Tapestry Inc., the parent company of Coach, Kate Spade, and other luxury brands, saw its stock plunge nearly 16% on Thursday after warning that U.S. tariffs will significantly impact its profits in the coming year.
The stock closed at $95.69, marking one of its steepest single-day declines in recent years. Despite robust sales trends, the company said higher duties — intensified by recent trade policy changes — will add $160 million in costs for its fiscal 2026, cutting into earnings expectations.
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Tariffs Take a Heavy Toll on Outlook
On its earnings call, Chief Financial Officer Scott Roe acknowledged the company’s strong sales momentum but cautioned that profits face stronger-than-anticipated headwinds.
“The earlier-than-expected ending of de minimis exemptions is a meaningful factor,” Roe said, referring to the U.S. government’s removal of a policy that allowed imports valued at $800 or less to enter the country duty-free.
President Donald Trump’s recent suspension of the rule, alongside increased tariffs on imports from multiple countries, is reshaping the retail and manufacturing landscape for global brands.
Earnings Forecast Falls Short of Expectations
Tapestry projects fiscal 2026 earnings per share between $5.30 and $5.45, below analysts’ average estimate of $5.49, according to FactSet. Revenue is expected to reach $7.2 billion, representing low single-digit growth compared to the prior year, excluding the Stuart Weitzman brand.
Earlier this year, Tapestry agreed to sell Stuart Weitzman to Dr. Scholl’s footwear owner Caleres for $105 million, signaling a sharper focus on core handbag and accessory lines.
Q4 Performance Beats Wall Street
Despite the challenging outlook, Tapestry’s fiscal 2025 fourth-quarter earnings and revenue exceeded Wall Street’s expectations. Strong demand for Coach and Kate Spade products helped offset some cost pressures.
Roe emphasized that the company’s guidance is not a reflection of weakening demand. “We feel like being prudent at this early stage in our full-year guidance is the right position,” he said, noting that sales have actually accelerated in the current quarter.
Retailers Brace for Rising Costs
Tapestry joins a growing list of retailers adjusting to higher import duties. In recent weeks, brands across the industry have shared strategies to cushion the blow from tariffs that took effect earlier this month after multiple delays.
Among the tactics:
- Shifting manufacturing to countries with lower tariff rates
- Raising retail prices on selected products
- Reducing promotions to protect margins
- Prioritizing high-demand, trend-driven products
Even companies in other footwear segments are feeling the squeeze. Crocs CEO Andrew Rees said earlier this month the brand is scaling back orders for the second half of the year after weaker demand from retail partners. Crocs is also retrieving older inventory from stores and replacing it with fresher, more appealing stock.
Tapestry’s Strategy to Offset Tariffs
Roe said Tapestry is leveraging its global manufacturing network to reduce exposure to heavily tariffed markets. The company is also working on operational efficiencies to streamline costs and maintain profitability.
With production spread across multiple countries, Tapestry has more flexibility than some competitors. However, the sudden end to the de minimis rule has added unexpected challenges, particularly for smaller shipment categories that previously avoided tariffs.
Industry Eyes Upcoming Retail Earnings
The retail sector is in the midst of a pivotal earnings season. Major players like Walmart, Home Depot, and Target are set to report results next week, offering further insight into how U.S. consumer spending and trade policy shifts are shaping the market.
Analysts expect these updates to highlight similar cost-mitigation efforts, as well as pricing adjustments in response to inflationary pressures and supply chain disruptions.
Investor Reaction
Thursday’s sell-off underscores investor concerns over profit erosion, even when sales trends remain healthy. The nearly 16% drop wiped out hundreds of millions in market value, a sharp reminder that trade policy shifts can have immediate and material effects on stock performance.
Market watchers note that luxury and aspirational brands like Coach and Kate Spade are somewhat insulated from demand declines during economic slowdowns, thanks to loyal customers and strong brand equity. However, persistent cost pressures could still weigh on margins and share prices if trade tensions persist.
The Bigger Picture: Trade Policy and Retail
The U.S. retail sector is navigating one of its most complex trade environments in recent years. Tariffs have become a central factor in supply chain planning, and the suspension of the de minimis exemption marks a significant shift in cross-border trade for smaller goods.
While the intent of these measures is to encourage domestic production, the short-term impact for global retailers is largely negative — higher costs, tighter margins, and increased operational complexity.
For Tapestry, the road ahead depends on its ability to adapt quickly, sustain customer demand, and preserve profitability in a challenging policy landscape.
Frequently Asked Questions
Why did Tapestry’s stock drop 16%?
Tapestry shares fell sharply after the company warned that new U.S. tariffs and the end of certain duty exemptions will increase costs by about $160 million in the coming fiscal year, putting pressure on profits despite strong sales growth.
What is the de minimis rule and why does it matter?
The de minimis rule allowed imports valued at $800 or less to enter the U.S. duty-free. Its suspension means even smaller shipments will now face tariffs, raising costs for companies like Tapestry.
How much profit will tariffs cut from Tapestry’s earnings?
The company estimates the tariff-related costs will reduce profits by $160 million in fiscal 2026, contributing to a lower-than-expected earnings forecast of $5.30–$5.45 per share.
Did Tapestry’s recent earnings beat expectations?
Yes. In its fiscal 2025 fourth quarter, Tapestry reported earnings and revenue that exceeded Wall Street forecasts, driven by strong demand for its Coach and Kate Spade brands.
How is Tapestry responding to higher tariffs?
The company is diversifying manufacturing locations, improving operational efficiencies, and focusing on high-demand products to offset tariff costs.
Which brands does Tapestry own?
Tapestry owns Coach, Kate Spade, and previously Stuart Weitzman, which it agreed to sell to Caleres for $105 million.
Are other retailers facing similar tariff challenges?
Yes. Many retailers, including Crocs, are adjusting strategies by shifting production, raising prices, reducing promotions, and managing inventory to cope with higher duties.
Conclusion
Tapestry’s sharp 16% stock decline highlights the growing influence of trade policies on global retail operations. While the company continues to post solid sales and outperform on quarterly earnings, the unexpected cost surge from U.S. tariffs and the removal of the de minimis rule poses a significant profitability challenge.
By leveraging its diverse manufacturing network, improving operational efficiencies, and focusing on high-demand products, Tapestry aims to soften the blow of rising duties.