Tapestry, Inc. (TPR) Cash Flow Statement

The robust OCF/NI ratio, particularly the 1.50x in 2026Q4 and 1.93x in 2026Q2, suggests that reported net income is well-supported by actual cash inflows, a positive sign for earnings quality. This pattern implies that non-cash charges, such as depreciation and stock-based compensation, are significant but are being more than offset by strong working capital management and operational cash generation. Investors should monitor whether this conversion rate remains elevated, as a sustained decline could signal deteriorating earnings quality or increased reliance on accruals.

The FCF margin has swung dramatically from 4.7% in 2026Q1 to 43.0% in 2026Q2, indicating that cash generation is heavily influenced by seasonal working capital swings rather than steady operational performance. Despite this volatility, the absolute FCF figures remain robust, with the most recent quarter generating $469.0M, which is significantly higher than the $347.8M net income. This suggests that the company's core business is fundamentally cash-generative, but the lumpy pattern warrants close monitoring for any sustained deterioration in the underlying cash conversion cycle.

The large negative working capital change in 2026Q1 (-$291.9M) likely reflects a seasonal inventory build ahead of the holiday quarter, which was then converted to cash in 2026Q2 (+$182.7M). This pattern is typical for a seasonal retailer but the magnitude of the swings suggests that inventory management is a critical lever for cash flow. The negative working capital change in 2026Q4 (-$12.0M) after a strong quarter indicates that the company may be carrying slightly more inventory or extending payables, which could be a sign of either strategic positioning or potential inefficiency.

The company's capital deployment strategy appears to prioritize share repurchases, with $403.5M in buybacks in 2026Q2 and $302.7M in 2026Q4, suggesting management believes the stock is undervalued. However, this aggressive buyback program is occurring alongside a high debt-to-equity ratio of 5.71, which raises questions about the sustainability of this approach. The consistent quarterly dividend payments of approximately $80M indicate a commitment to shareholder returns, but the combination of high leverage and aggressive buybacks may limit financial flexibility for strategic investments or acquisitions.