Tapestry (TPR)

Luxury fashion conglomerate Tapestry (NYSE:TPR) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 14% year on year to $2.50 billion. The company’s full-year revenue guidance of $7.75 billion at the midpoint came in 4.8% above analysts’ estimates. Its GAAP profit of $2.68 per share was 20.7% above analysts’ consensus estimates.

Company Overview

Originally founded as Coach, Tapestry (NYSE:TPR) is an American fashion conglomerate with a portfolio of luxury brands offering high-quality accessories and fashion products.

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Tapestry’s main competitors are PVH Corp (NYSE:PVH) who owns Calvin Klein and Tommy Hilfiger; Kering (OTCMKTS:PPRUY) who owns Gucci, Yves Saint Laurent, and Bottega Veneta; LVMH Moët Hennessy Louis Vuitton (OTCMKTS:LVMUY) who owns Louis Vuitton, Dior, Givenchy; Ralph Lauren (NYSE:RL)

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Tapestry grew its sales at a 10.1% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Tapestry’s recent performance shows its demand has slowed as its annualized revenue growth of 5.7% over the last two years was below its five-year trend.

Tapestry also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 5.9% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Tapestry has properly hedged its foreign currency exposure.

This quarter, Tapestry reported year-on-year revenue growth of 14%, and its $2.50 billion of revenue exceeded Wall Street’s estimates by 7.7%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

Tapestry’s operating margin has been trending down over the last 12 months and averaged 13.3% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

This quarter, Tapestry generated an operating margin profit margin of 28.6%, up 6.2 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Tapestry’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Tapestry reported EPS of $2.68, up from $1.38 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Tapestry’s full-year EPS of $2.42 to grow 142%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Tapestry has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 18.1%, lousy for a consumer discretionary business.

Tapestry’s free cash flow clocked in at $1.12 billion in Q4, equivalent to a 44.7% margin. This result was good as its margin was 23 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Tapestry historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 19.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Tapestry’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Tapestry reported $1.08 billion of cash and $3.94 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.84 billion of EBITDA over the last 12 months, we view Tapestry’s 1.6× net-debt-to-EBITDA ratio as safe. We also see its $76 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Tapestry blew past analysts’ constant currency revenue expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 5% to $136.41 immediately after reporting.

Updated: February 5, 2026 at 7:16 AM EST

Before making an investment decision, investors should account for Tapestry’s business fundamentals and valuation in addition to what happened in the latest quarter.

Tapestry doesn’t pass our quality test. First off, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its constant currency sales performance has disappointed. On top of that, its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Tapestry’s P/E ratio based on the next 12 months is 21.7x. This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $135.83 on the company (compared to the current share price of $136.41).