Tapestry, a prominent luxury fashion conglomerate, recently announced its first-quarter fiscal year 2026 financial outcomes, surpassing market expectations for both earnings per share and overall revenue. The company recorded an adjusted earnings per share of $1.38 against an anticipated $1.26, and achieved $1.71 billion in sales, exceeding the estimated $1.64 billion. This robust performance was largely fueled by a significant 13% year-over-year revenue growth, with its flagship Coach brand leading the charge with a 22% increase. Furthermore, Tapestry has revised its full-year 2026 financial projections upwards, anticipating stronger earnings and sales. However, despite these encouraging results, the company's stock experienced a noticeable downturn on Thursday, prompting investors and analysts to ponder the underlying causes of this market reaction.
The company's impressive first-quarter results highlighted several key areas of growth and operational efficiency. Tapestry expanded its gross margin by 120 basis points, reaching 76.5%, and improved its operating margin by 200 basis points to 20.9%. A substantial achievement was the acquisition of over 2.2 million new customers globally, with approximately 35% of these being Gen Z shoppers, indicating successful outreach to younger demographics. Direct-to-consumer sales also saw a healthy 16% rise, benefiting from double-digit growth across both digital and physical retail channels.
Geographically, Tapestry demonstrated strong momentum across various regions. North America experienced an 18% increase in constant-currency sales, while Europe showed even more robust growth at 32%. The Asia Pacific region also contributed positively with an 8% rise, prominently featuring a 19% increase in Greater China. Financially, the company maintained a healthy balance sheet, with a gross debt to adjusted EBITDA leverage ratio of 1.5 times, supported by $743 million in cash and short-term investments.
Management attributed this strong quarterly performance to the successful implementation of its 'Amplify' plan, which was introduced at an investor day in September. This strategic initiative aims to attract new generations of consumers to Tapestry's iconic brands and foster sustained long-term growth. The initial results indicate that this new chapter for the company has started on a powerful note.
Looking ahead, Tapestry has increased its adjusted earnings per share guidance for fiscal year 2026 from an initial range of $5.30 to $5.45 to a revised range of $5.45 to $5.60, surpassing the consensus estimate of $5.49. Similarly, the sales forecast has been elevated from $7.20 billion to $7.30 billion, exceeding the $7.22 billion consensus. Despite these optimistic revisions and strong operational performance, Tapestry's shares closed down by 10.3% at $98.02 on Thursday, suggesting that market sentiment may be influenced by factors beyond immediate financial results, possibly related to broader market trends or specific investor concerns.