Tapestry (TPR) Q1 2027 earnings review
Coach lifts Tapestry profit, but Kate Spade sales fall 10%
Tapestry's Coach handbag brand is carrying the accessories group while its smaller Kate Spade label keeps shrinking. Sales from ongoing brands rose 12% to $1.89 billion, above what the company's own plan pointed to, as shoppers in China and Europe paid higher prices for Coach bags. Chief executive Joanne Crevoiserat raised the full-year profit outlook, though by our math the sales plan has growth slowing to about 5% in the second half.
| Sales from ongoing brands | $1.89B +12% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.82 +32% from a year ago |
| Coach vs Kate Spade sales | +16% / -10% from a year ago |
| Full-year profit outlook | Raised $0.45 to $8.25–8.35 per share (+17–18%) |
⚖️ Verdict: 🟢 Bullish
The story got better because Coach grew both its bag prices and unit volumes while doubling the company's full-year margin expansion target. Management also lifted its share buyback plan to $1.7 billion and raised full-year profit per share by more than the first-quarter beat. One caution: North America sales growth slowed to 4%, and Kate Spade swung to an operating loss.
The question now is whether theoutlook for 5% to 6% sales growth over the rest of the year is another cautious target or a real slowdown as Coach laps last year's big gains. Bulls see a fourth straight beat-and-raise quarter; skeptics point to cooling US growth and flat second-half revenue math. Holiday-quarter sales in North America and Coach unit volumes will settle it.
🐂 Bull Case
Coach Price And Volume Gains Lift Margins
Tapestry, the parent of accessories brands Coach and Kate Spade, gets 88% of its sales from Coach. Chief executive Joanne Crevoiserat said the company is raising its full-year outlook, "reflecting our confidence in the durability of our growth." Last quarter, flat handbag volumes at Coach raised the question of whether its popular bag lines were tiring.
This quarter, Coach sales grew 16% to $1.66 billion. Its "handbag AUR increased at a low-double-digit percentage rate and units rose low-single digits" — average unit retail (AUR) is the average selling price per bag. Across both brands, Tapestry brought in 2.6 million new customers, about 35% of them Gen Z shoppers.
- Gross margin excluding one-offs: 78.7%, up 2.2 percentage points from a year ago and 1 point above the company's plan
- Cost of making the products: 21.4% of sales, down 2.3 percentage points from a year ago
- Tariff impact: a 0.7-point benefit to gross margin this quarter, plus a $109 million cash refund of prior duties
- Operating margin excluding one-offs: 23.2%, up 2.3 percentage points against an outlook for no change
Higher bag prices and a bigger revenue share for Coach, which carries wider margins than Kate Spade, lifted profitability well beyond the initial plan. Because those gains came from operations as well as lower tariff costs, management doubled its full-year operating margin expansion target from 0.5 percentage points to 1.0 point.
What to watch: Coach handbag unit growth in the second-quarter holiday release. Positive unit volumes against last year's 25% brand sales jump would show that higher prices are not curbing customer demand.
China And Europe Carry Growth As US Slows
Tapestry is leaning on overseas shoppers and department-store partners to keep growing as its home market cools. While international momentum is a key growth driver, reliance on Greater China — mainland China, Hong Kong, Macao and Taiwan — also carries geopolitical and consumer-sentiment risks for American brands.
In the first quarter, Coach international revenue jumped 30%. That pushed wholesale sales — goods sold through third-party retailers rather than Tapestry's own stores — up about 30%, while sales in the company's own stores and websites rose 9%.
- Greater China sales: $385 million, up 39% in constant currency (43% reported) to 20% of company revenue
- Europe and Other Asia sales: up 22% and 23% in constant currency
- Japan sales: up 4% in constant currency (down 5% in dollars to $103 million), reversing prior declines
- North America sales: $1.11 billion, up 4% (7% at Coach)
Overseas demand more than made up for slower North American spending, and Japan returned to local-currency growth after a pullback on discounting. However, Greater China now accounts for a fifth of total sales, making the full-year outlook more sensitive to Chinese consumer appetite.
