Tapestry shares plunge 15% as Coach parent says tariffs will bite into profits

Tapestry shares plummeted after the luxury accessories firm projected fiscal 2026 earnings per share of $5.30-$5.45, below analyst consensus, citing a $160 million impact from higher tariffs and the unexpected end of de minimis exemptions. Despite strong sales trends and an anticipated revenue growth to $7.2 billion, the company emphasized that these tariff headwinds, rather than slowing demand, are driving its conservative profit outlook, underscoring the broader pressure tariffs are exerting on consumer brands.

Analysis

Tapestry's (TPR) stock plunged following the release of its fiscal 2026 guidance, which fell short of analyst expectations due to significant macroeconomic headwinds. The company projects a $160 million negative impact from higher duties, exacerbated by the earlier-than-expected suspension of the de minimis rule, which previously allowed duty-free entry for items under $800. This external pressure led to a forecasted earnings range of $5.30 to $5.45 per share, below the FactSet consensus of $5.49. Crucially, management has explicitly disconnected this conservative profit outlook from the company's operational performance. CFO Scott Roe stated that sales trends remain strong and have even accelerated in the current quarter, with revenue projected to see low single-digit growth to approximately $7.2 billion. This narrative is supported by the company's fiscal 2025 fourth-quarter results, which surpassed Wall Street's earnings and revenue estimates. The situation at Tapestry thus represents a clear case of external trade policy directly compressing margins for a company with otherwise healthy consumer demand and a streamlining strategy, evidenced by the sale of its Stuart Weitzman brand.

Key Decisions for Investors

• Investors should distinguish between the external tariff-driven margin pressure and the company's reported strong underlying sales momentum, as the stock's sharp decline may overstate fundamental weakness in consumer demand.
• It is critical to monitor Tapestry's success in mitigating the $160 million tariff impact through its global manufacturing diversification and operational efficiency initiatives, as any progress could lead to future upward revisions in guidance.
• Consider the potential valuation disconnect; the market appears to have priced in the profit warning, which may present an opportunity if one believes the underlying business trajectory remains robust as management suggests.
• Watch for commentary on tariff impacts in upcoming earnings reports from major retailers like Walmart, Home Depot, and Target to assess whether this margin pressure is a widespread theme or more isolated.