Coach Parent Tapestry Reports High-Growth Earnings, but Market Remains Unconvinced

On August 13 local time, Coach parent company Tapestry announced its financial results for the fourth quarter and full year of fiscal 2026. Fourth-quarter revenue reached $1.877 billion, a 9% year-over-year increase; full-year revenue totaled $8.004 billion, up 14% year over year.

Following the earnings release, Tapestry’s stock price fell as much as 16.9% to $127.78, hitting a low not seen in over six months. Although adjusted profits for the quarter exceeded market consensus estimates, the company’s relatively cautious revenue outlook for fiscal 2027, combined with Kate Spade’s ongoing decline, has heightened investor concerns about the sustainability of growth.

The financial report showed that Tapestry’s operating profit for the fourth quarter was $442 million, compared to an operating loss of $584 million in the same period last year. Full-year operating profit rose from $415 million to $1.914 billion, while diluted earnings per share increased from $0.82 to $7.27.

However, the significant year-over-year profit growth was partly due to base effects. In fiscal 2025, Tapestry recorded approximately $855 million in impairments on Kate Spade trademarks and goodwill, along with expenses related to terminating the acquisition of Capri and selling Stuart Weitzman.

Excluding special items, Tapestry’s fourth-quarter operating profit was $362 million, a 25% year-over-year increase. Full-year operating profit amounted to $1.866 billion, up 33% year over year. The adjusted full-year operating margin was 23.4%, an increase of 3.4 percentage points year over year, providing a clearer reflection of changes in core business performance.

From a brand perspective, Coach continued to drive the majority of growth. In the fourth quarter, Coach’s revenue was $1.642 billion, up 15% year over year (or 14% on a constant currency basis). For the full year, revenue reached $6.915 billion, a 24% year-over-year increase, accounting for approximately 87% of Tapestry’s revenue excluding Stuart Weitzman.

Coach’s growth was driven by both pricing and volume. In the fourth quarter, the average selling price of its handbags increased by more than 10% year over year, while sales volume remained roughly flat compared to the previous year. For the full year, the average selling price of handbags saw a similar increase, with sales volume growing in the low double digits.

Series such as Brooklyn, Empire, Chelsea, and Tabby continued to contribute to sales. While reducing promotions, the company increased brand investment, with marketing expenditures rising by approximately 20% year over year in the fourth quarter. Coach added nearly 9 million new consumers throughout the year, with younger demographics remaining the primary source of incremental growth.

Kate Spade’s turnaround has been slower than expected. The brand’s fourth-quarter revenue was $235 million, down 7% year over year. Full-year revenue totaled $1.075 billion, a 10% year-over-year decline (or 11% on a constant currency basis).

Handbag series such as Margot, 454, and Duo helped improve performance in certain product categories, and Kate Spade added approximately 2 million new consumers for the year. However, these efforts have not yet reversed the revenue decline. Tapestry has appointed Jonathan Saunders as Executive Creative Director to continue adjusting product design and brand expression.

The company expects Kate Spade’s revenue to decline by high single digits in fiscal 2027, accompanied by a slight operating loss. This implies that Tapestry’s reliance on Coach will deepen further in the short term.

The third brand, Stuart Weitzman, was sold to Caleres in August 2025. It contributed only $14.6 million in revenue during fiscal 2026. Following the sale, Tapestry’s brand portfolio has been reduced to Coach and Kate Spade.

The Chinese market was the fastest-growing region this fiscal year. In the fourth quarter, Tapestry’s Greater China revenue was $352 million, up 33% year over year (or 28% on a constant currency basis). For the full year, revenue reached $1.397 billion, a 38% year-over-year increase (or 35% on a constant currency basis).

Specifically, Coach’s revenue in Greater China grew by 30% on a constant currency basis in the fourth quarter. The company stated that growth spanned both online and offline channels, with digital business performing particularly well. New consumer acquisition continued to be dominated by younger demographics.

However, the constant currency growth rate in Greater China slowed to 28% in the fourth quarter, down from 55% in the third quarter. While this rate remains significantly higher than the 7% growth in North America during the same period, it indicates that the previous high growth momentum is beginning to ease.

For fiscal 2027, Tapestry projects revenue between $8.4 billion and $8.5 billion, representing mid-single-digit year-over-year growth. Coach revenue is expected to grow by high single digits, with Greater China and Europe anticipated to see mid-double-digit growth, while Kate Spade continues to contract. How to sustain Coach’s growth while narrowing the gap between brands remains a key focus for the next fiscal year.