What to watch: Greater China constant-currency sales growth next quarter. A reading that holds above 20% would keep international expansion offsetting single-digit North American growth.
Tapestry Raises Its Buyback Plan To $1.7 Billion
Tapestry returns almost all of its yearly cash generation to investors through dividends and share buybacks. Because its gross debt sits at 1.1 times trailing twelve-month cash profit (Adjusted EBITDA), the accessories group has room to fund extra repurchases with short-term borrowing.
The company spent $600 million in the first quarter to buy back 4.6 million shares at an average cost of $130 each, and raised its full-year repurchase target by $350 million to $1.7 billion. Combined with $300 million in dividends ($1.85 per share annually), total planned capital returns now reach $2.0 billion — $300 million more than the $1.7 billion in cash the business expects to generate this year. That cut the diluted share count by 5.1% from a year ago to 204.5 million, turning a 24% rise in operating profit excluding one-offs into 32% per-share profit growth.
What to watch: second-quarter share repurchases and commercial paper borrowings. A lower average share count than the 200 million full-year target would add further per-share profit growth even if store sales slow.
🐻 Bear Case
US Sales Slow And Outlook Points To 5% Growth
"Our first quarter marked a powerful start to the year, with revenue, margin, and earnings growth ahead of expectations and strength around the world," chief executive Joanne Crevoiserat said. That headline strength hides a sharp slowdown in Tapestry's largest market and a cautious outlook for the rest of the year.
North America, which brings in 59% of company revenue, grew 4% to $1.11 billion, down from 18% growth in the same quarter last year. Coach North America grew 7%. Furthermore, management raised the full-year revenue outlook by $100 million — less than the $190 million first-quarter beat by our math.
- First-quarter sales from ongoing brands: up 12% from a year ago
- Second-quarter sales outlook: 5% to 6% constant-currency growth (about 6.2% in dollars)
- Second-half sales implied by the full-year outlook: about 5.3% growth by our math
Tapestry has beaten its quarterly sales targets four times in the last five quarters, so the new outlook may prove conservative. Even so, the company's own numbers point to growth cutting in half as Coach laps last year's 25% to 32% quarterly jumps.
What to watch: second-quarter North America sales growth on February 4, 2027. A drop toward flat US revenue would confirm that Coach is digesting two years of price increases.
Kate Spade Sales Drop 10% And Lose Money
Kate Spade New York, Tapestry's smaller handbag and lifestyle brand at 12% of sales, is in the middle of a multi-year reset after years of heavy discounting. Management previously pushed out its goal of returning the brand to profitable growth this fiscal year.
In the first quarter, Kate Spade sales fell 10% from a year ago to $233 million, marking another quarter of double-digit contraction. The brand posted an operating loss of $6 million excluding one-offs ($20 million loss on a reported basis), swinging from a $6 million operating profit a year earlier. Its gross margin excluding one-offs rose 1.8 percentage points to 66.1%, but overhead costs (SG&A) climbed from 61.9% of brand sales to 68.7% as revenue shrank, and Tapestry closed 8 international Kate Spade stores.
What to watch: Kate Spade holiday revenue and operating profit in the second quarter. Last year the brand earned $16.3 million in the holiday period, so a smaller profit or a loss would deepen the full-year drag.
Higher Ad Spending Has Not Stopped US Slowdown
Tapestry spends heavily on advertising to bring younger shoppers into Coach and rebuild Kate Spade. Management treats this marketing budget as a competitive advantage that smaller rivals cannot match.
In the first quarter, selling, general and administrative expenses (overhead and store operating costs) rose 12% excluding one-offs to $1.05 billion, or 55.5% of sales. Within that bill, marketing spending jumped by 1.4 percentage points of revenue compared with a year ago, eating up the savings from slower growth in other overhead lines. Despite that extra advertising push, North America revenue growth cooled to 4% and Kate Spade sales fell 10%, while the release gave no repeat-purchase rates for the 2.6 million new shoppers.
What to watch: selling and administrative expenses as a share of sales in the second quarter. Rising ad costs alongside 5% to 6% sales growth would squeeze operating margin in the second half.
