Tapestry, Inc. (NYSE:TPR) stock fell sharply Thursday after the company reported fiscal fourth-quarter 2026 results and issued a fiscal 2027 sales outlook whose midpoint came in slightly below expectations.
Net sales rose 9% year over year to $1.88 billion, or 8% on a constant-currency basis. Reported sales of $1.876 billion matched estimates.
Adjusted earnings per share increased 28% to $1.32, beating the $1.28 estimate. GAAP diluted earnings were $1.68 per share, compared with a loss of $2.49 per share a year earlier.
Investors weighed the softer sales outlook and continued weakness at Kate Spade against the earnings beat and strong growth at Coach.
Coach Drives Growth as Margins Expand
Adjusted gross margin increased 180 basis points to 78.1%. Operational improvements contributed 170 basis points, while the Stuart Weitzman divestiture added 60 basis points. Tariffs and duties reduced the margin by 60 basis points.
Adjusted operating income rose 25% to $362 million. Adjusted operating margin expanded 250 basis points to 19.3%.
Coach revenue climbed 15% to $1.64 billion, or 14% on a constant-currency basis. Kate Spade revenue fell 7% to $235.1 million.
Coach generated $546.1 million in adjusted operating income, while Kate Spade posted an adjusted operating loss of $28.9 million.
On a pro forma constant-currency basis, revenue increased 28% in Greater China, 19% in Europe and 22% in Other Asia.
Tapestry said Kate Spade’s turnaround is progressing more slowly than expected, even as Coach continues to deliver strong growth. CEO Joanne Crevoiserat said Kate Spade’s “top-line progress was more gradual than we planned,” while Coach posted 14% constant-currency revenue growth in the fourth quarter. Kate Spade revenue fell 7% during the period, underscoring the widening performance gap between the two brands.
Tapestry Adds More Than 2.5 Million Customers
Tapestry acquired more than 2.5 million new customers during the quarter and about 11 million during fiscal 2026. About 35% of new customers were Gen Z consumers.
Pro forma constant-currency direct-to-consumer revenue rose 11% in the quarter and 16% for the full year.
Digital revenue increased at a mid-single-digit rate during the fourth quarter, while store revenue grew at a mid-teens rate.
Cash Flow Supports Shareholder Returns
Operating cash flow totaled $1.98 billion for fiscal 2026, while adjusted free cash flow reached $1.86 billion.
Tapestry ended the year with $1.15 billion in cash, cash equivalents and short-term investments. Inventory totaled $826 million, while total debt stood at $2.38 billion. The company’s leverage ratio was 1.1 times.
Tapestry returned $1.7 billion to shareholders during fiscal 2026, including $1.35 billion through share repurchases. Its board also approved a 16% dividend increase.
Tapestry Issues Fiscal 2027 Outlook
Tapestry expects fiscal 2027 sales of $8.4 billion to $8.5 billion. The midpoint of $8.45 billion is slightly below the $8.464 billion analyst estimate.
The company expects adjusted earnings of $7.80 to $7.90 per share, compared with the $7.84 estimate.
Tapestry also expects about 50 basis points of operating margin expansion and adjusted free cash flow approaching $1.7 billion.
The outlook assumes a tariff rate in the mid-20% range on U.S. inventory receipts, resulting in a neutral year-over-year net tariff impact. It also assumes no significant deterioration in inflationary pressures or consumer confidence.
TPR Price Action: Tapestry shares were down 16.17% at $128.88 during Thursday’s premarket session, according to Benzinga Pro data.
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