People walk past a Coach store on Madison Avenue in New York.
Carlo Allegri | Reuters
Shares of Coach and Kate Spade parent Tapestry plunged Thursday after the company said tariffs will bite into its profits even as sales grow.
The handbag, shoe and accessory maker said costs from higher duties will total $160 million for its coming fiscal year and drag on its profits. It said it expects full-year fiscal 2026 earnings of $5.30 to $5.45 per share, while analysts polled by FactSet were looking for $5.49.
On the company’s earnings call, Chief Financial Officer Scott Roe said sales trends have been strong. Yet he said the company is “facing greater than previously expected profit headwinds from tariffs and duties, with the earlier than expected ending of de minimis exemptions being a meaningful factor.”
Along with raising tariffs on imports from many countries, President Donald Trump suspended the de minimis rule, which allowed items worth $800 or less to enter the U.S. duty-free.
Tapestry expects its sales to grow in the fiscal year, however. The company said it expects revenue of about $7.2 billion, excluding Stuart Weitzman, which would represent low single-digit growth compared to the prior year. Tapestry agreed earlier this year to sell the shoe brand to Dr Scholl’s footwear owner Caleres for $105 million.
Tapestry’s fiscal 2025 fourth-quarter earnings and revenue also topped Wall Street’s expectations.
In recent weeks, retailers and consumer brands have offered a clearer picture of how they’re trying to mitigate higher costs from tariffs — including many that went into effect earlier this month after delays and extensions. Trump on Monday pushed back high tariffs on China for another 90 days.
Among those strategies, companies are moving manufacturing to other countries, raising prices on some items they sell, trimming promotions and focusing on trendy items that shoppers are more likely to buy.
Crocs CEO Andrew Rees, for instance, told investors on an earnings call earlier this month that it is reducing orders for the back half of the year after seeing weaker demand from retailers that carry its shoes. It also is taking back some of the older inventory from its Heydude shoe brand from retailers and giving partners newer stock.
Yet Tapestry’s Roe said the company’s conservative outlook “has nothing to do with the trajectory of our business.”
He said demand hasn’t slowed, and has even accelerated so far in the current quarter. But he added, “We feel like being prudent at this early stage in our full-year guidance is the right position.”
He said Tapestry is focused on ways to blunt the cost of tariffs, including leaning on its manufacturing in many different parts of the globe and looking for ways to operate more efficiently.
Major U.S. retailers are sharing their latest sales updates and outlooks in the coming weeks. Walmart, Home Depot and Target are all scheduled to report quarterly earnings next week.
