Tapestry Beats EPS Estimates with Strong Q2 Fiscal 2025 Results

Tapestry showcases resilience with a reported EPS of $2.00 in Q2 2025, outperforming expectations. Strong revenue growth, particularly from Coach, positions the company favorably for future quarters.

Date: 06-02-2025

AI Rating: 8

Tapestry's excellent performance in the second quarter highlights significant positive developments. The reported adjusted earnings per share (EPS) of $2.00 surpassed analyst expectations of $1.75 by 14.3%, indicating a strong financial position. This can lead to a favorable perception among investors, likely resulting in an upward trend for TPR stock.

Revenue growth also exceeded estimates, reaching $2.20 billion compared to the anticipated $2.11 billion, marking a year-over-year increase of 5.3%. This ongoing revenue expansion signals robust business performance that could affect stock prices positively as it demonstrates Tapestry's ability to attract consumers.

The company observed remarkable growth primarily from the Coach brand, which recorded a 10% increase in constant-currency revenue. The successful launch of new products and a 4% rise in direct-to-consumer sales have contributed to this growth. Such strong brand performance could lead to increased investment as Tapestry strengthens its market position.

Tapestry's gross margin improved by 280 basis points to 74.4%, aided by operational efficiencies and lower freight expenses. This improvement in profit margins could enhance investor confidence, further driving TPR's stock prices up.

The adjusted free cash flow rose by 3.7% to $891 million, reflecting healthy cash generation that enables the company to reinvest in growth initiatives or return money to shareholders. This could also have positive repercussions for stock valuations.

On the downside, the report indicates challenges with the Kate Spade and Stuart Weitzman brands, which faced revenue declines of 10% and 15%, respectively. These factors may exert pressure on stock prices as investors will be keenly watching how management addresses these underperforming segments.

Tapestry's raised forecast for the 2025 fiscal year, anticipating revenues exceeding $6.85 billion and a 100-basis point increase in operating margin, reflects confidence in its strategic direction. This bullish outlook adds to positive sentiment surrounding the company's stock.

Investor attention will be pivotal regarding Tapestry's continued brand management efforts, especially concerning underperforming segments, as they navigate competitive challenges in the luxury fashion market.

Stocks: TPR