Tapestry Q4 Earnings Beat on Coach Growth & Margin Expansion

Revenues of $1.88 billion matched the Zacks Consensus Estimate and increased 9% year over year. Excluding the Stuart Weitzman business, pro forma revenues increased 12% year over year on a reported basis and 11% on a constant-currency basis.

The company added more than 2.5 million new consumers globally during the quarter, with approximately 35% of new customers coming from Gen Z. Tapestry continued to benefit from strength in its core leathergoods business. Coach handbag average unit retail (“AUR”) increased at a mid-teens percentage rate during the quarter, reflecting continued pricing and product momentum.

Tapestry Leans on Coach as Kate Spade Lags

Coach revenues reached $1.64 billion, met the Zacks Consensus Estimate and rose 15% year over year and 14% in constant currency. Handbag unit volumes were roughly flat, while footwear delivered high-teens growth. The brand also acquired more than 2 million new customers during the quarter.

Kate Spade sales declined 7% to $235.1 million, surpassing the consensus estimate of $232 million. The brand added more than 450,000 new customers, who transacted at higher AURs than the broader customer base. Management cited improving handbag performance and better conversion and average transaction value at lightly renovated stores.

TPR Posts Broad-Based Regional Growth

Regional performance was broad-based. North America revenues increased 7% on a constant-currency basis, while Greater China revenues increased 28%. Europe revenues advanced 19% and Other Asia increased 22%. Japan remained a weak spot, with revenues declining 4% on a constant-currency basis. Coach delivered double-digit revenue growth in every quarter of fiscal 2026, including 14% in the fiscal fourth quarter.

Direct-to-consumer revenues increased 11% on a pro forma constant-currency basis in the quarter. Digital revenues grew at a mid-single-digit rate, while store revenues increased at a mid-teens rate, highlighting continued strength across Tapestry's consumer-facing channels.

TPR Expands Margins Despite Tariff Headwinds

Adjusted gross profit increased 11% year over year to $1.47 billion. The adjusted gross margin expanded 180 basis points to 78.1%, supported by roughly 170 basis points of operational improvement and a 60-basis-point benefit from the Stuart Weitzman divestiture. Tariffs and duties created a 60-basis-point headwind.

Adjusted operating income increased 25% year over year to $362 million. Meanwhile, the adjusted operating margin expanded 250 basis points to 19.3%.

Adjusted SG&A expenses totaled $1.05 billion. As a percentage of sales, adjusted SG&A expenses leveraged 80 basis points year over year. The quarter included a 130-basis-point increase in marketing investment.  

TPR’s Fiscal Q4 Store Update

As of the end of the fiscal fourth quarter, the company operated 336 Coach stores and 178 Kate Spade stores in North America. Internationally, the store count stood at 637 for Coach and 148 for Kate Spade stores.

Tapestry Converts Profit to Cash & Returns Capital

Cash generation strengthened, supported by higher profitability and working-capital discipline. The operating cash flow was $522.2 million in the fiscal fourth quarter. The adjusted free cash flow totaled $492.6 million in the quarter, while capital expenditures amounted to $53.2 million.

At fiscal year-end, cash, cash equivalents and short-term investments totaled $1.15 billion, compared with total borrowings of $2.38 billion. Inventory ended fiscal 2026 at $826.2 million compared with $860.7 million a year earlier. Tapestry's gross-debt-to-adjusted-EBITDA leverage ratio was 1.1X, reflecting its balance-sheet position following a year of stronger earnings and cash generation.

Tapestry returned $1.7 billion to its shareholders during fiscal 2026 through dividends and share repurchases. The company paid $326 million in dividends and repurchased $1.35 billion of common stock, buying back about 11.5 million shares at an average price of approximately $118.

The board approved a 16% dividend increase, lifting the quarterly payout to 46.25 cents per share and the anticipated annual rate to $1.85. TPR expects to repurchase another $1.35 billion of common stock in fiscal 2027.

TPR’s Q1 Fiscal 2027 Outlook

For the first quarter of fiscal 2027, Tapestry expects revenues to grow at a high-single-digit rate on both a nominal and constant-currency basis compared with the prior-year pro forma revenues. Foreign currency is expected to provide a 30-basis-point tailwind to revenue growth. By brand, Coach revenues are expected to increase at a low-teens rate, while Kate Spade revenues are projected to decline at a low-double-digit rate.

Gross margin is expected to expand approximately 120 basis points, while operating margin is expected to remain in line with the prior-year period. SG&A expense deleverage is expected to be entirely attributable to increased marketing investments. Adjusted EPS is expected to be approximately $1.55, representing a low-teens increase compared with the prior year.

TPR’s Fiscal 2027 Financial Outlook

For fiscal 2027, Tapestry expects revenues to be in the range of $8.4-$8.5 billion, representing mid-single-digit growth on a nominal and constant-currency basis. Foreign currency is expected to provide a 40-basis-point tailwind to revenue growth.

By brand, Coach revenues are expected to grow at a high-single-digit rate, while Kate Spade revenues are projected to decline at a high-single-digit rate. Gross margin is expected to increase approximately 30 basis points, while SG&A is projected to provide approximately 20 basis points of leverage. As a result, operating margin is expected to expand 50 basis points. At the brand level, Coach is expected to maintain an operating margin of nearly 36%, while Kate Spade is projected to report a modest operating loss. 

Tapestry expects adjusted EPS of $7.80-$7.90, representing low-double-digit growth compared with the prior year. Adjusted free cash flow is expected to approach $1.7 billion, with CapEx and cloud computing costs in the area of $300 million, or approximately 3% to 4% of revenues.

The outlook excludes the impact of the 53rd week, which is expected to contribute an additional percentage point to annual revenue growth while having a neutral impact on operating margin for the full fiscal year. It embeds a mid-20% tariff rate on U.S. inventory receipts, resulting in a neutral net impact from tariffs year over year. Tapestry assumes no material worsening of inflationary pressures or consumer confidence. The fiscal 2027 outlook remains consistent with the company’s long-term commitment to deliver mid-single-digit revenue growth and low-double-digit EPS growth.

TPR Stock Past Three-Month Performance

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Shares of the company have gained 18.3% over the past three months compared with the industry’s 8.6% growth.

Zacks Rank & Key Picks

The company currently has a Zacks Rank of 3 (Hold).

FIGS, Inc. FIGS is an apparel company focused on the healthcare industry. Its offerings include lab coats, jackets, footwear, bags, socks and other accessories used by healthcare professionals. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for FIGS’ current financial-year earnings and sales indicates growth of 57.9% and 18.2%, respectively, from the year-ago actuals. FIGS delivered a trailing four-quarter average earnings surprise of 201.8%.

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The Zacks Consensus Estimate for Boot Barn’s current fiscal-year earnings and sales implies growth of 22.6% and 15.7%, respectively, from the year-ago actuals. BOOT delivered a trailing four-quarter average earnings surprise of 11.4%.

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The Zacks Consensus Estimate for Gap’s current fiscal-year earnings and sales indicates growth of 9.9% and 1.1%, respectively, from the year-ago actuals. GAP delivered a trailing four-quarter average earnings surprise of 2%.

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