- Tapestry reported Q3 adjusted EPS of $1.66 on revenue of $1.92 billion, beating estimates.
- The company raised its full-year 2026 earnings forecast to $6.95 per share.
- Shares fell 11% on a weak Q4 outlook, including slowing growth at Coach.
Back
Tapestry stock drops 11% despite strong Q3 earnings beat
Tapestry Inc. (NYSE: TPR) shares fell 11% on Thursday even as the Coach parent beat third-quarter estimates and raised its full-year guidance, fueled by concerns over a slowdown in the current quarter.
"The expected deceleration in growth for the high-performing Coach brand is a cause for concern, and there is still not much positive news on Kate Spade's turnaround efforts," said Sky Canaves, an analyst at eMarketer.
For the third quarter, Tapestry reported adjusted earnings of $1.66 per share on revenue of $1.92 billion, easily topping the LSEG consensus estimates of $1.30 in profit and $1.79 billion in revenue. The strong results were driven by a 31% jump in sales at the Coach brand.
Despite the beat, the company’s forecast for the fourth quarter spooked investors. Tapestry guided for low-teens revenue growth at Coach and a high-single-digit decline at Kate Spade, leading to the sharp selloff and erasing a 4% premarket gain.
Tale of Two Brands
The third-quarter results highlighted a growing divergence between Tapestry's core brands. Coach has recorded seven consecutive quarters of sales gains, benefiting from the popularity of its Tabby handbags and a successful courtship of Gen Z shoppers. In contrast, revenue at Kate Spade declined 10% in the third quarter as its turnaround efforts continue to lag.
The company raised its annual earnings forecast for a third time, now expecting earnings per share of $6.95 for fiscal 2026, up from a previous range of $6.40 to $6.45. The revenue forecast was also lifted to approximately $7.95 billion. "The consumer continues to be resilient and respond to our brands," CFO Scott Roe told Reuters.
Beat/Miss Table
The company's performance stands in contrast to other major luxury players like LVMH and Kering, which have recently reported weak demand. Tapestry said it has not been significantly affected by geopolitical conflicts that have impacted sales for rivals in the Middle East and Europe.
The sharp stock decline despite a positive report indicates investors are more focused on the future slowdown than the historical outperformance. Management's ability to stabilize Kate Spade and maintain momentum at Coach in a more challenging fourth quarter will be critical. Investors will be watching the company's next earnings report for signs of progress.
This article is for informational purposes only and does not constitute investment advice.
[1] Tapestry beats Q3 earnings expectations and raises full-year guidance[2] Tapestry Lifts FY Outlook Amid Coach Boom[3] Tapestry rallies after new Gen Z customers boost Q1 results[4] Tapestry raises annual targets on strong demand for Tabby bags[5] Tapestry lifts annual targets, beats quarterly estimates on strong demand for Tabby bags
