Coach Owner Warns US Tariffs May Cost US$160 Million in FY2026

Tapestry, the parent company of Coach and Kate Spade, warned that US tariffs could cost the company about US$160 million (MX$2.9 billion) in fiscal 2026, with full offset expected by 2028. Luxury and accessible-luxury retailers face higher import duties on goods produced in Southeast Asia.

Most of Tapestry’s handbags are manufactured in Vietnam, Cambodia, the Philippines, and India. Although less than 10% of production comes from China, executives noted that tariffs remain significant—particularly for Kate Spade, which derives most of its revenue from the US market.

Scott Roe, CFO, Tapestry, said the company will reduce Kate Spade handbag offerings by 30% globally to manage costs. “We expect to grow gross and operating margins in FY27 and beyond and fully mitigate the impacts of tariffs over this three-year period,” he told investors.

CEO Joanne Crevoiserat added that Tapestry has a series of measures planned to offset tariff costs. “We have multiple actions in place that will have an even bigger impact against these costs, so we remain confident in our ability to grow gross margins despite tariffs,” she told Reuters.

Tapestry projected fiscal 2026 earnings per share (EPS) of US$5.30–5.45, slightly below analyst estimates of US$5.49, with about 60 cents of the shortfall attributed to tariffs, including the removal of the “de minimis” exemption on low-value shipments. Full-year revenue is forecast at US$7.2 billion.

For the quarter ended June 28, revenue reached US$1.72 billion, beating analyst expectations of US$1.68 billion, while adjusted EPS came in at US$1.04, exceeding the US$1.02 estimate.

Coach, which accounts for roughly 82% of company revenue, continues to drive growth and is expected to reach US$10 billion in sales long-term. Kate Spade, challenged by discounting and weaker brand positioning, is expected to return to profitable topline growth by fiscal 2027.

Tapestry forecasts mid-single-digit revenue growth in fiscal 2027 and 2028, with adjusted EPS rising in the low double digits annually. The company also announced a US$3 billion share buyback program through fiscal 2028.

Industry analysts note that tariffs are reshaping brand strategies. “Tariffs are now forcing brands across the consumer spectrum to reassess assortments and focus on their most profitable SKUs,” said Sky Canaves, eMarketer analyst.

Shares of Tapestry fell 14% after the tariff warning and were down as much as 3.4% in recent trading, although the stock has gained 60% so far this year.