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Is TPR Positioned to Deliver Strong Growth Despite Tariff Headwinds?
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Key Takeaways
Tapestry closed FY25 with $7B in revenues, up 5% y/y, with adjusted EPS rising to $5.10 from $4.29.
TPR projects 2026 sales of $7.2B and EPS of $5.30-$5.45, absorbing tariff-related costs.
Coach drives growth, with strong momentum across regions, while Kate Spade faces a near-term decline.
Tapestry, Inc. (TPR - Free Report) concluded fiscal 2025 with record results, setting the stage for an improved outlook in fiscal 2026. The company reported revenues of $7 billion, up 5% from the prior year, and adjusted earnings per share of $5.10, up year over year from $4.29.
Coach was the key driver, posting 10% annual growth and a 13% gain in the fiscal fourth quarter, supported by strong momentum in North America, China and Europe. Customer acquisition also accelerated, with Gen Z and millennials emerging as a powerful growth engine, thanks to higher retention and spending levels.
Building on this momentum, management expects fiscal 2026 revenues of $7.2 billion, indicating mid-single-digit growth. Adjusted EPS is projected at $5.30-$5.45, or 4-7% growth from last year, even after factoring in more than 60 cents in tariff-related costs. Regionally, sales are forecast to rise in the mid-single digits in North America, nearly 20% in Europe and in the high-single digits in China.
By brand, Coach is projected to deliver high-single-digit revenue growth. However, Kate Spade is expected to decline in the near term before improving later in the year.
Profitability is expected to remain healthy despite tariff pressures. The operating margin is projected to expand, supported by 120 basis points of an operational gross margin improvement and at least 160 basis points of operational SG&A leverage. These gains will help offset an estimated $160 million in incremental tariffs.
The company also expects a strong start to the year. Fiscal first-quarter sales are projected to rise at a low double-digit rate, with EPS of $1.25, suggesting more than 20% year-over-year growth. The gross margin in the fiscal first quarter is forecast to expand 100 basis points, with tariff pressures concentrated in the second half of the year.
Alongside the raised outlook, Tapestry is enhancing shareholder returns with an $800-million share repurchase program and a 14% dividend increase to $1.60 per share. The free cash flow is projected to be $1.3 billion, while capital expenditure of $200 million will likely be spent on store growth, renovations and digital investments. Together, these initiatives underscore Tapestry’s confidence in its ability to deliver sustainable growth and long-term value.
Tariff Pressures on TPR: How SHOO, UAA & URBN Are Responding
Steven Madden, Ltd. (SHOO - Free Report) , Under Armour, Inc. (UAA - Free Report) and Urban Outfitters Inc. (URBN - Free Report) are the key footwear companies competing with Tapestry, facing tariff headwinds.
Steven Madden faces elevated tariff risks, with the second-quarter 2025 gross margin pressured by about 230 basis points despite supplier discounts. Tariffs triggered wholesale order cancellations, shipment delays and softer demand in mass and off-price channels.
While Steven Madden cut reliance on China to about 30% of U.S. imports from 71% last year, sourcing diversification remains exposed to shifting policies in markets like Brazil and Mexico. Management has pushed through about 10% price increases and vendor negotiations to offset costs, but profitability recovery may remain challenged in the near term.
Under Armour faces major tariff headwinds in fiscal 2026, with management estimating $100 million in added costs, equating to 200 basis points of gross margin pressure. While mitigation efforts, including supplier cost-sharing, alternative sourcing and selective price increases, are underway, most benefits will not materialize until fiscal 2027.
Adjusted operating income is expected to decline to half of the fiscal 2025 reported level, with the second-quarter gross margin projected to contract 340-360 basis points, including 300 from higher product costs. Under Armour expects a second-quarter adjusted EPS of 1-2 cents, whereas it reported 30 cents last year, underscoring near-term profitability risks amid an intensely competitive athletic market.
Urban Outfitters faces heightened tariff risks, with management estimating a 75-basis-point gross margin headwind in the second half of fiscal 2026. While the company is actively pursuing mitigation strategies, such as vendor negotiations, country-of-origin diversification, shifting from air to ocean freight and limited price increases, these measures may not fully offset the pressure.
