Tapestry, Inc. ( TPR ) stock tumbled in premarket trading Thursday despite topping Wall Street forecasts for the fourth quarter, fueled by double-digit revenue growth at its flagship Coach brand.

The parent of Coach and Kate Spade posted adjusted earnings of $1.04 per share, ahead of the $1.02 consensus, on revenue of $1.72 billion, up 8% year-over-year and above expectations.

Coach saw strong handbag revenue growth, driven by a mid-teens AUR gain for the quarter and a low-double-digit gain for the year. This reflects compelling innovation and broad-based traction across its leather goods offerings.

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Tapestry’s overall revenue growth was led by a 14% (+13% constant currency) gain at the Coach Brand with $1.425 billion in revenues. Kate Spade revenues fell 13% to $252.6 million.

Gross profit rose to $1.32 billion from $1.19 billion a year ago. Gross margin increased to 76.3% from 74.9%, driven by about 200 basis points of operational improvements, partly offset by a currency headwind of over 50 basis points.

Cash, equivalents, and short-term investments totaled $1.12 billion, while total borrowings stood at $2.39 billion. This resulted in net debt of $1.27 billion.

Inventory was $861 million, as expected, which excluded $92 million of Stuart Weitzman inventory classified as Assets held for sale.

Dividend

The firm approved a 14% increase to the company’s dividend, with a quarterly cash dividend of 40 cents per common share payable on September 22 to shareholders of record as of the close of business on September 5.

“We achieved bold targets we set three years ago in a dynamic landscape, delivering over $5 in adjusted earnings per share and returning more than $3 billion cumulatively to shareholders,” said CEO Joanne Crevoiserat. 

Outlook

For fiscal 2026, Tapestry expects revenue to approach $7.2 billion compared to the $6.96 billion estimate, reflecting low-single-digit growth from last year.

Excluding the planned divestiture of Stuart Weitzman, pro-forma sales are projected to rise at a mid-single-digit pace on both a nominal and constant-currency basis, with foreign exchange providing an 80-basis-point boost.

Operating margin is forecast to improve by more than 250 basis points, though this will be largely offset by an estimated 230-basis-point drag from incremental tariffs and duties, a $160 million impact tied to policy changes, sell-through timing, and mitigation efforts. The company aims to fully offset these costs over time.

Management projects net interest expense of about $65 million, an effective tax rate of roughly 18%, and a weighted average diluted share count near 213 million. Adjusted EPS is guided at $5.30-$5.45, up 4%-7% year-over-year, despite more than 60 cents in negative tariff and duty effects. Adjusted free cash flow is expected to approach $1.3 billion.

Price Action: TPR shares are trading lower by 12.36% to $99.50 premarket at last check Thursday.

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