Tapestry Shares Plunge as Cautious Outlook Overshadows Strong Coach Sales

Tapestry shares plunged Thursday even after the Coach and Kate Spade parent reported a strong fiscal fourth quarter, as investors focused on a more measured revenue outlook for the new fiscal year and another sales decline at Kate Spade. The stock was down 15.5% at $129.95 at about 10:40 a.m. ET.

The selloff came against a quarter that was strong on several headline measures. Tapestry reported $1.88 billion in net sales for the quarter ended June 27, up 9% from a year earlier. Adjusted earnings were $1.32 per diluted share, up 28%, and Reuters reported that the figure beat the $1.28 consensus estimate compiled by LSEG.

In its fiscal 2026 results, Tapestry said the Coach brand generated $1.64 billion in fourth-quarter sales, up 15% on a reported basis and 14% in constant currency. Kate Spade went the other direction, with sales down 7% to $235.1 million. That split left investors weighing whether Coach can keep carrying the company’s growth while management works to stabilize its smaller brand.

Coach remains the growth engine

Coach’s fourth-quarter performance capped a year in which the brand generated $6.91 billion in sales, up 24% on a reported basis and 23% in constant currency. Tapestry said Coach delivered double-digit revenue growth in every quarter of fiscal 2026, while stronger handbag demand and higher average unit retail prices supported the result.

The company also reported more than 2.5 million new customers across its brands in the fourth quarter and about 11 million for the full year, with roughly 35% of new customers coming from Gen Z. At Coach, handbag average unit retail increased at a mid-teens percentage rate in both the quarter and the year, an indication that growth was not coming only from unit volume or heavier discounting.

Profitability also strengthened. Adjusted gross margin rose 180 basis points to 78.1% in the quarter, while adjusted operating margin expanded 250 basis points to 19.3%. Tapestry said operational improvements more than offset a 60-basis-point tariff and duty drag on adjusted gross margin. Adjusted operating income rose 25% to $362 million.

The geographic mix was less uniform. On a pro forma constant-currency basis, fourth-quarter revenue rose 7% in North America, 28% in Greater China and 19% in Europe. Japan fell 4%, while the rest of Asia rose 22%. Reuters noted that North American growth slowed sharply from the prior quarter, adding another reason for investors to scrutinize how much momentum can carry into fiscal 2027.

Fiscal 2027 guidance shifts attention to the pace of growth

Tapestry forecast fiscal 2027 revenue of $8.4 billion to $8.5 billion, which it described as mid-single-digit growth on both a nominal and constant-currency basis. The midpoint of $8.45 billion was slightly below the $8.46 billion LSEG consensus cited by Reuters, a small gap in absolute terms but one that landed after a year of much faster growth.

Management guided for adjusted earnings of $7.80 to $7.90 per diluted share, representing low-double-digit growth, and for operating margin expansion of about 50 basis points. The EPS midpoint of $7.85 was slightly above the $7.84 analyst estimate reported by Reuters, so the market reaction was not a simple case of all guidance missing expectations. The concern centered more on the expected pace of sales growth and the durability of Coach’s momentum.

For the first quarter of fiscal 2027, Tapestry expects high-single-digit revenue growth and adjusted EPS of about $1.55. The annual guidance excludes the effect of a 53rd week, which the company said could add about one percentage point to reported annual revenue growth without affecting full-year operating margin.

The outlook also assumes a mid-20% tariff rate on U.S. inventory receipts, with a neutral year-over-year net impact from tariffs, and no material worsening in inflationary pressures or consumer confidence. Those assumptions matter because Tapestry is entering the year with a much higher revenue base after fiscal 2026 net sales reached $8.00 billion, up 14% from the prior year.

Tapestry is still planning substantial capital returns. The board approved a 16% increase in the quarterly dividend to $0.4625 per share, and the company expects to repurchase $1.35 billion of common stock during fiscal 2027. Together with dividends, management expects to return about $1.7 billion to shareholders during the year.

Kate Spade remains the main portfolio question

The contrast between Coach and Kate Spade is becoming harder to ignore. Kate Spade’s fourth-quarter sales fell 7% on both a reported and constant-currency basis, while full-year sales declined 10% reported and 11% in constant currency. Coach, by comparison, produced nearly six and a half times as much annual revenue and grew by more than 20%.

That imbalance does not mean Kate Spade is large enough on its own to erase Coach’s gains, but it affects how investors assess the breadth of Tapestry’s growth. Reuters reported that the brand appointed designer Jonathan Saunders as creative director in July as part of a broader effort to improve product design and visual identity. The challenge is to convert those changes into sustained sales improvement rather than relying on Coach to offset weakness elsewhere.

Tapestry’s fiscal 2026 results show how powerful that offset has been. Companywide adjusted operating margin rose 340 basis points to 23.4% for the year, adjusted EPS increased 38% to $7.05, and adjusted free cash flow reached $1.86 billion. The company also returned $1.7 billion to shareholders through dividends and share repurchases during the year.

Thursday’s stock reaction suggests those achievements were already embedded in expectations to a meaningful degree. Investors were instead pricing the transition from a year of 18% pro forma reported revenue growth to management’s mid-single-digit fiscal 2027 target, with Coach still doing most of the heavy lifting and Kate Spade not yet back to growth.

The next scheduled checkpoint will be Tapestry’s fiscal 2027 first-quarter report, which the company expects to release on November 5, 2026. That quarter should provide the first evidence of whether Coach can maintain double-digit momentum at a larger base and whether the early stages of the Kate Spade reset are beginning to stabilize the brand.