Tapestry Inc (NYSE: TPR) reported fourth-quarter and full-year fiscal 2026 results that exceeded earnings guidance but triggered a sharp market sell-off due to continued weakness at its Kate Spade brand and a fiscal 2027 sales outlook that missed consensus estimates. Non-GAAP diluted earnings per share for the quarter ended June 27, 2026, came in at $1.32, beating the analyst consensus estimate of $1.28 by 3.1%. This represents a 28% increase from the $1.04 per share recorded in the same period last year. Despite the earnings beat, Tapestry shares fell 16.17% to $128.88 in premarket trading as investors weighed the slower-than-expected turnaround at Kate Spade against the robust growth at Coach.

Key Financial Highlights

The following table summarises the company's reported and non-GAAP financial performance for the quarter and full year ended June 27, 2026, compared to the prior year periods.

Brand Divergence: Coach Gains, Kate Spade Lags

The Coach brand remained the primary growth driver, while Kate Spade’s recovery proved slower than anticipated. Pro forma net sales by brand for the quarter and full year are summarised below.

Coach generated $546.1 million in adjusted operating income for the quarter, contrasting sharply with Kate Spade, which posted an adjusted operating loss of $28.9 million. CEO Joanne Crevoiserat noted that Kate Spade’s “top-line progress was more gradual than we planned,” underscoring a widening performance gap between the two flagship brands.

On a pro forma constant currency basis, regional performance for the quarter included:

• North America revenue grew 7% in Q4 and 15% for the full year, reaching $1,148.2 million in Q4 and $5,034.1 million for FY26.
• Greater China revenue grew 28% in Q4 and 35% for the full year, reaching $352.2 million in Q4 and $1,396.6 million for FY26.
• Europe revenue grew 19% in Q4 and 23% for the full year, reaching $122.6 million in Q4 and $525.4 million for FY26.
• Other Asia revenue grew 22% in Q4 and 13% for the full year, reaching $109.0 million in Q4 and $441.6 million for FY26.
• Japan revenue declined 11% in Q4 and 10% for the full year, reaching $105.0 million in Q4 and $465.7 million for FY26.

Strategic and Operational Highlights

Tapestry advanced its Amplify growth strategy, focusing on building emotional connection with consumers, fuelling fashion innovation, delivering compelling experiences, and igniting the power of its people.

Key operational highlights for the fiscal fourth quarter and full year 2026 included:

• New customer acquisition: Over 2.5 million new consumers welcomed in Q4 and approximately 11.0 million in FY26, with approximately 35% of new customers being Gen Z.
• Leathergoods performance: Handbag average unit retail (AUR) at Coach increased at a mid-teens percentage rate in both Q4 and FY26, with full-year leathergoods outperformance driven by a combination of AUR and unit growth.
• Direct-to-Consumer (DTC) growth: DTC revenue increased 11% in Q4 and 16% for the full year on a pro forma constant currency basis. Digital revenue grew at a mid-single-digit rate in Q4 and at a high-teens rate for the full year, while store revenue increased at a mid-teens rate in both the quarter and the full year.
• Coach brand consistency: Coach delivered double-digit revenue growth in every quarter of FY26, including 14% in Q4 and 23% for the full year on a constant currency basis.

Q4 FY26 Financial Results — Detailed Overview

For the fourth quarter ended June 27, 2026:

• Net sales totalled $1.88 billion, increasing 9% on a reported basis and 8% on a constant currency basis. Excluding Stuart Weitzman, pro forma net sales increased 12% on a reported basis and 11% on a constant currency basis.
• Non-GAAP gross profit totalled $1.47 billion, with gross margin of 78.1%, representing an expansion of 180 basis points versus the prior year, driven by operational improvements of approximately 170 basis points and a favourable impact from the divestiture of Stuart Weitzman of 60 basis points, partially offset by a negative tariff and duty impact of 60 basis points.
• SG&A expenses totalled $1.12 billion on a GAAP basis compared to $1.90 billion in the prior year. On a non-GAAP basis, SG&A expenses totalled $1.10 billion, representing 58.8% of sales or leverage of 80 basis points versus the prior year, including a 130-basis point increase in marketing investment.
• Non-GAAP operating income was $362 million, an increase of 25% versus the prior year, with operating margin of 19.3%, representing an expansion of 250 basis points versus the prior year, including a 50-basis point favourable impact from the divestiture of Stuart Weitzman.
• Net interest expense was $12 million versus prior year net interest expense of $15 million.
• Tax rate was 18.9% on a GAAP basis and 21.3% on a non-GAAP basis.
• GAAP diluted EPS was $1.68 compared to $(2.49) in the prior year. Non-GAAP EPS was $1.32, an increase of 28% versus the prior year.

