Tapestry stock slide despite record results and upgraded outlook

Tapestry Inc., the parent company of Coach and Kate Spade, reported record quarterly revenue and stronger-than-expected earnings on Thursday.

However, despite the upbeat financial performance and raised full-year guidance, shares of the luxury retailer tumbled as investors expressed disappointment over the company’s growth outlook and ongoing challenges at its Kate Spade brand.

Record quarter led by Coach strength

For its fiscal first quarter ended in September, Tapestry reported adjusted earnings of $1.38 per share, surpassing Wall Street’s estimate of $1.26, according to FactSet.

Revenue came in at $1.7 billion, ahead of the expected $1.6 billion, marking a 13% increase from the same period a year earlier.

The results were fueled primarily by strong growth in the company’s flagship Coach brand, where sales jumped 22% year-over-year to $1.43 billion.

The gains more than offset an 8% decline in revenue at Kate Spade, which continues to face headwinds in its turnaround efforts.

Tapestry’s net income rose to $274.8 million, or $1.28 per share, compared with $186.6 million, or 79 cents per share, in the prior-year period.

The company declared a quarterly dividend of 40 cents per share and announced plans to repurchase $1 billion in shares in fiscal 2026, an increase from its earlier $800 million target.

Despite the record quarter, Tapestry shares fell more than 10% on Thursday, with analysts attributing the decline to heightened investor expectations following a sharp run-up in the stock this year.

Raised outlook fails to satisfy investors

Tapestry modestly raised its full-year guidance, now forecasting revenue of approximately $7.3 billion, up from its prior estimate of $7.2 billion, and earnings per share between $5.45 and $5.60, compared with its earlier projection of $5.30 to $5.45.

The midpoint of the new range, $5.53, came in slightly above analysts’ consensus estimate of $5.50.

While the updated guidance signals confidence in the company’s performance, several analysts said Wall Street had expected a more aggressive outlook from one of retail’s top-performing luxury players.

Citi analyst Paul Lejuez wrote that investors “had priced in stronger momentum,” particularly given Tapestry’s 67% stock gain year-to-date prior to the earnings report.

Analysts also noted that the company’s revenue projections imply a slower growth pace in the second half of fiscal 2026, which dampened enthusiasm despite the earnings beat.

Tapestry said tariff-related pressures are expected to reduce its operating margins by 230 basis points in fiscal 2026, though the company maintains that its core business remains resilient.

Kate Spade challenges and Gen Z momentum

Tapestry’s Kate Spade brand remains a weak spot, with executives acknowledging that its turnaround will require continued investment.

The company warned that efforts to rejuvenate the label, coupled with tariff impacts, could result in a “modest profit loss” for the brand this year.

The retailer is currently executing its “Amplify” growth strategy, launched earlier this fall, which focuses on four priorities: expanding its Gen Z customer base, innovating in fashion and footwear, driving growth across North America and international markets, and deepening its consumer focus.

The first quarter showed progress on that plan, Tapestry added 2.2 million new customers globally, with 35% of them belonging to Gen Z.

CEO Joanne Crevoiserat emphasized that this demographic remains central to Coach’s ongoing success, underscoring the brand’s growing cultural relevance among younger luxury buyers.

Despite the mixed market reaction, analysts such as Telsey Advisory Group’s Dana Telsey said Tapestry remains “in a position of strength,” citing its raised guidance and the durability of the Coach brand as signs of underlying momentum in a challenging retail environment.

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