Tapestry, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Tapestry, Inc. (NYSE: TPR), the luxury goods conglomerate behind brands like Coach, Kate Spade, and Stuart Weitzman, delivered a strong fiscal Q1 2025 earnings report, beating on both revenue and earnings per share (EPS). The results, coupled with raised guidance and analyst enthusiasm, suggest the company is positioning itself for sustained growth. Here’s what investors need to know about the path ahead.

The Earnings Beat: Key Highlights

Tapestry reported Q1 revenue of $1.51 billion, aligning with the prior-year period but exceeding internal forecasts. Non-GAAP diluted EPS rose to a record $1.02, a 10% year-over-year increase. The standout metric was gross margin expansion, which surged 280 basis points to 75.3%, driven by operational efficiencies, lower freight costs, and favorable currency impacts.

Regional Performance:
- Europe delivered a 27% constant currency revenue surge, fueled by Coach’s strong handbag sales and higher average unit pricing (AUR).
- North America faced a 1% revenue decline due to reduced wholesale activity, though operating margins improved.
- APAC struggled, with 2% revenue decline, reflecting ongoing challenges in Greater China and Japan.

Brand Dynamics:
- Coach remained the growth engine, contributing $1.17 billion in sales (+2% constant currency), driven by premiumization and Gen Z/Millennial customer acquisition.
- Kate Spade and Stuart Weitzman lagged, with revenue declines of 7% and 2%, respectively.

Strategic Moves and Financial Health

Tapestry’s balance sheet remains robust, with $7.31 billion in cash offset by similar borrowings (largely tied to its proposed Capri Holdings acquisition). The company also raised its dividend to $0.35 per share, signaling confidence in its cash flow.

A key strategic shift is the planned sale of Stuart Weitzman, a move analysts applaud for streamlining operations and reducing distractions. Meanwhile, Tapestry’s focus on direct-to-consumer growth—including high-single-digit digital sales growth—highlights its adaptation to evolving retail trends.

Analyst Reactions: Bullish on Margin Expansion and Coach’s Momentum

Analysts have responded to the results with upgraded ratings and price targets, citing Tapestry’s execution and margin upside:

• Morgan Stanley upgraded shares to Overweight, raising its price target to $90 (from $75). Analysts highlighted Coach’s 15% constant currency revenue growth and margin resilience, projecting $5.65 EPS by FY2026.
• JP Morgan boosted its target to $104, emphasizing Tapestry’s 15-year high gross margin (76.1%) and disciplined capital allocation.
• Consensus Price Target: Analysts now average a $90.53 price target, with a high of $110 (Redburn Atlantic) and a low of $80 (UBS).

Post-earnings, shares surged 5.4% to $78.79 but have since settled at ~$75, reflecting a mix of optimism and caution around macro risks.

Risks and Challenges Ahead

While the outlook is positive, risks persist:
1. Capri Acquisition Uncertainty: Regulatory delays or cost overruns could disrupt Tapestry’s financial flexibility.
2. Brand Diversification: Kate Spade’s struggles and Stuart Weitzman’s sale highlight reliance on Coach.
3. Currency Headwinds: A 50-basis-point drag from dollar strength is already factored into guidance.

Conclusion: A Luxury Leader with Momentum

Tapestry’s Q1 results underscore its ability to navigate macroeconomic headwinds while capitalizing on Coach’s global appeal. With margins at a 15-year high, $1.1 billion free cash flow guidance, and analyst consensus pointing to a 20% upside from current prices, the stock appears attractively positioned.

The company’s focus on Gen Z/Millennial engagement, digital innovation, and operational efficiency aligns with long-term luxury consumer trends. While risks like APAC slowdowns and brand concentration remain, the raised FY2025 EPS guidance of $4.50–$4.55 (vs. $4.24 in FY2024) and a $2 billion ASR buyback reinforce confidence in its trajectory.

For investors, Tapestry’s blend of margin expansion, cash flow strength, and analyst bullishness makes it a compelling play in the luxury sector—a space where strong brands and disciplined execution increasingly define success.