Tapestry shares tumbled Thursday after the company warned that a challenging year lay ahead for its Kate Spade brand, even as sister label Coach delivered robust growth.
The share price was down by close to 14% at 10:51 am on Thursday. The drop came despite a near-tripling of the stock over the past year.
Kate Spade sales fell 13% in the fiscal fourth quarter to $252.6 million, slightly better than Wall Street forecasts.
Coach sales rose 14% to $1.43 billion, helping push companywide sales past expectations.
For the current fiscal year, Tapestry expects revenue to approach $7.2 billion, slightly above analyst estimates of $7.12 billion.
Earnings per share are projected at $5.30 to $5.45, shy of the $5.49 Wall Street consensus.
Finance chief and Chief Operating Officer Scott Roe said higher costs from tariffs would trim profitability by about $160 million in fiscal 2026.
While the company is working to offset those costs, the impact will be felt in the near term.
“I remain confident in our ability to address these headwinds fully over time,” Roe said.
The luxury accessories group said it will embark on “strategic and financial steps” to reposition Kate Spade for long-term expansion, a process Chief Executive Joanne Crevoiserat said will temporarily weigh on revenue and profitability.
“While these actions will pressure revenue and profitability in fiscal 2026, they are essential to strengthening the brand’s foundation and unlocking sustainable, profitable growth,” Crevoiserat told analysts.
Applying Coach’s playbook to Kate Spade
Tapestry plans to replicate strategies used in Coach’s turnaround, which included sharpening brand identity, reducing discounting, and improving product focus.
For Kate Spade, the company will increase marketing targeting Gen Z shoppers and streamline its handbag offerings.
“While a turnaround takes time, we are confident in our path forward and the brand’s opportunity for healthy and profitable growth,” Crevoiserat said.
Analysts see longer-term upside due to Coach’s revamp
Despite the weak reaction in shares, analysts maintained a generally positive long-term view.
In the long run, analysts believe the company still benefits from several tailwinds, stemming from the Coach brand’s successful revamp that has drawn in younger, trend-conscious shoppers.
TD Cowen’s Oliver Chen reiterated a Buy rating on the stock after the earnings, and a $130 price target, saying earnings guidance could prove conservative if management offsets the tariff hit more effectively than expected.
“We believe the Coach brand momentum will continue, lifestyle execution can drive pricing, and transactions and investments into China marketing will support growth,” he wrote in a research note Thursday morning.
“Coach continues to find momentum with younger consumers, who tend to shop more often and spend more, and category expansion like footwear are performing well,” wrote Dana Telsey, CEO of Telsey Advisory Group, in a note previewing Tapestry’s results.
She rates Tapestry stock at Outperform with a $125 price target.
Dividend boost signals confidence
Tapestry’s board approved a 14% increase to its quarterly dividend, to 40 cents a share, payable Sept. 22 to shareholders of record Sept. 5.
The annualized dividend rate is now $1.60 per share.
While the company faces near-term headwinds from tariffs and the Kate Spade overhaul, its strong Coach performance, disciplined execution, and commitment to shareholder returns underscore management’s belief in its long-term growth path.
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