TPR

Tapestry's headline FY2025 numbers look alarming until you read the filing: net income fell -77.5% to $183M and diluted EPS -76.6% to $0.82, yet revenue still grew +5.1% to $7.01B, gross profit rose +8.2%, and gross margin expanded to 75.4%. The MD&A explains the disconnect — the company financed the Capri Holdings acquisition with $4.50B of USD senior notes, €1.50B of EUR notes, and a $1.40B term loan, then the FTC won a preliminary injunction blocking the merger in October 2024, leaving Tapestry carrying enormous financing/interest costs without the deal. Crucially, operating cash flow barely moved (-3.1% to $1.22B), confirming the income collapse is largely non-operating; the core Coach/Kate Spade house of brands is still throwing off cash.

The balance sheet is the real caveat. Stockholders' equity fell -70.4% to $858M, retained earnings swung to a -$2.56B deficit, cash dropped -82.1% to $1.10B, and liabilities/equity sits at a heavy 6.67x — the footprint of $2.40B long-term debt and an aggressive $1.72B of buybacks plus $299M of dividends in one year. Management is simplifying, selling the Stuart Weitzman business to Caleres for $105M (closed August 2025) to refocus on Coach and Kate Spade. Reported ROE of 21.4% is flattered by the shrunken equity base, so I weight it lightly.