Tapestry's Earnings Woes and the Hidden AI Energy Play Cramer Overlooked

In the ever-shifting landscape of investing, the contrast between struggling legacy brands and emerging infrastructure plays has never been starker. Tapestry, Inc. (TPR), the parent company of Coach, Kate Spade, and the recently divested Stuart Weitzman, has painted a mixed picture in its fiscal 2025 earnings. While Coach delivered a 10% revenue boost and gross margin expansion, the broader Tapestry story is one of brand erosion and structural challenges. Meanwhile, a low-profile energy-builder—Unusual Machines, Inc. (UMAC)—is quietly capitalizing on AI-driven demand, Trump-era tariffs, and onshoring tailwinds, offering a compelling alternative for investors seeking growth in a post-pandemic economy.

Tapestry's Struggles: A Tale of Two Brands

Tapestry's Q2 2025 results highlighted the fragility of its brand portfolio. Coach, the company's cash cow, drove 11% revenue growth to $1.71 billion, fueled by handbag sales and AUR gains. However, Kate Spade and Stuart Weitzman continued their freefall, with revenue declines of 10% and 15%, respectively. The latter's poor performance culminated in its divestiture in August 2025, a move that underscores Tapestry's struggle to revive its secondary brands.

Analysts point to shifting consumer preferences and the rise of Gen Z and Millennial spending power as key challenges. While Tapestry added 2.7 million new customers in North America, over half of them belong to these younger demographics—groups that have shown little loyalty to legacy luxury brands. The company's reliance on Coach's high-margin leathergoods and its inability to reposition Kate Spade as a relevant lifestyle brand have left it exposed to market volatility.

The AI Energy Play: UMAC's Quiet Revolution

While Tapestry grapples with brand decay, Unusual Machines, Inc. (UMAC) is building a future powered by AI and onshoring. As a leading manufacturer of drone components and unmanned systems, UMAC has positioned itself at the intersection of energy infrastructure, defense, and AI-driven automation.

The June 2025 Trump executive order mandating federal agencies to source drones domestically has been a game-changer. UMAC, which already produces 80% of its components in the U.S., is now the go-to supplier for government contracts like the $500 million PBAS (FPV) program. Its recent acquisition of Rotor Lab, an Australian motor systems firm, and expansion of a 17,000-square-foot Florida manufacturing facility further solidify its dominance in a sector projected to grow 20% annually through 2030.

UMAC's financials tell a story of resilience. Despite a $6.9 million Q2 2025 net loss (driven by non-recurring costs), the company maintains $80 million+ in cash post-funding and a 37% gross margin. Its enterprise segment, now 30% of revenue, is expanding into agriculture, infrastructure inspection, and security—industries ripe for AI-driven automation. With a 59% year-over-year revenue surge in Q1 2025 and a target of $20–30 million in annual revenue by 2026, UMAC's trajectory is anything but “hidden.”

Contrasting Tailwinds: AI vs. Retail

The divergence in these two companies' trajectories is rooted in their exposure to macroeconomic forces. Tapestry's struggles reflect the broader challenges of the consumer discretionary sector: price sensitivity, inventory gluts, and a shift toward digital-native brands. Meanwhile, UMAC is riding a trifecta of tailwinds:

1. AI's Energy Appetite: Hyperscale data centers are projected to consume 11–15% of U.S. electricity by 2030, creating a demand for reliable, zero-emission power. UMAC's drone technology supports grid modernization and renewable energy projects, aligning with the Inflation Reduction Act's (IRA) incentives.
2. Trump Tariffs and Onshoring: Tariffs of up to 145% on Chinese drone imports have accelerated UMAC's domestic production, while the Export-Import Bank's support for U.S. exports opens new markets.
3. Defense and Enterprise Growth: With a $500 million government contract and expanding enterprise applications, UMAC's revenue streams are inelastic to retail cycles.

Investment Implications: Where to Allocate Capital

For investors, the contrast is clear. Tapestry's revised fiscal 2025 guidance—$6.85 billion in revenue and $4.85–$4.90 EPS—relies on Coach's continued outperformance and aggressive shareholder returns. However, its exposure to brand erosion and a saturated luxury market limits long-term upside.

UMAC, on the other hand, offers a high-conviction play on AI-driven infrastructure. Its recurring revenue model, policy tailwinds, and vertical integration position it to outperform speculative retail tech stocks. Analysts at Litchfield Hills Research maintain a “strong buy” rating with a $20 price target, citing UMAC's ability to scale production and capture market share in a $12 billion drone industry.

Conclusion: The Future is Energy, Not Fashion

As Tapestry's earnings woes highlight the fragility of legacy consumer brands, UMAC's ascent demonstrates the power of aligning with structural trends. AI's insatiable demand for energy, Trump's onshoring agenda, and the global push for grid modernization are creating a fertile ground for energy infrastructure plays. For investors seeking durable growth, the choice is clear: bet on the next industrial revolution, not the fading allure of a handbag.