The fluid tariff environment creates ongoing uncertainty, raising the potential for sustained profitability challenges despite Urban Outfitters’ goal of delivering about 100 basis points of gross margin improvement for the full year.
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Is TPR Positioned to Deliver Strong Growth Despite Tariff Headwinds?
Key Takeaways
Tapestry, Inc. (TPR - Free Report) concluded fiscal 2025 with record results, setting the stage for an improved outlook in fiscal 2026. The company reported revenues of $7 billion, up 5% from the prior year, and adjusted earnings per share of $5.10, up year over year from $4.29.
Coach was the key driver, posting 10% annual growth and a 13% gain in the fiscal fourth quarter, supported by strong momentum in North America, China and Europe. Customer acquisition also accelerated, with Gen Z and millennials emerging as a powerful growth engine, thanks to higher retention and spending levels.
Building on this momentum, management expects fiscal 2026 revenues of $7.2 billion, indicating mid-single-digit growth. Adjusted EPS is projected at $5.30-$5.45, or 4-7% growth from last year, even after factoring in more than 60 cents in tariff-related costs. Regionally, sales are forecast to rise in the mid-single digits in North America, nearly 20% in Europe and in the high-single digits in China.
By brand, Coach is projected to deliver high-single-digit revenue growth. However, Kate Spade is expected to decline in the near term before improving later in the year.
Profitability is expected to remain healthy despite tariff pressures. The operating margin is projected to expand, supported by 120 basis points of an operational gross margin improvement and at least 160 basis points of operational SG&A leverage. These gains will help offset an estimated $160 million in incremental tariffs.
The company also expects a strong start to the year. Fiscal first-quarter sales are projected to rise at a low double-digit rate, with EPS of $1.25, suggesting more than 20% year-over-year growth. The gross margin in the fiscal first quarter is forecast to expand 100 basis points, with tariff pressures concentrated in the second half of the year.
Alongside the raised outlook, Tapestry is enhancing shareholder returns with an $800-million share repurchase program and a 14% dividend increase to $1.60 per share. The free cash flow is projected to be $1.3 billion, while capital expenditure of $200 million will likely be spent on store growth, renovations and digital investments. Together, these initiatives underscore Tapestry’s confidence in its ability to deliver sustainable growth and long-term value.
Tariff Pressures on TPR: How SHOO, UAA & URBN Are Responding
Steven Madden, Ltd. (SHOO - Free Report) , Under Armour, Inc. (UAA - Free Report) and Urban Outfitters Inc. (URBN - Free Report) are the key footwear companies competing with Tapestry, facing tariff headwinds.
Steven Madden faces elevated tariff risks, with the second-quarter 2025 gross margin pressured by about 230 basis points despite supplier discounts. Tariffs triggered wholesale order cancellations, shipment delays and softer demand in mass and off-price channels.
While Steven Madden cut reliance on China to about 30% of U.S. imports from 71% last year, sourcing diversification remains exposed to shifting policies in markets like Brazil and Mexico. Management has pushed through about 10% price increases and vendor negotiations to offset costs, but profitability recovery may remain challenged in the near term.
Under Armour faces major tariff headwinds in fiscal 2026, with management estimating $100 million in added costs, equating to 200 basis points of gross margin pressure. While mitigation efforts, including supplier cost-sharing, alternative sourcing and selective price increases, are underway, most benefits will not materialize until fiscal 2027.
Adjusted operating income is expected to decline to half of the fiscal 2025 reported level, with the second-quarter gross margin projected to contract 340-360 basis points, including 300 from higher product costs. Under Armour expects a second-quarter adjusted EPS of 1-2 cents, whereas it reported 30 cents last year, underscoring near-term profitability risks amid an intensely competitive athletic market.
Urban Outfitters faces heightened tariff risks, with management estimating a 75-basis-point gross margin headwind in the second half of fiscal 2026. While the company is actively pursuing mitigation strategies, such as vendor negotiations, country-of-origin diversification, shifting from air to ocean freight and limited price increases, these measures may not fully offset the pressure.
The fluid tariff environment creates ongoing uncertainty, raising the potential for sustained profitability challenges despite Urban Outfitters’ goal of delivering about 100 basis points of gross margin improvement for the full year.