Shares of Tapestry Inc. (TPR) plummeted 13.46% in pre-market trading on Thursday, despite the luxury goods company reporting better-than-expected first-quarter results for fiscal 2026 and raising its full-year outlook. The sharp decline comes as a surprise given the positive financial performance, leaving investors to speculate on underlying concerns.

Tapestry announced Q1 adjusted earnings per share of $1.38, surpassing the analyst estimate of $1.25. Sales for the quarter reached $1,700 million, exceeding expectations of $1,631 million. The company also reported a robust operating margin of 19.3%. In light of these strong results, Tapestry raised its full-year adjusted EPS guidance to $5.45-$5.60 and projected sales of $7,300 million for fiscal 2026.

However, several factors appear to be contributing to the stock's decline. The company's CFO mentioned potential profit volatility due to tariff impacts, with the outlook reflecting a negative tariff and duty impact of about 230 basis points. Additionally, the Kate Spade brand continues to post sales declines, dragging on the company's overall performance. Investors may also be reacting to the Q2 EPS guidance of around $2.15, which falls slightly below analysts' estimates of $2.17. These concerns seem to be overshadowing the otherwise positive results and outlook, leading to the significant pre-market drop in Tapestry's stock price.