Tapestry Lifts Outlook Amid Coach Momentum and Supply Chain Flexibility

Tapestry, Inc. (TPR) delivered a resilient first-quarter performance, driven by the Coach brand’s strategic execution and supply chain improvements. Despite macroeconomic headwinds, Coach’s sales growth, margin expansion, and customer acquisition fueled a raised outlook for fiscal 2025. Management emphasized Coach’s role as the company’s growth engine, with its agile operations and brand relevance propelling Tapestry to exceed expectations.

Coach’s Financial Performance: Growth and Margin Strength

Coach reported $1.17 billion in Q1 net sales, a 1% increase year-over-year (2% at constant currency), accounting for 77.6% of Tapestry’s total revenue. The brand’s gross margin soared by 280 basis points to 75.3%, driven by operational efficiencies (180 bps), lower freight costs (60 bps), and favorable foreign exchange impacts. This margin expansion outpaced expectations, with non-GAAP operating income reaching $386.6 million.

Regional Breakdown: Europe Shines, North America Adjusts

• Europe: Delivered a 27% revenue increase at constant currency, fueled by strong demand for Coach’s handbags and accessories.
• North America: Revenue dipped 1% due to a planned reduction in wholesale sales, but profitability improved thanks to margin gains.
• Asia-Pacific: Growth in “Other Asia” (11%) offset declines in Greater China (-4%) and Japan (-8%), highlighting regional diversification efforts.

Customer Acquisition and Digital Growth

Coach added 1.4 million new customers in North America, with over 50% being Gen Z and Millennial consumers. Digital sales rose by a high-single-digit percentage, while brick-and-mortar sales declined slightly. This underscores the brand’s success in engaging younger demographics through omnichannel strategies.

Supply Chain Agility and Strategic Priorities

CEO Joanne Crevoiserat highlighted Coach’s operational excellence, including inventory management and agile production, as critical to navigating market volatility. The brand’s focus on product innovation—such as premium handbags and higher average unit retail (AUR)—drove both revenue and margin growth. Management also emphasized investments in data-driven customer platforms to enhance loyalty and engagement.

Outlook and Risks

Tapestry raised its FY2025 outlook, projecting revenue of over $6.75 billion (up from prior guidance) and non-GAAP EPS of $4.50–$4.55, a 1.1% increase from prior estimates. Despite challenges in North America and APAC, Coach’s European momentum and margin discipline provide a buffer. Risks include regulatory hurdles for the Capri acquisition and slower demand in key markets, but management remains confident in Coach’s standalone strength.

Conclusion

Coach’s Q1 performance reaffirms its status as Tapestry’s growth driver. With 280 basis points of margin expansion, 27% European revenue growth, and 1.4 million new customers, the brand is leveraging product innovation, customer engagement, and operational agility to outperform peers. Tapestry’s raised outlook reflects Coach’s resilience and strategic focus, positioning the company to capitalize on global luxury demand.

Investors should note Coach’s $94 million free cash flow and strong balance sheet ($7.3 billion in cash) as catalysts for shareholder returns. While regional headwinds persist, Coach’s ability to balance premium pricing, digital growth, and margin discipline makes it a compelling bet in an uncertain retail landscape.

In short, Tapestry’s Q1 results are a testament to Coach’s enduring relevance. With $1.17 billion in sales and a 75.3% gross margin, the brand is not just surviving—it’s thriving, and that bodes well for Tapestry’s future.