Tapestry (NYSE:TPR) raised its fiscal 2027 outlook after first-quarter revenue and earnings exceeded expectations, driven by growth at Coach and stronger-than-anticipated results in North America.
The company reported revenue of $1.9 billion, up 12% on a pro forma basis, and earnings per share of $1.82, up 32%. Operating margin expanded 230 basis points to more than 23%, while the company welcomed 2.6 million new customers across its brands, Chief Executive Officer Joanne Crevoiserat said.
“Growth in North America exceeded our expectations and drove our beat, while international added to our performance with strong double-digit revenue increases,” Crevoiserat said.
Higher Earnings Outlook and Share Repurchases
Tapestry now expects fiscal 2027 revenue of $8.5 billion to $8.6 billion, representing constant-currency growth of 6% to 7%. It forecasts earnings per share of $8.25 to $8.35, up from its previous outlook of $7.80 to $7.90. The guidance is non-GAAP and compares 52 weeks with 52 weeks.
Chief Financial Officer and Chief Operating Officer Scott Roe said the company’s $0.27 first-quarter earnings outperformance contributed to the higher forecast. Approximately $0.12 of the increase came from below-the-line items for the balance of the year, primarily additional share repurchases. The remaining increase primarily reflected higher revenue expectations driven by North America.
Tapestry also increased planned share repurchases by $350 million to $1.7 billion for the year. Including dividends, it expects to return approximately $2 billion to shareholders in fiscal 2027. During the first quarter, it returned approximately $700 million, including $600 million in buybacks.
The company expects operating margin to expand approximately 100 basis points to more than 24% for the year. Its outlook assumes a low- to mid-20% tariff rate on U.S. imports and a modest net year-over-year benefit to the profit and loss statement, including mitigating actions. Fiscal 2027 includes a 53rd week, which the company expects to add approximately one percentage point of annual revenue growth outside its comparable 52-week guidance.
For the second quarter, Tapestry forecasts constant-currency revenue growth of 5% to 6% and earnings per share of approximately $3.05.
Coach Drives Growth Across Regions
Coach revenue rose 16% at constant currency in the first quarter, including gains of 7% in North America, 41% in Greater China, 27% in Europe and 5% in Japan. The brand welcomed more than 2.1 million new customers, 40% of whom were Gen Z, according to Coach CEO and Brand President Todd Kahn.
Coach’s handbag average unit retail increased at a low-double-digit rate, while unit volumes grew at a low-single-digit rate. Crevoiserat said the brand increased both prices and units in its core $200-to-$500 handbag range while deliberately reducing its emphasis on more promotional products below $200.
Kahn said that price range would remain central to the brand’s strategy. Asked about holiday promotions, he said shoppers should see Coach become “even less promotional,” with the brand emphasizing its assortment and limited seasonal offerings.
Coach footwear revenue rose more than 20% in the quarter. Kahn said footwear contributed about 6% of the brand’s growth and helped attract new customers, including young men purchasing the Soho sneaker.
For the full year, Tapestry continues to forecast high-single-digit revenue growth at Coach, including mid-single-digit growth in North America. Crevoiserat said the company has modeled mid-teens growth in Greater China for both the second quarter and the year, despite tougher comparisons.
Kate Spade Turnaround Continues
Kate Spade revenue declined 10% in the first quarter, in line with guidance, although gross margin expanded 190 basis points. Tapestry continues to expect a high-single-digit revenue decline and a modest operating loss at the brand for fiscal 2027.
Crevoiserat said the company is streamlining Kate Spade, closing unproductive stores and stepping away from promotional activity as it works to build a stronger foundation. Newly appointed Executive Creative Director Jonathan Saunders is working with Brand CEO Eva Erdmann on product and storytelling.
Handbags brought nearly 500,000 new customers to Kate Spade during the quarter at higher average unit retail, Crevoiserat said. She added that the company expects to make progress as the year moves into its second half, while monitoring those early signs of improvement.
Margins and Investment
First-quarter gross margin rose 220 basis points to 78.7%, including 130 basis points of operational improvement and a 70-basis-point net benefit from lower tariffs and duties. Marketing represented more than 12% of sales, up 140 basis points from a year earlier.
Tapestry expects adjusted free cash flow to approach $1.7 billion for fiscal 2027 and plans approximately $300 million in capital expenditures and cloud computing costs. Much of that spending will support store openings and renovations, including Coach’s expressive luxury store concept, which the company aims to expand to reach approximately 80% of its traffic by fiscal 2030.
