Tapestry’s shares fell Thursday, after it warned of a difficult year ahead for the Kate Spade label. However Coach, its sister brand, saw a robust increase in sales.
At 10:51am on Thursday, the share price had dropped by almost 14%. This drop occurred despite the fact that the share price had nearly tripled in the last year.
Kate Spade’s sales in the fourth fiscal quarter fell by 13% to 252.6 million dollars, which was slightly higher than Wall Street expectations.
Coach sales grew 14%, to $1.43 Billion. This helped push the company’s sales above expectations.
Tapestry’s current fiscal year revenue is expected to be around $7.2 billion. This is slightly higher than analyst expectations of $7.12 Billion.
The Wall Street consensus for earnings per share is $5.49, but the projections are $5.30-5.45.
Scott Roe, Chief Financial Officer and Chief Operating officer at Scott Roe Finance, said that higher tariff costs would reduce profitability by approximately $160 million during fiscal 2026.
The company will feel the immediate impact of these costs while it works to offset them.
Roe stated, “I am confident that we will be able to fully address these challenges over time.”
Kate Spade, the luxury accessory group, said that it would take “strategic financial and business steps” in order to position itself for long-term growth. Chief Executive Joanne Crevoiserat stated that this process will have a temporary impact on revenues and profits.
Crevoiserat, a Crevoiserat analyst, said that while these actions would pressure revenue and profit in fiscal 2026 they were essential for strengthening the foundation of the brand and unlocking profitable, sustainable growth.
Kate Spade’s Coaches Playbook
Tapestry will replicate the strategies that were used by Coach to turn around their business. These included sharpening of brand identity, decreasing discounting and improving focus on products.
Kate Spade will streamline and increase its marketing efforts to target Gen Z consumers.
Crevoiserat stated that “while a turnaround can take time, we’re confident about our future and in the opportunity of a healthy and profitable brand growth.”
Analysts expect Coach to benefit in the long-term from its revamp
Analysts maintained an overall positive view on the long term despite the lackluster reaction of shares.
Analysts believe that the Coach brand has been a success in attracting younger and trendier shoppers.
Oliver Chen, TD Cowen, reiterated a buy rating and a price target of $130 on the stock following the earnings. He said that the guidance for earnings could be conservative if the management is able to offset the tariff impact more effectively than anticipated.
In a Thursday morning research note, he said: “We think the Coach brand will grow, that lifestyle execution will drive prices, and that transactions and investment in China marketing will help growth.”
In a preview of Tapestry results, Dana Telsey (CEO, Telsey Advisory Group) wrote: “Coach is continuing to gain momentum among younger consumers who shop more frequently and spend more. Category expansions like footwear have also performed well.”
She gives Tapestry a rating of Outperform and a price target of $125.
Dividend boost signals confidence
Tapestry’s board of directors approved an increase in its quarterly dividend by 14%, up to 40 cents per share. The new amount will be paid on Sept. 22, to all shareholders who have registered their shares as at Sept. 5,
Dividends are now paid at $1.60 annually per share.
The company’s management believes in the long-term path of growth, despite the near-term challenges posed by tariffs and Kate Spade. This is reflected in the strong Coach performance and its commitment to shareholders.
As updates are made, this post Tapestry Slides on Kate Spade Reset, Tariffs but Coach Momentum Signals Long-Term Upside may be updated.
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