Why Shares of Tapestry Were Falling Today
Key Points
Tapestry beat fourth-quarter estimates, but called for growth to slow substantially in fiscal 2027.
The company is executing well after divesting the Stuart Weitzman brand.
It raised its dividend by 16%.
- 10 stocks we like better than Tapestry ›
Shares of Tapestry (NYSE: TPR), the parent of Coach and Kate Spade, were heading lower today after the company beat estimates in its fourth quarter, but gave disappointing guidance for fiscal 2027.
As a result, the stock was down 15.1% as of 12:57 p.m. ET.
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Tapestry sees risks ahead
The handbag and accessories company delivered solid results in the fourth quarter with revenue up 9%, or 11% on a pro forma constant currency basis, which adjusts for the sale of Stuart Weitzman, to $1.88 billion, which essentially matched the consensus at $1.87 billion.
Coach, which makes up the vast majority of sales, was particularly strong with 14% constant-currency, and Tapestry delivered gross margin and operating margin expansion for both the quarter and the year. Kate Spade continued to struggle with revenue down 7%.
Geographically, China was a bright spot for the business, with constant-currency revenue up 28%, while Japan revenue continued to decline.
On the bottom line, the company reported adjusted earnings per share of $1.32, up from $1.04, which was better than the consensus of $1.28. Tapestry also raised its dividend by 16%, a sign of confidence in the business.
CEO Joanne Crevoiserat said, "Our fourth-quarter outperformance capped a year of strong growth, as we meaningfully exceeded expectations."
What's next for Tapestry
If the report had ended there, the stock might have risen, but the market was clearly disappointed with its guidance.
For fiscal 2027, the company expects revenue of $8.4 billion-$8.5 billion, representing just mid-single-digit growth, and it called for earnings per share of $7.80-$7.90, up low double digits.
Given the 2026 results, which included 17% constant currency growth and 38% adjusted EPS growth, investors are understandably disappointed. However, that forecast is likely conservative, meaning investors seem to be overreacting to the report, especially considering the 16% dividend hike.
Between that and the sell-off, Tapestry's dividend yield just jumped by 35% to nearly 1.5%.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Tapestry. The Motley Fool has a disclosure policy.
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