Tapestry raises FY25 outlook as Q3 sales surge 7%

Tapestry, the parent company of Coach and Kate Spade, has recorded net sales of $1.58bn in the third quarter (Q3) of fiscal year 2025 (FY25), marking a 7% rise on a reported basis or an 8% increase on a constant currency basis against the same period last fiscal year.

The company's growth is attributed to significant constant currency gains across various regions, including 9% in North America, 35% in Europe, and 4% in Asia-Pacific.

A key contributor to this growth was the Coach brand, which witnessed a robust 15% revenue surge on a constant currency basis.

Direct-to-consumer revenues for the quarter also climbed by 9% on a constant currency basis, bolstered by a mid-teens percentage surge in digital sales and a mid-single digit uptick in global brick-and-mortar store sales.

Tapestry posted operating income of $254m on a generally accepted accounting principles (GAAP) basis in Q3 FY25, resulting in an operating margin of 16.0%. This performance surpasses last year's figures of $204m with a 13.8% operating margin.

The company also saw its net income surge to $203m over the quarter compared with $139m recorded in Q3 FY24.

Its diluted earnings per share were reported at $0.95 on a GAAP basis, compared to $0.60 per diluted share in Q3 FY24.

Tapestry’s selling, general, and administrative expenses totalled $952m in Q3 FY25, accounting for 60.1% of sales on a GAAP basis.

Gross profit for the company amounted to $1.21bn in Q3 FY25, with a gross margin of 76.1%, reflecting operational enhancements of approximately 140 basis points over the prior year's gross profit of $1.11bn and gross margin of 74.7%.

In light of these positive results, Tapestry has revised its FY25 outlook upwards on a non-GAAP basis.

The company now anticipates revenues to be roughly $6.95bn, indicating a 4% growth from the previous year on a reported basis despite an expected currency headwind of nearly 50 basis points, surpassing the earlier forecast of around 3% growth.

Tapestry projects an operating margin expansion of approximately 100 basis points over the previous year, aligning with previous guidance.

It expects diluted earnings per share to be around $5.00, signifying high-teens percentage growth compared to last year and exceeding earlier projections of between $4.85 and $4.90.

The updated outlook incorporates trade policies as of 10 April 2025, including an anticipated additional tariff of 145% on imports from China and an extra 10% tariff on all other global imports, said the company.

It notes that these tariffs are expected to have a negligible effect on FY25 outcomes due to the timing associated with sell-throughs and goods in transit.