MW Millennial and Gen Z customers are flocking to Coach. So why is Tapestry's stock tanking?

By James Rogers

Shares of fashion-brand company Tapestry are pulling back sharply from a record high, as Kate Spade sales continue to decline

Tapestry, parent to the Coach and Kate Spade brands, reported fiscal fourth-quarter results before market open Thursday.

Tapestry Inc., parent to the Coach and Kate Spade brands, enjoyed a revenue jump in its fiscal fourth-quarter results that comfortably beat Wall Street's expectations, boosted by growing numbers of millennial and Gen Z customers.

But Tapestry's (TPR) stock tumbled 12% in premarket trading, weighed down by ongoing weakness in its Kate Spade business and the impact of tariffs on the fashion brand's outlook.

The stock, which had closed at a record high on Wednesday, was leading the S&P 500 index's SPX premarket decliners. It was also on pace for its biggest daily percentage decline since April 3, 2025, when it dropped 12.9%, Dow Jones Market Data show.

The company's fourth-quarter results come at a time when the impact of tariffs is being closely scrutinized, particularly in the fashion and apparel sectors, which typically rely on complex international supply chains.

Tapestry's revenue rose 8% from the prior year's quarter to $1.723 billion, topping the FactSet consensus estimate of $1.681 billion. Revenue growth was fueled by the Coach brand, where sales rose 14% year over year to $1.425 billion, to beat expectations of $1.38 billion.

However, Kate Spade sales fell 13% to $252.6 million. While that was above the FactSet consensus of $251.3 million, it marked the 10th straight quarter of year-over-year declines and the lowest fourth-quarter total since 2020, at the height of the COVID-19 pandemic.

Revenue from the Stuart Weitzman business declined 10% to $45.5 million. Tapestry's sale of Stuart Weitzman to Caleres Inc. $(CAL)$ was completed earlier this month.

Basically, with results beating Wall Street's expectations, they were good enough, considering how well the stock has performed this year. It has soared 73.8% in 2025 through Wednesday, while the Consumer Discretionary Select Sector SPDR exchange-traded fund XLY has tacked on 2.5% and the S&P 500 index has gained 10%.

The company said that it acquired 1.5 million customers in North America during the quarter and over 6.8 million during the year, driven by a growing number of Gen Z and millennial consumers. These represented approximately 60% of new customers for the quarter and year, the company said in a statement.

In a note, Neil Saunders of GlobalData described the uplift in Tapestry's total revenue as "no mean feat" given the current soft environment. However, he added that the company's strong top-line showing is clouded by a "very gloomy bottom line" and an "eyewatering" net loss.

The fashion-brand company reported a net loss of $517 million, or a loss of $2.49 a share, after net income of $159.3 million, or 68 cents a share, in the prior year's quarter.

Saunders said that the company's loss was driven by two exceptional factors.

"First, the loss on the extinguishment of debt taken on to fund the failed acquisition of Capri, which cost the group some $120 million. Second, a write down on the brand value of Kate Spade," he said. "The former is somewhat outside of Tapestry's control as the [Federal Trade Commission] kiboshed the deal. The latter is down to Tapestry's inability to turn the brand around, so responsibility lies on the shoulders of management."

On an adjusted basis, which excludes nonrecurring items, Tapestry earned $1.04 a share, above the FactSet consensus estimate of $1.02 a share.

Tapestry also gave a full-year outlook that includes the impact of tariffs and U.S. trade policy.

For fiscal 2026, Tapestry expects revenue approaching $7.2 billion, which represents low-single-digit percentage growth versus the prior year, excluding Stuart Weitzman. Analysts surveyed by FactSet are looking for revenue of $7.12 billion.

The company also expects adjusted full-year earnings of $5.30 to $5.45, which includes negative impact of incremental tariffs and duties of over 60 cents. The FactSet consensus estimate for full-year adjusted earnings is $5.49 a share.

Tapestry expects that its operating margin will be better than the prior year, reflecting more than 2.5 percentage points (250 basis points) of underlying margin expansion, although this will be offset by a negative tariff and duty impact of approximately 230 basis points, or $160 million. In a statement, the company said that it expects to offset the impact of the incremental tariffs and duties over time.

A recent analysis from Goldman Sachs found that, so far, U.S. consumers have largely been spared the impact of the Trump administration's tariffs, but that could change in the coming months.

-James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

August 14, 2025 09:18 ET (13:18 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.