Key Takeaways
- Tapestry shares jumped 11% after Coach sales rose 16% and the company raised its fiscal 2027 EPS outlook to $8.25-$8.35.
- Coach is carrying the company, and Kate Spade’s 10% sales drop is too small to do much damage.
- Gross margin rose 220 basis points to 78.7%.
- Ralph Lauren also beat and raised today, a sign the same shopper is spending across the group.
Tapestry (TPR) shares jumped 11% this morning after a Coach-led first-quarter beat and a raised full-year outlook. And Ralph Lauren (RL), which sells to much the same shopper, beat and raised too.
Coach CEO Todd Kahn told Reuters of the brand’s shoppers: “We’ve seen across every cohort – both economically and in terms of age – compelling growth.”
Coach is doing the heavy lifting
In the quarter to Sept. 26:
- Adjusted EPS rose 32% to $1.82, well ahead of the $1.56 analysts expected
- Coach sales rose 16% to $1.66 billion, with average handbag prices up at a low-double-digit rate
- Greater China sales jumped 43%
Going in, analysts expected $7.96 of EPS this year, and Tapestry now guides to $8.25-$8.35:
Expect this year’s estimate, and fiscal 2028’s $8.89, to move up from here.
A smaller share count explains only about a quarter of the raise. The rest comes from the business, and gross margin is the clearest sign. It hit 78.1% in the June quarter, a two-year high:
This quarter it reached 78.7%, though about 90 of the 220 basis points came from tariffs and currency.
Kate Spade can’t do much damage anymore
Kate Spade sales fell 10% to $233 million. But it’s now just 12% of sales. It can slow Tapestry’s growth a little, and that’s about it.
The same shopper is spending elsewhere
Ralph Lauren’s quarter points the same way: China revenue up more than 35%, and adjusted gross margin up 250 basis points to 70.5%, helped by higher prices. When two brands raise prices and grow fast in China at once, I read it as the shopper spending across the group.
TIKR tracks 21 analysts on Tapestry. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Tapestry, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Tapestry’s Analyst Ratings
Still cheaper than Ralph Lauren
Before today, Tapestry traded at 15x forward earnings. That’s above its 13x five-year average but well below January’s 24x peak:
Today’s jump takes it higher, though rising estimates should pull it back down. Ralph Lauren sits at 20x.
The way I see it, Coach is growing at higher prices, and the stock still costs less than its closest peer, so I see more upside from here.
Of course, the holiday quarter comes next: Tapestry reports on Feb. 4 and guides to about $3.05 of EPS.
So what is Tapestry stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
