TPR Drops 13.2% in the Past Month. Is This Selloff an Opportunity?

Shares of Tapestry, Inc. TPR have fallen 13.2% in the past month even as operating results and earnings expectations have improved. The pullback raises a straightforward question: Has the stock reset enough to offset the risks still surrounding the business?

Coach is providing the strongest counterweight through customer acquisition, pricing and international growth. Yet Kate Spade remains unprofitable, tariffs add execution risk and TPR still trades at a premium to its sub-industry and five-year median.

TPR’s Coach Momentum Pushes Against the Selloff

Coach’s fourth-quarter fiscal 2026 revenues rose 15% on a reported basis and 14% at constant currency. The brand added more than 2 million customers, while handbag average unit retail increased at a mid-teens rate. Demand was broad-based. Coach grew 10% in North America, 30% in Greater China and 25% in Europe, and management expects high-single-digit Coach revenue growth in fiscal 2027.

Tapestry’s Margins and Cash Flow Add Support

Profitability moved higher as well. Adjusted gross margin expanded 180 basis points to 78.1%, while adjusted operating margin rose 250 basis points to 19.3% in the fiscal fourth quarter.

Fiscal 2026 adjusted free cash flow increased to $1.86 billion from $1.35 billion. Tapestry returned $1.7 billion to shareholders through repurchases and dividends, preserving financial capacity alongside growth investments.

TPR Still Faces Kate Spade and Tariff Risks

Kate Spade remains the clearest operating drag. Fourth-quarter revenues fell 7%, and the brand posted an adjusted operating loss of $28.9 million. Fiscal 2027 guidance calls for another high-single-digit revenue decline and a modest operating loss.

Tariffs add another layer of uncertainty. Tapestry’s fiscal 2027 outlook assumes a mid-20% tariff rate on U.S. inventory receipts and a roughly neutral year-over-year profit-and-loss impact after mitigation, leaving margin expansion dependent on those offsets.

Tapestry’s Valuation Leaves Less Room for Error

At 15.3X forward 12-month earnings, TPR trades above its Zacks sub-industry’s 13.5X multiple and its five-year median of 10.5X. Despite the recent decline, the current multiple remains above both comparisons.

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Peer results show mixed operating trends. Capri Holdings Limited CPRI reported fiscal first-quarter 2027 revenue down 3.5% while adjusted operating margin improved to 3.6%. Levi Strauss & Co. LEVI posted second-quarter 2026 net revenues up 8% and raised its full-year revenue and earnings outlook.

TPR’s Estimates Show Underlying Momentum

Earnings revisions are moving in a more constructive direction. The Zacks Consensus Estimate for fiscal 2027 earnings has risen 3% in the past four weeks and 4.4% in the past 12 weeks, while projected fiscal 2027 earnings growth stands at 12.1%.

Management expects adjusted earnings of $7.80-$7.90 per share for fiscal 2027, representing low-double-digit growth. That outlook keeps the earnings picture firmer than the stock’s recent price action.

TPR’s Mixed Rating Signals Reward Patience

The 13.2% selloff does not by itself make TPR a clear buying opportunity. Coach, margins, cash flow and estimates are supportive, while Kate Spade and tariffs limit the margin for error.

TPR currently carries a Zacks Rank #3 (Hold), which supports a wait-and-see stance rather than an aggressive entry. The stock also has a Growth Score of A, Momentum Score of A and VGM Score of A, but a Value Score of C. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The A Growth and Momentum Scores point to favorable characteristics in those styles, while the VGM Score of A reflects strength across the combined style framework. Still, Style Scores are designed to complement the Zacks Rank, and the #3 ranking keeps patience appropriate after the pullback.

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This article originally published on Zacks Investment Research (zacks.com).

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