The luxury and premium fashion market continues to reward brands capable of combining pricing power, robust consumer loyalty, and international growth, instead of being dependent entirely on higher volumes. In the current scenario, consumers focus on spending on recognizable brands, provided the products offer inherent quality and brand value, with young shoppers becoming a critical source of growth. The companies having powerful brand identities and global distribution tend to have an edge. Therefore, Coach gives Tapestry, Inc. (NYSE:TPR) a strong advantage.
Tapestry, Inc. (NYSE:TPR) marked its entry into FY 2027 with a strong position as compared to the prior year. FY 2026 revenues touched $8.0 billion, implying YoY growth of 14%, with adjusted EPS increasing to $7.05. This was mainly backed by Coach, as annual revenue rose 24% and Q4 sales increased 15%. Despite expanding gross and operating margins, it returned $1.7 billion to shareholders.
Notably, the combination of growth and margin expansion demonstrates that the turnaround in performance is not only backed by cost-cutting. Coach continues to gain customers, improve pricing power, and expand internationally, mainly among younger consumers.
BTIG Remains Optimistic: Here’s Why
BTIG analyst Robert Drbul maintained a “Buy” rating on the company’s stock and reduced its price objective to $175. The thesis mainly revolves around Coach’s brand momentum, new-customer acquisition, and pricing power. Furthermore, Drbul expects additional runway in underpenetrated markets, like China and Europe.
If we take into account the FY 2027 EPS guidance of between $7.80-$7.90, the company trades at ~16-17x forward EPS based on the current price of ~$130. The multiple seems reasonable if the low-double-digit EPS growth and further margin expansion show results.
Coach Could Drive an Earnings Re-Rating
The upside case rests on Coach maintaining momentum, while margin expansion tends to make earnings increase faster than revenue. Tapestry, Inc. (NYSE:TPR) is targeting low-double-digit EPS growth in FY 2027. Over the long-term, the company anticipates that Coach will reach $10 billion in revenue and improve the operating margin to the mid-30% range.
If Coach maintains its current momentum, attracts young shoppers, and expands in markets like China and Europe, while Kate Spade stabilizes, there are chances that Tapestry, Inc. (NYSE:TPR) will deliver earnings above current expectations. Therefore, a higher valuation multiple is expected to stem from mid-single-digit sales growth, margin expansion, and buybacks.
Bear Case
Bears believe that the biggest risk is mainly concentrated in Kate Spade. Its Q4 sales saw a decline of 7%, with Coach rising by 15%. If Kate Spade continues to see this weakness, investors might be concerned about Tapestry, Inc. (NYSE:TPR)’s growth story becoming increasingly dependent on the single brand.
The broader market is looking beyond the robust FY 2026 numbers. The company expects FY 2027 revenue to increase only at the mid-single-digit rate, with adjusted EPS projected to rise at a low double-digit rate. This is a significant slowdown compared to FY 2026’s 14% revenue growth.
Tapestry, Inc. (NYSE:TPR) versus Ralph Lauren: A Comparison
Ralph Lauren Corporation (NYSE:RL) remains a close competitor to the company. Both companies are seeing the benefits of resilient demand for premium brands and younger consumers. Ralph Lauren Corporation (NYSE:RL)’s FY 2026 revenue increased by 15%, roughly in line with Tapestry’s growth.
Also, Ralph Lauren expects mid-single-digit revenue growth for FY 2027. However, Tapestry provides a potentially stronger EPS growth profile, and its management expects continued operating margin expansion and low-double-digit EPS growth for FY 2027.
Short Interest and Hedge Funds Data
Coming to short interest, ~9.56% of Tapestry, Inc. (NYSE:TPR)’s float is sold short relative to ~8.92% for Ralph Lauren. These levels demonstrate that investors are cautious when it comes to premium apparel demand. However, the gap between these companies remains narrow. Therefore, Tapestry has not been singled out for the greater bearish sentiment.
As per Insider Monkey’s database, 67 hedge funds reported owning stakes in Tapestry, Inc. (NYSE:TPR)’s stock at the end of Q1 2026 as compared to 63 funds at the end of Q4 2025.
Conclusion
Tapestry, Inc. (NYSE:TPR)’s story revolves around earnings quality instead of headline sales growth. Coach has been reporting double-digit growth, margins are expanding, and buybacks are backing per-share earnings. At ~16x forward earnings, it seems that the valuation could leave room for further upside provided Coach sustains its current momentum and Kate Spade begins to stabilize.
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