Tapestry (NYSE: TPR) raises its full-year outlook and Coach sales jump 16%

What happened

Tapestry, Inc. (NYSE: TPR) beat its first-quarter guidance and raised its fiscal 2027 outlook for revenue, operating margin and earnings.

Coach led the quarter ended Sept. 26, with revenue up 16% to $1.66 billion. Kate Spade fell 10% to $233 million from $260 million a year earlier. For a holder, that split is the story. The larger brand is speeding up and the smaller one is shrinking.

Total net sales were $1.89 billion, up 11% from $1.71 billion. Tapestry sold Stuart Weitzman on Aug. 4, 2025. Without it, pro forma sales rose 12%. In constant currency, Greater China grew 39% and North America grew 4%.

Key numbers

Metric	Latest	Change	Source
Net sales, first quarter	$1.89 billion	from $1.71 billion, +11%	SEC 8-K, Exhibit 99.1
GAAP diluted EPS	$1.76	from $1.28, +38%	SEC 8-K, Exhibit 99.1
Non-GAAP diluted EPS	$1.82	from $1.38, +32%	SEC 8-K, Exhibit 99.1
GAAP gross margin	78.6%	from 76.3%, +230 basis points	SEC 8-K, Exhibit 99.1
Adjusted free cash flow, first quarter	$56 million	from $103 million, -45.6%	Calculated from SEC 8-K
Fiscal 2027 EPS outlook	$8.25 to $8.35		SEC 8-K, Exhibit 99.1

Read more: Tapestry (TPR) company research

Why it matters

Profit grew faster than sales, but not all of the margin gain came from the business itself. Non-GAAP gross margin was 78.7%, up 220 basis points. The filing credits about 130 basis points to operational improvements, 70 basis points to a net benefit from tariffs and duties, and 20 basis points to foreign currency.

Spending rose too. Marketing added 140 basis points to non-GAAP selling, general and administrative expenses. Those expenses still came in at 55.5% of sales, 10 basis points below a year earlier.

Coach earned $590 million of operating income on a GAAP basis, while Kate Spade lost $20 million. Non-GAAP operating income was $439 million, up 24%, at a 23.2% margin.

GAAP diluted EPS was $1.76, up 38% from $1.28. Non-GAAP EPS was $1.82, up 32% from $1.38. The quarter carried $15 million of distribution network charges, mainly from moving an Ohio fulfillment center to a third-party facility in Pennsylvania. Those charges cut EPS by $0.06. The prior-year quarter had divestiture and organizational efficiency costs.

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What the raised outlook says

Tapestry now expects fiscal 2027 revenue of about $8.5 billion to $8.6 billion, or about 6% to 7% growth in constant currency. It expects operating margin to expand about 100 basis points, up from about 50 basis points in prior guidance.

EPS is guided to $8.25 to $8.35, which is 17% to 18% growth. Prior guidance was $7.80 to $7.90. The diluted share count is now about 200 million, down from about 203 million. The tax rate is about 18%, down from about 18.5%. Net interest expense is now expected to be higher, at about $60 million.

The outlook assumes no material worsening of inflation or consumer confidence. It also builds in a low-to-mid-20% tariff rate on U.S. inventory receipts, with a modest net tariff benefit year over year. That matters because tariffs and duties already helped first-quarter gross margin. The outlook leaves out a 53rd week in fiscal 2027, which is expected to add one percentage point to annual revenue growth.

Where the cash goes

Management leaned on buybacks. Tapestry returned about $700 million to shareholders in the quarter. That included $600 million spent on about 4.6 million shares at an average cost of $130 per share.

It now expects to return about $2.0 billion in fiscal 2027. That includes $1.7 billion of repurchases, up $350 million from prior guidance. The board declared a quarterly dividend of $0.4625 per share, payable Dec. 21 to holders of record on Dec. 4. The company still expects an annual dividend of $1.85.

Adjusted free cash flow moved the other way. Operating cash flow rose to $197 million from $113 million. Adjusted free cash flow was $56 million against $103 million a year earlier, a 45.6% drop by OptimistFi's calculation. Capital spending and cloud computing implementation costs were $55 million versus $38 million.

Cash and short-term investments ended the quarter at $782 million, down from $1.15 billion at June 27. Total borrowings were $2.56 billion and the leverage ratio was 1.1x. Inventory was $1.06 billion against $1.02 billion at the prior year's end.

OptimistFi has argued that Tapestry works if Coach and Kate Spade keep selling accessible luxury at full-price economics while management turns brand heat into cash. Coach growth and wider margins support the first part. The cash part is still open. Full-year adjusted free cash flow guidance is unchanged, so the last three quarters must deliver most of it.

What's next

Tapestry expects to report fiscal 2027 second-quarter results on Thursday, Feb. 4, 2027. For that quarter it guides to constant-currency revenue growth of 5% to 6%, helped by a 70-basis-point currency benefit, and EPS of $3.05.

The case strengthens if Coach keeps growing and adjusted free cash flow builds toward the full-year outlook. It weakens if Kate Spade's decline widens or cash flow again trails the pace of buybacks.

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