and Europe |
Brand Portfolio Management: Coach Strength vs. Kate Spade Underperformance | Q1 emphasized Coach’s strong margin gains, market share growth, and robust new customer acquisition versus Kate Spade’s revenue decline and need for a turnaround | Q4 continued to praise Coach’s performance (e.g., 10% revenue growth and high Gen Z/Millennial acquisition) while detailing Kate Spade’s 13% revenue decline and strategic reset initiatives | Consistently, Coach remains a high-performing brand while Kate Spade undergoes a turnaround, with the narrative remaining similar though Q4 offers deeper product and market details for both brands |
Strategic Acquisition Risks & Integration Uncertainties (Capri Acquisition) | Q1 featured detailed discussion on FTC injunction, paused integration plans, and contingency capital allocation related to the Capri acquisition | Q4 had no mention of this topic, and Q2 confirmed that the merger was terminated with a shift to organic growth | A noticeable de-emphasis in later periods indicating that acquisition risks have been largely resolved or deprioritized in favor of organic and portfolio-focused strategies |
Expansion into Lower-Margin Categories | Q1 briefly mentioned expansion into lower-margin areas (ready-to-wear and footwear) with an emphasis that these were accretive on operating margins | Q4 and Q2 did not mention this topic | The topic has dropped from subsequent discussions, suggesting a strategic shift away from expanding into lower-margin categories or reduced emphasis on its impact |
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Fiscal Outlook
Q: What is fiscal '26 guidance overall?
A: Management expects mid single‐digit revenue growth and mid to high single-digit EPS growth despite tariff pressures, confidently outlining a strong rebound at Coach and overall margin expansion. -
Tariff Impact
Q: How will tariffs affect overall margins?
A: Despite an added headwind of approximately $160M (about 60bps), management is mitigating these costs through pricing adjustments, supply chain agility, and operational improvements to sustain expanding margins. -
Coach Performance
Q: How are unit growth and pricing interplaying?
A: Coach is cutting excess SKUs and reducing promotions, leading to improved AUR and a healthy mix of unit growth—with robust early-year margin gains offset later by tariff effects. -
Structural Shift
Q: What differentiates today’s Coach from the past?
A: Today’s Coach benefits from a more direct-to-consumer model, broader global diversification, and data-driven pricing—yielding stronger margins than the early 2000s model. -
SG&A Leverage
Q: What is driving the 160bps SG&A leverage?
A: Enhanced fixed cost absorption from higher full-price sales, operational efficiencies, and a modest benefit from the Stuart Weitzman sale underpin the improved SG&A leverage. -
Share Buyback
Q: What is the share repurchase plan?
A: The company is targeting $800M in share repurchases this year, driven by strong cash flow and a disciplined capital allocation approach. -
De Minimis
Q: How does the de minimis policy change affect costs?
A: The early termination of the de minimis exemption now subjects previously duty‐free shipments to tariffs, adding cost but manageable through agile supply chain adjustments. -
Regional Growth
Q: Which regions lead in acceleration and AUR?
A: Acceleration is widespread globally—with key markets like North America, China, and Europe all showing strong performance and elevated AUR growth driven by renewed Coach momentum.
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