Tapestry targets full tariff mitigation by FY28; $3B buyback to lift EPS
Bottom Line Impact
If executed, tariff mitigation and disciplined capital returns can expand gross margins by 100-200 bps and drive low double-digit EPS growth in FY27-FY28, reinforcing Tapestry's accessible luxury leadership while strengthening Coach's brand equity and restoring Kate Spade's profitability.
Key Facts
5- Tariff impact estimated at ~$160M in FY26; management expects full mitigation over a three-year window through FY28 with gross and operating margin expansion from FY27 onward
- $3B share buyback announced; if executed over 24-36 months at a $45-$60 share price, potential share count reduction of ~10%-15%, implying EPS accretion of ~10%-15% assuming stable net income
- Coach momentum targets a long-run ~$10B revenue run-rate; brand remains Tapestry's largest profit contributor and primary lever for AUR and mix-led margin gains
- Kate Spade guided to return to profitable topline growth by FY27, with specific focus on margin rebuild despite tariff sensitivity
- Tapestry forecasts mid-single-digit revenue growth and low double-digit adjusted EPS growth in FY27 and FY28, incorporating end of de-minimis exemption and current trade policies as of Aug 1
Time Horizons
Key Roles Affected
Executive Summary
Tapestry plans to fully offset an estimated $160M FY26 tariff headwind within three years while executing a $3B share repurchase, signaling confidence in margin expansion and cash generation. Coach is positioned as the growth and profit engine toward a $10B long-run sales goal, while Kate Spade is guided to return to profitable topline growth by FY27, underpinning mid-single-digit revenue and low double-digit EPS growth in FY27-FY28.
Actionable Insights
Immediate Actions (Next 30-90 days)
Lock a three-year tariff mitigation playbook combining 2%-3% targeted pricing at Coach, 200-300 bps mix shift to higher-margin hero SKUs, and 15%-20% reduction in China-sourced volume
Rationale: Balanced levers reduce elasticity risk while delivering measurable gross margin protection and supply chain resilience
Role affected:CEO
Urgency level:immediate
Execute dual-sourcing to shift 10-15 percentage points of volume out of high-tariff corridors by FY27; negotiate 3%-5% vendor cost downs and consolidate freight lanes
Rationale: Diversification and cost-downs are essential to meet the FY28 full mitigation commitment
Role affected:Chief Supply Chain Officer
Urgency level:immediate
Short-term Actions (6-12 months)
Phase the $3B buyback with a rules-based program: 40% in next 12 months and remainder opportunistically, with guardrails tied to net leverage <2.0x and FCF yield >8%
Rationale: Optimizes EPS accretion while preserving balance-sheet flexibility amid policy volatility
Role affected:CFO
Urgency level:short-term
Accelerate AUR growth via limited-edition Coach capsules and personalization, targeting +3%-5% AUR and +150 bps full-price mix lift within 12 months
Rationale: Brand heat and scarcity can offset duty-related COGS inflation without damaging demand
Role affected:CMO
Urgency level:short-term
Risks & Opportunities
Primary Risks
- Policy risk: faster-than-expected tariff escalation or earlier end of de-minimis raises COGS and fulfillment costs
- Demand elasticity: price and promo pullback could dampen traffic, particularly in US outlets and for Kate Spade
- Execution risk: delays in supply chain relocation and brand-specific turnarounds undermine margin targets
Primary Opportunities
- Coach scale-up to $10B via men, footwear, and China full-price expansion with higher AUR
- DTC acceleration and loyalty personalization to raise LTV and lower promo dependency
- Share repurchases to drive double-digit EPS growth and rerating if margin bridge is delivered