Scott Roe said the total expected impact on profitability in fiscal 2026 from tariffs is $160 million, representing approximately 230 basis points of margin headwind.
Tapestry (TPR) CFO Scott Roe said on Thursday the luxury handbag maker was facing a greater-than-expected profit headwind from tariffs and duties, with the earlier-than-expected ending of de minimis exemptions being a meaningful factor.
The Trump administration has levied tariffs on most of its global trading partners. In July, the government ended the “de minimis” rule, which helped major companies, including Amazon.com and Shein, to import low-value shipments priced at $800 or below to the country without facing tariffs.
“In aggregate, the total expected impact on profitability this year from tariffs is $160 million, representing approximately 230 basis points of margin headwind,” Roe said on a post-earnings call.
Shares of Tapestry were down nearly 15% during midday trading after the company forecast 2026 profit below Wall Street expectations. Retail sentiment on the stock improved to ‘extremely bullish’ from ‘neutral’ a day ago, with chatter at ‘extremely high’ levels, according to Stocktwits data.
Roe noted that for fiscal 2026, the firm expects inventory levels to be modestly down year over year on a reported basis. “We recorded a non-cash impairment charge of over $850 million related to Kate Spade,” he added.
“This was based upon the current business trends, the outsized impact of tariffs, which disproportionately affects Kate Spade as the vast majority of its businesses in the U.S. and the incremental investments we’re making in support of profitable long-term growth,” Roe said.
CEO Joanne Crevoiserat said the company’s actions to reset the Kate Spade brand for durable growth was underway and its performance was pressured as expected in the fourth quarter. She noted that this would continue to pressure revenue and profitability in fiscal 2026 as well.
“We’re bringing more innovation to the assortment while we streamline our offering, reducing handbag styles by over 30% by fall,” Crevoiserat added.
Tapestry forecast fiscal 2026 earnings per share (EPS) of $5.30 to $5.45, below analysts’ estimates of $5.48, according to data compiled by Fiscal AI. The company expects annual revenue to be $7.2 billion, compared with Street expectations $7.10 billion.
“We view the guidance as prudently conservative in the current environment and remain encouraged by what appears to be a strong start to FY26,” Telsey Advisory Group analyst Dana Telsey said.
Shares of Tapestry have gained nearly 48% so far this year and jumped nearly 150% in the last 12 months.
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