Tapestry bets on Coach brand heat to help it thrive amid uncertainty

The news: Tapestry raised its outlook for the third time this year, making it the rare retailer to project optimism as tariffs and uncertainty roil the landscape.

• Coach’s parent expects fiscal 2025 revenues to rise 4% YoY to $6.95 billion, up from its prior guidance of 3%.
• Earnings per share are projected to be roughly $5, an increase from its previous forecast of $4.85 to $4.90.

The caveat: Tapestry has just one quarter left in the fiscal year, making the impact of tariffs largely “immaterial.” It also stocked up on inventory early, allowing it to sidestep—for now—additional tariffs of 145% on China imports (which account for 10% of its sourcing) as well as 10% duties on imports from Vietnam, Cambodia, and the Philippines.

But, given that the latter three countries account for 70% of production, Tapestry could be vulnerable to reciprocal tariffs.

Tapestry’s advantages: Accounting practices notwithstanding, Tapestry is confident that its product array, affordable price point, and brand building efforts position it to continue growing despite falling consumer confidence and declining interest in luxury spending.

• Interest in Coach’s signature Tabby line and viral products like the Brooklyn bag are bringing in younger consumers, who are willing to pay full price for coveted styles.
• It helps that a Coach bag costs 10 times less than its European luxury counterparts, making the brand an attractive entry point for shoppers interested in designer labels.
• The combination of comparative value and trendy products—as well as marketing investments—brought Tapestry 1.2 million North American customers during the most recent fiscal quarter, two-thirds of whom were Gen Z and millennials.

Our take: Coach’s current status as one of fashion’s “it” brands and its relative affordability help insulate it from the effect of tariffs. Whether it can maintain that advantage will depend on its ability to stay on top of trends—and whether its three main production hubs will be hit with tariffs above the current 10% level.

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