Sabrina Escobar

Tapestry stock jumped Thursday after Coach's parent company posted a strong fiscal-third-quarter earnings, and raised guidance, indicating that tariffs will have an "immaterial impact" on results for the year.

Tapestry reported adjusted earnings per share of $1.03 for the quarter ended March 29, well above consensus estimates for 88 cents, according to FactSet.

Revenue rose 7% year over year to $1.58 billion, topping the consensus estimates for $1.53 billion. Sales at Coach, Tapestry's biggest brand by revenue, jumped 13% from the year-ago quarter.

Importantly, Tapestry raised its outlook for the rest of the fiscal year, which ends in June. It now expects revenue of about $6.95 billion, representing 4% year over year growth. Past guidance called for a 3% annual increase. Earnings per share will be about $5, compared with prior guidance for a range from $4.85 to $4.90.

Shares of Tapestry were gaining 7.3% in premarket trading to $80.20, while futures tracking the S&P 500 were ticking up 0.9%. Tapestry stock has gained 14% so far this year, compared with the index's 4% loss.

Citi analyst Paul Lejuez noted that the market's expectations were high heading into the quarter, but the "continued very strong performance" at the Coach brand and implied strong start to the fourth quarter will likely move the stock higher today.

The outlook factors in tariffs "in accordance with the latest trade policies as of April 10," Tapestry said in the earnings release. That includes a 145% levy on imports from China, and a 10% tariff on all other global imports. These tariffs are expected to have an "immaterial impact" on fiscal 2025 results due to the timing of the fiscal year's end, Tapestry said.

The company pulled forward product shipments to get merchandise into the U.S. ahead of the tariffs, executives said on a call with investors Thursday. Plus, Tapestry has "very limited" manufacturing exposure to China, they added, with 70% of its production coming from Vietnam, Cambodia, and the Philippines.

Of course, the outlook could shift as trade policy evolves -- the Trump administration had sought to impose high tariff rates on many Asian countries, including Vietnam and Cambodia, when so-called reciprocal tariffs were announced a month ago. Those tariffs have since been paused as negotiations are under way.

The outlook doesn't foresee any material worsening of inflationary pressures or consumer confidence, the company added. Executives said on Thursday they hadn't seen a slowdown in the business throughout the current quarter.

The company's outlook does, however, exclude one-time transaction costs associated with the sale of its Stuart Weitzman shoe brand, announced earlier this year, as well as any impacts tied to the scrapped acquisition attempt of competitor Capri Holdings.

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

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May 08, 2025 08:58 ET (12:58 GMT)

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