FY26 Full-Year Financial Results — Detailed Overview

For the full year ended June 27, 2026:

• Net sales totalled $8.00 billion, increasing 14% on a reported basis and 13% on a constant currency basis. Excluding Stuart Weitzman, pro forma net sales increased 18% on a reported basis and 17% on a constant currency basis.
• Non-GAAP gross profit totalled $6.12 billion, with gross margin of 76.6%, representing expansion of 120 basis points versus the prior year, driven by operational improvements of approximately 200 basis points and a favourable impact from the divestiture of Stuart Weitzman of 60 basis points, partially offset by a negative tariff and duty impact of 130 basis points.
• SG&A expenses totalled $4.31 billion on a GAAP basis compared to $4.87 billion in the prior year. On a non-GAAP basis, SG&A expenses totalled $4.26 billion, representing 53.3% of sales, or leverage of approximately 210 basis points versus the prior year, including a 140-basis point increase in marketing investment.
• Non-GAAP operating income was $1.87 billion, an increase of 33% versus the prior year, with operating margin of 23.4%, representing expansion of approximately 340 basis points versus the prior year, including an 80-basis point favourable impact from the divestiture of Stuart Weitzman.
• Net interest expense was $55 million, compared to prior year net interest expense of $85 million on a GAAP basis and $25 million on a non-GAAP basis.
• Tax rate was 17.9% on a GAAP basis and 18.2% on a non-GAAP basis.
• GAAP diluted EPS was $7.27 compared to $0.82 in the prior year. Non-GAAP EPS was $7.05, up 38% versus the prior year.

Balance Sheet and Cash Flow

The company's leverage ratio, based on gross debt to adjusted EBITDA, was 1.1x as of the end of the fiscal year.

Shareholder Returns and Dividend

In Fiscal 2026, Tapestry returned $1.7 billion to shareholders through its dividend and share repurchase programs:

• Dividend: The company returned $326 million to shareholders at an annual dividend of $1.60 per share in Fiscal 2026.
• Share repurchases: Tapestry bought back $1.35 billion in common stock in Fiscal 2026, repurchasing approximately 11.5 million shares at an average share price of approximately $118.

The Board of Directors approved a 16% increase to the company's dividend, with a quarterly cash dividend of $0.4625 per common share payable on September 21, 2026 to shareholders of record as of close of business on September 4, 2026, for an anticipated annual dividend rate of $1.85 per share. Tapestry expects to buy back $1.35 billion in common stock in Fiscal 2027 under its existing share repurchase authorisation.

Fiscal 2027 Outlook

Tapestry initiated its Fiscal 2027 outlook on a non-GAAP and comparable 52-week versus 52-week basis. The company sees FY2027 Adj EPS of $7.80-$7.90 vs $7.84 analyst estimate. It also sees sales of $8.400 billion-$8.500 billion vs $8.464 billion analyst estimate. The midpoint of the sales guidance ($8.45 billion) came in slightly below expectations.

For the first fiscal quarter of 2027, the company expects revenue growth of high-single-digits on a nominal and constant currency basis versus prior year pro forma revenue, and diluted EPS of approximately $1.55, representing low-teens growth versus the prior year. The FY27 outlook embeds a mid-20% tariff rate on U.S. inventory receipts, resulting in a neutral net impact from tariffs year-over-year.

What the Numbers Show

Tapestry’s ability to beat earnings estimates while meeting sales expectations highlights significant operational leverage. The 250-basis-point expansion in non-GAAP operating margin, combined with SG&A leverage of 80 basis points, indicates that cost discipline and the divestiture of Stuart Weitzman are driving profitability faster than top-line growth. With Coach contributing 87% of pro forma net sales ($1,641.5 million of $1,876.6 million), the company’s financial health remains heavily concentrated in this single brand. The divergence is stark: Coach generated $546.1 million in adjusted operating income, while Kate Spade posted a $28.9 million loss, making the latter's turnaround critical to sustaining the margin expansion trajectory outlined in the FY27 guidance despite the current drag on overall sentiment.

Tapestry expects to return approximately $1.7 billion to shareholders in Fiscal 2027 through its capital return programs. The company highlighted its strong financial position and significant free cash flow generation as the basis for this commitment.

Under its existing share repurchase authorization, Tapestry plans to buy back $1.35 billion in stock during the fiscal year. This buyback constitutes the primary component of the total shareholder return plan for the period.

Capital Return Breakdown

The following table outlines Tapestry's expected capital returns for Fiscal 2027:

The remaining portion of the $1.7 billion total return is allocated to other capital programs, though specific details on dividends or other mechanisms were not itemized separately in the disclosure. The company emphasized that these actions are supported by its outlook for continued growth.