By Sabrina Escobar

Tapestry Inc. reported record quarterly revenue, topped earnings expectations, and raised guidance for the year. But the stock was still sinking Thursday.

Wall Street appears to be disappointed that Coach's parent company didn't provide an even sunnier outlook.

The company reported adjusted earnings of $1.38 a share on $1.7 billion in revenue for the fiscal first quarter ended September. Analysts polled by FactSet were projecting $1.26 in earnings per share and $1.6 billion in revenue.

Total sales rose 13% from the year-ago quarter, driven by a 22% increase in Coach revenue. Kate Spade sales dipped 8% from a year ago.

Tapestry inched up its forecast for the full fiscal year. It now expects revenue of about $7.3 billion, up from a prior forecast of $7.2 billion. Earnings per share will range from $5.45 to $5.60 for the year, higher than the previous range calling for $5.30 to $5.45 a share. The new range's midpoint of $5.53 a share is above Wall Street's estimates of $5.50.

"While the macro-operating environment remains uncertain globally and the trade policy situation is still somewhat fluid, TPR continues to operate from a position of strength, in our view, as the company raised its prior full year outlook," wrote Dana Telsey, CEO of Telsey Advisory Group.

Not all investors shared Telsey's enthusiasm.

Tapestry stock dived about 11% Thursday morning. The decline largely stems from the fact that Wall Street was expecting even more from one of retail's best-performing brands, writes Citi analyst Paul Lejuez. While Tapestry's full-year guidance topped expectations, some analysts pointed out in the earnings call that its revenue projections embed a slower pace of growth in the second half of fiscal year 2026 compared with prior quarters.

Tapestry stock has gained 67% this year as of Wednesday's close, pushing up its valuation. The stock's current 12-month price-to-earnings ratio of 19.1 is well above its five-year average of about 11 times forward earnings.

Kate Spade's underperformance may also be weighing on the shares. The brand's turnaround is still in early stages, and will require ongoing investment to help bring it back to growth. Tapestry executives warned Thursday that these efforts, coupled with tariff impacts, could result in a "modest profit loss" for the brand.

Improving Kate Spade is part of Tapestry's newest "Amplify" growth strategy, unveiled earlier this fall. The plan focuses on four pillars, including acquiring more Gen Z customers, innovating in fashion and footwear, continuing to grow in North America and international markets, and focusing on consumer needs.

The company's first quarter suggests it is making progress against its new playbook, Telsey said. Tapestry acquired over 2.2 million new customers globally -- of those, 35% were Gen Z. Revenue grew in all but one of the company's geographic regions.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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November 06, 2025 10:09 ET (15:09 GMT)

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