👓 Other Themes
Warehouse Move Cuts Reported Profit By $15 Million
Tapestry recorded $15 million in pre-tax restructuring charges ($11 million after tax, or $0.06 per share) this quarter for "costs to transition from our Ohio fulfillment center to a third-party facility in Pennsylvania." Nearly all of the charge — $14 million — hit Kate Spade's reported results, including $12 million in overhead and $2 million in cost of sales. The company strips these warehouse transition costs out of its preferred profit measures and full-year outlook.
💲 Other KPIs
Fell 46% from $103 million a year ago, equal to 3.0% of sales. Reported operating cash flow jumped 74% to $197 million, but that included a $109 million "cash collection of the IEEPA tariff refund" — a one-off return of prior import duties that Tapestry strips out of its adjusted cash flow measure.
Accounts receivable — money owed by department stores and wholesale partners — rose 18.5% from a year ago to $343 million, outpacing the 11% rise in total revenue because international wholesale shipments grew about 30%. Ending inventory stayed tight at $1.06 billion, up 3.6% from $1.02 billion a year earlier.
Coach opened 15 stores and closed 5, adding 10 net locations to reach 983 (4 net additions in North America, 7 internationally) toward its full-year goal of over 1,000 stores. Kate Spade closed 8 international stores, dropping to 318. Capital and cloud spending rose 45% from a year ago to $55 million.
🔮 Guidance
Raised. The range moved up $100 million, calling for 6% to 7% constant-currency growth (plus a 0.3-point currency benefit, and excluding an extra 53rd calendar week worth 1 point). Because Q1 beat the old plan by roughly $190 million, our math shows the outlook leaves about 5.3% growth for the second half.
Raised. Tapestry doubled its full-year margin expansion target to 1.0 percentage point above last year's 23.4% rate, after delivering a 2.3-point jump in the first quarter. Last fiscal year the company also started with a 0.5-point expansion target and finished 3.4 points higher.
Raised. Management lifted the per-share profit outlook by $0.45, or 17% to 18% growth over last year's $7.05. That raise is $0.18 larger than the $0.27 first-quarter beat, reflecting wider operating margins, a lower tax rate (18.0% vs 18.5% prior) and fewer shares (200 million vs 203 million prior), partly offset by $60 million in net interest expense (up from $55 million).
Unchanged. The cash flow plan stays near $1.7 billion, down from $1.86 billion last year because capital and cloud computing spending is stepping up to $300 million (3% to 4% of sales) from $217 million in fiscal 2026.
New. The holiday-quarter plan calls for 5% to 6% constant-currency growth plus a 0.7-point currency benefit (about 6.2% in dollars, or $2.66 billion by our math). That marks a slowdown from 12% underlying growth in Q1 as Coach laps a 25% jump a year ago. If Tapestry's four-quarter average beat of 5.8 points holds, growth would land near 12%.
New. The outlook points to about 13.4% per-share profit growth over last year's $2.69. Tapestry has beaten its quarterly profit outlook four times in a row by an average of 21%; if that pattern holds, second-quarter profit would reach about $3.70 per share by our math.
❓ Key Questions
Why did the full-year revenue outlook rise less than the Q1 beat?
First-quarter revenue beat the company's plan by roughly $190 million, but the full-year sales range moved up by $100 million. Did management trim its internal expectations for the rest of the year, or just leave extra cushion?
When will Kate Spade stop losing money?
Kate Spade sales dropped 10% and the brand swung from a $6 million operating profit a year ago to a $6 million loss excluding one-offs. Has management set a new timeline for the brand to return to revenue growth and profitability?
Are the 2.6 million new shoppers coming back to buy again?
Tapestry increased marketing spending by 1.4 percentage points of sales and brought in 2.6 million new customers, 35% of them Gen Z. What are the repeat-purchase rates for these younger shoppers, given that North America growth slowed to 4%?
How much of the 30% wholesale jump is store restocking vs shopper demand?
Wholesale revenue jumped about 30% on international shipments and accounts receivable rose 18.5%, while Tapestry's own stores and websites grew 9%. Are overseas retail partners selling those bags through at the same 30% pace?