American holding company Tapestry Inc has posted strong second-quarter (Q2) results for fiscal 2026 (FY26) ended December 27, 2025, delivering record quarterly revenue, operating profit and earnings. Net sales rose 14 per cent year on year (YoY) to $2.5 billion on both reported and constant-currency basis, reflecting broad-based growth across brands and regions.
Excluding the Stuart Weitzman business, pro forma net sales increased 18 per cent, with growth led by surge at the Coach brand. Foreign exchange provided a modest tailwind of around 10 basis points (bps) during the quarter.
The gross profit rose 16 per cent to $1.89 billion, while gross margin expanded 110 bps to 75.5 per cent. The margin improvement was driven by operational efficiencies of around 250 bps and a 50-basis point benefit from the divestiture of Stuart Weitzman, partially offset by a negative tariff and duty impact of about 190 bps, Tapestry said in a press release.
The operating income increased sharply to $716.4 million on a GAAP basis, with operating margin expanding 620 bps to 28.6 per cent. On a non-GAAP basis, operating income was $719.8 million and operating margin rose 390 bps to 28.8 per cent, supported by gross margin expansion and SG&A leverage.
GAAP diluted earnings per share (EPS) climbed 94 per cent YoY to $2.68, while non-GAAP diluted EPS rose 34 per cent to $2.69. Net income reached $561 million on a GAAP basis, compared with $310 million in the prior-year quarter. The effective tax rate for the quarter was 19.5 per cent on a GAAP basis.
On a pro forma basis, Coach delivered standout performance, with revenue rising 25 per cent, driven by strong demand for handbags and core leathergoods. Handbag average unit retail and units both increased at mid-teens rates, contributing equally to topline growth. Kate Spade revenue declined 14 per cent during the quarter.
Regionally, North America revenue grew 17 per cent on a pro forma constant-currency basis. Greater China posted growth of 34 per cent, while Europe recorded a 22 per cent increase. Japan declined 6 per cent in constant currency, while another Asia grew 12 per cent. Overall, Asia-Pacific revenue rose 18 per cent.
Direct-to-consumer (DTC) revenue increased 17 per cent on a pro forma basis, supported by around 20 per cent growth in digital sales and mid-teens growth in bricks-and-mortar stores. Tapestry said it expanded profitability across channels through disciplined execution and data-driven insights.
During the quarter, Tapestry advanced its Amplify growth strategy, focused on strengthening emotional connections with consumers, accelerating fashion innovation, delivering compelling experiences and empowering its workforce. The company acquired more than 3.7 million new customers globally, with Gen Z accounting for around one-third of new customers, while demand from existing customers also increased.
Tapestry ended the quarter with $1.08 billion in cash, cash equivalents and short-term investments, and total borrowings of $2.40 billion. Inventory stood at $896 million, down from $937 million a year earlier. Operating cash flow for the quarter was an inflow of $1.08 billion, more than double the prior-year level, while adjusted free cash flow reached $1.04 billion.
Capital expenditure and cloud computing implementation costs were $54 million in the quarter and $92 million year to date.
“Our second quarter outperformance reflects the compounding impact of our Amplify strategy, driving deeper consumer engagement, accelerated growth, and record results. This holiday season, our talented teams brought creativity, craftsmanship, and value to consumers around the world, building new and lasting connections that fuel enduring brand desire and demand. As we move forward, we do so with momentum and confidence. By harnessing our proven strategies and structural advantages, we are raising our outlook for the fiscal year, reinforcing our commitment to driving durable growth and long-term value creation,” said Joanne Crevoiserat, CEO of Tapestry Inc.
Tapestry raised its full FY26 guidance on a non-GAAP basis. The company now expects revenue of over $7.75 billion, representing around 11 per cent reported growth. Excluding Stuart Weitzman, pro forma revenue is projected to rise about 15 per cent on a nominal basis and 14 per cent in constant currency, with foreign exchange expected to provide a 70-basis point tailwind.
Operating margin is now expected to expand by around 180 basis points YoY, compared with prior guidance of around 50 bps, despite a tariff and duty headwind of nearly 200 bps. The company also lifted its EPS outlook to $6.40-$6.45, implying growth of more than 25 per cent, and raised its adjusted free cash flow forecast to around $1.5 billion.
Reflecting strong cash generation and balance sheet strength, Tapestry raised its FY26 shareholder return target to $1.5 billion, equivalent to around 100 per cent of anticipated adjusted free cash flow. This includes an annual dividend of $1.6 per share and share repurchases of around $1.2 billion. During Q2, the company repurchased $400 million of shares, taking year-to-date buybacks to $900 million, added the release.
Fibre2Fashion News Desk (SG)
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