TCF POST Analysis
Tapestry raised its full-year fiscal 2027 outlook after reporting stronger-than-expected first-quarter revenue, margins and earnings, with Coach delivering the principal growth momentum across its global accessories business.
The New York-based group, whose brand portfolio includes Coach and Kate Spade New York, recorded net sales of $1.894 billion for the quarter ended September 26, 2026, up 11% from $1.705 billion a year earlier. On a pro forma basis, excluding prior-year sales from the divested Stuart Weitzman business, revenue increased 12%.
Coach generated $1.661 billion in revenue, a 16% increase, while Kate Spade sales fell 10% to $233 million. The contrasting performances underline Coach’s growing contribution to the group’s expansion as Kate Spade continues to face a more difficult trading environment.
Geographically, Greater China was the strongest growth market, with revenue rising 39% on a constant-currency basis to $385 million. Other Asia increased 23% to $114 million, while Europe grew 22% to $151 million. North America, the company’s largest regional market, recorded 4% growth to $1.11 billion. Japan declined 5% on a reported basis but increased 4% at constant currency, generating $103 million.
Tapestry said it welcomed 2.6 million new consumers during the quarter, approximately 35% of whom were Gen Z. Demand from existing customers also increased.
The group reported stronger demand for Coach leathergoods, led by handbags. Coach handbag average unit retail prices increased at a low-double-digit percentage rate, while unit sales rose at a low-single-digit rate, indicating growth in both pricing and volume.
Its direct-to-consumer revenue increased 9% on a pro forma basis, exceeding expectations. Store sales grew at a low-double-digit rate and digital revenue at a mid-single-digit rate. Wholesale revenue advanced approximately 30%, driven by international markets.
Profitability also improved. Gross margin expanded 230 basis points to 78.6%, while non-GAAP gross margin increased 220 basis points to 78.7%. The company attributed the adjusted margin improvement to operational gains of approximately 130 basis points, a 70-basis-point net benefit from tariffs and duties, and a 20-basis-point foreign-exchange benefit.
Operating income rose 29% to $424 million on a GAAP basis. Adjusted operating income increased 24% to $439 million, with the non-GAAP operating margin expanding 230 basis points to 23.2%. Diluted earnings per share climbed 38% to $1.76, while non-GAAP diluted EPS increased 32% to $1.82.
Higher full-year guidance
Reflecting the first-quarter performance, Tapestry raised its fiscal 2027 revenue outlook to $8.5 billion-$8.6 billion, representing 6%-7% growth at constant currency, compared with its previous range of $8.4 billion-$8.5 billion.
The company now expects approximately 100 basis points of operating-margin expansion, doubling its previous projection of around 50 basis points. Its full-year non-GAAP diluted EPS forecast has also increased to $8.25-$8.35, from the earlier $7.80-$7.90 range, implying 17%-18% annual growth.
For the second fiscal quarter, Tapestry expects constant-currency revenue growth of 5%-6% and diluted EPS of approximately $3.05.
The group also increased its planned shareholder returns for fiscal 2027 to approximately $2 billion. This includes an expected $1.7 billion in share repurchases, $350 million above its previous guidance. During the first quarter, it returned approximately $700 million through its capital-return programmes, including $600 million spent on repurchasing around 4.6 million shares.
Chief Executive Joanne Crevoiserat said the company’s Amplify strategy was bringing new consumers to its brands through creativity, craftsmanship and value, while its first-quarter revenue, margin and earnings growth exceeded expectations.
The results point to strong momentum at Coach, particularly in China and international markets, while the decline at Kate Spade remains a notable weakness within the group’s otherwise positive first-quarter performance.
