Tapestry Q4 Earnings & Sales Top Estimates, Gross Margin Grows Y/Y

Tapestry, Inc. (TPR) exceeded fiscal Q4 2025 revenue and earnings estimates, driven by an 8.3% sales increase to $1.72 billion and 13% adjusted EPS growth to $1.04. Performance was led by Coach's 14% sales growth and strong engagement from Gen Z and Millennials, particularly in North America, Europe, and China, despite declines at Kate Spade and Stuart Weitzman. The company enhanced profitability with a 140 basis point gross margin improvement and demonstrated significant shareholder returns, including $2.3 billion in FY25 and plans for an additional $800 million buyback in FY26. Fiscal 2026 guidance projects revenues near $7.2 billion and EPS of $5.30-$5.45, reflecting continued growth but acknowledging a notable impact from incremental tariffs.

Analysis

Tapestry, Inc. demonstrated strong performance in its fourth-quarter fiscal 2025, with revenues rising 8.3% to $1.72 billion and adjusted EPS increasing 13% to $1.04, both surpassing consensus estimates. This growth was overwhelmingly driven by its flagship Coach brand, which posted a 14% sales increase to $1.43 billion, fueled by effective engagement with Gen Z and Millennial consumers and robust demand in North America (+8%), Greater China (+18%), and Europe (+13%). However, this strength masks significant weakness in its other core assets, with Kate Spade sales declining 13% and Stuart Weitzman sales falling 10%. Profitability improved, with the gross margin expanding 140 basis points to 76.3% and the adjusted operating margin ticking up 20 basis points. The company is aggressively returning capital to shareholders, having completed a $2 billion share repurchase and raising its dividend by 14%, with plans for an additional $800 million buyback in fiscal 2026. Despite this momentum, the fiscal 2026 guidance is cautious, projecting low-single-digit revenue growth and 4-7% EPS growth. This outlook is materially impacted by a significant headwind of approximately $160 million from tariffs and duties, which is expected to reduce EPS by more than 60 cents and presents a notable risk to future profitability.

Key Decisions for Investors

• Investors should recognize the robust performance of the core Coach brand and the company's aggressive capital return program, including a 14% dividend increase and a planned $800 million share repurchase, as primary drivers of shareholder value.
• It is critical to monitor the ongoing underperformance and turnaround efforts for the Kate Spade and Stuart Weitzman brands, as the company's current growth is heavily concentrated in Coach, creating a significant portfolio risk.
• Given the modest FY26 guidance, which forecasts low-single-digit revenue growth and includes a material 60-cent EPS headwind from tariffs, investors should carefully weigh the recent 36.4% stock price appreciation against the potential for slowing growth and margin pressure in the coming fiscal year.