Coach's viral bags failed to boost Tapestry's outlook. Investors are selling shares

Shares of Tapestry, the parent company of the Coach and Kate Spade brands, plummeted nearly 17% on August 13. This happened after the release of its fourth-quarter financial report: despite strong sales growth for its flagship brand, the company issued a weak full-year outlook, according to Seeking Alpha. The company took a conservative stance, despite the popularity of its handbags among Gen Z and other products that have gone viral.

The reason for the negative investor reaction following the release of the financial results was Tapetsry management’s guidance, the average figures of which were merely in line with analysts’ expectations and offered no surprises. The company expects total revenue for fiscal year 2027 to range from $8.4 billion to $8.5 billion. The consensus estimate was $8.47 billion, according to The Wall Street Journal. Adjusted earnings per share are expected to be $7.8–$7.9; the midpoint of this range was lower than analysts’ forecast of $7.87.

At the same time, the outlook for the current first quarter looks more positive. Tapestry expects earnings of $1.55 per share, which exceeds the analysts’ consensus estimate of $1.49, the WSJ noted.

In the fourth quarter, Tapestry reported a net profit of $347.8 million, compared with a loss of $517.1 million a year earlier. Adjusted earnings per share came in at $1.32—exceeding analysts’ expectations of $1.28, according to the WSJ, citing data from FactSet. The holding company’s sales rose 9% to $1.88 billion. This is virtually in line with Wall Street’s forecast of $1.87 billion.

For yet another quarter, the Coach brand single-handedly drove the holding company’s sales, offsetting the decline at Kate Spade, according to the WSJ. Revenue for the flagship brand, known for its classic leather bags and premium accessories, jumped 15% to $1.64 billion. As the WSJ notes, in recent years Tapestry has run a highly successful campaign to boost loyalty to Coach, making the Brooklyn Bag a viral hit.

At the same time, revenue for the youth-oriented Kate Spade brand, known for its colorful handbags, fell by 7%.

Tapestry's Board of Directors approved a 16% increase in the quarterly dividend to $0.4625 per common share. In addition, the holding company plans to allocate $1.35 billion to share buybacks under its existing program during the upcoming fiscal year.

The Wall Street consensus rating for Tapestry shares is “Overweight,” according to MarketWatch. Of the 25 analysts covering the stock, 18 recommend buying the stock (Buy and Overweight ratings), while six analysts recommend holding (Hold). Only one analyst recommends selling (Sell).

This article was AI-translated and verified by a human editor