-- Tapestry (TPR) raised its fiscal 2026 outlook after delivering a third-quarter beat, but provided a subdued fourth-quarter sales guidance for its Kate Spade brand, sending the luxury fashion company's shares lower Thursday.
The Coach parent now anticipates full-year adjusted revenue in the area of $7.95 billion, up from its previous outlook of more than $7.75 billion. Adjusted earnings are pegged at around $6.95 a share versus its prior guidance range of $6.40 to $6.45. The current consensus on FactSet is for non-GAAP EPS of $6.53 and sales of $7.83 billion.
For the quarter ended March 28, non-GAAP EPS jumped to $1.66 from $1.03 a year earlier, while net sales climbed 21% to $1.92 billion. Wall Street's views were for $1.30 and $1.79 billion, respectively.
For the ongoing quarter, the company projects EPS of about $1.20, Chief Financial Officer and Chief Operating Officer Scott Roe said on an earnings conference call Thursday, according to a FactSet transcript.
"For (the fourth quarter) specifically, our guidance embeds pro-forma revenue growth of low-double digits on both a reported and a constant currency basis," Roe told analysts. This incorporates a low-teens growth rate at Coach and a high-single-digit decline at Kate Spade, according to Roe.
Tapestry shares were down 10% in afternoon trade.
Sales at the Coach brand jumped 31% to $1.70 billion in the third quarter, while Kate Spade saw a 10% drop to $219.6 million.
Although top-line trends at Kate Spade improved sequentially, they fell "slightly below expectations, which included pressure from our strategic pullback in promotions at retail," Chief Executive Joanne Crevoiserat said on the call.
"We also know that turnarounds take time and the path to long-term growth is not always linear," Crevoiserat said. "We are continuing to track the leading indicators of growth, informed by our success and learnings at Coach."
In fiscal 2026, the company now expects to return $1.6 billion to shareholders through dividends and share buybacks, up from its previous outlook of $1.5 billion.
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