Tariff Costs: The $160 Million Question
Tapestry’s annual earnings-per-share (EPS) outlook for the current fiscal year has missed analyst expectations, with leadership now forecasting diluted EPS between $5.30 and $5.45. Analysts had hoped for $5.49. The discrepancy is due to the impact of increased tariffs. The company’s EPS forecast already includes additional costs from higher duties, totaling about $160 million for the year. Management indicated that the effect of tariffs would be significant and emphasized their plans to address and mitigate these pressures moving forward.
Revenue Outlook: Growth Driven by Coach
Despite these challenges, Tapestry projects revenue of nearly $7.2 billion for the fiscal year ending June. This would be an increase over the previous year and is slightly above analyst expectations. Notably, this forecast excludes contributions from Stuart Weitzman, the shoe brand recently sold by Tapestry due to poor performance. Executives say that offloading Stuart Weitzman will enable more focus and resources on boosting Coach sales and turning around Kate Spade.
Coach has demonstrated remarkable growth in the most recent quarter, with revenues rising substantially. The brand’s appeal has accelerated in recent months, helping Tapestry face headwinds in the luxury market.
Kate Spade, however, continues to require strategic attention. Revenue at the brand declined during the same period, and management indicated that efforts to reset and improve the brand are underway.
How Tariffs Are Shaping the Luxury Market
Tapestry’s situation reveals how tariffs are influencing strategies in the luxury sector. Many U.S. fashion companies haven’t fully priced in the costs, as the duties are forcing businesses to reassess forecasts and margin plans, even at a time of solid demand. Bloomberg Intelligence analysts Deborah Aitken and Andrea Ferdinando Leggieri noted that Coach and Ralph Lauren, both prominent U.S. brands in a field dominated by European luxury labels, have held their own, sustained by high-quality products at relatively more accessible price points than competitors like Miu Miu, Loewe, Prada, or Moncler.
Their analysis points out that the popularity of these brands supports market-share gains and operating margin via full-price sales, even with increased price sensitivity, low consumer confidence, and ongoing tariff risk, according to Bloomberg Intelligence.
The Coach Effect
As of June, Coach was listed as the fifth hottest fashion brand in the Lyst Index. Celebrity-endorsed products like the Tabby and Brooklyn bags are driving growth, while playful, less expensive items such as the cherry bag charm are also helping capture a wider audience. This ability to blend trend-driven desirability with accessible pricing has supported Coach during periods of price increases and has also helped offset negative consumer sentiment from tariffs.
The Road Ahead: Mitigation and Strategy
While uncertainty persists, Tapestry is relying on Coach’s resilience and a renewed effort at revitalizing Kate Spade. Recent earnings reports show the company achieved a record $7 billion in fiscal 2025 revenue despite the challenges. Shareholders are watching closely to see how well the company manages the tariff pressures without further jeopardizing margins or consumer loyalty. For now, Tapestry’s leadership insists they are equipped to address the impact and maintain growth, but the fashion industry recognizes that the stakes remain high and the risks are very real.
