By Teresa Rivas
Gen Z is affectionately called the Christopher Columbus generation because of its penchant for rediscovering trends that were popular in the past. In this case, that goes all the way back to the horse-and-carriage era that adorns the Coach logo.
Coach is one of the most popular brands among younger consumers, and with good reason. The company has reinvented itself from a few decades ago, when it was defined by its outlet locations. It has moved much further upmarket, but remains priced well below European ultraluxury alternatives -- with plenty of trendy bags that hark back to its roots and personalization options. That success has translated into gains for parent company Tapestry, whose stock was just hit by a post-earnings selloff. Investors should take advantage of this entry point before the rally regains steam.
"I've been very impressed with Coach's outreach to the younger cohorts and how many new customers they've brought into the family," says Kevin McCarthy, managing director at Neuberger Berman, which owns Tapestry stock. "You have a management team there that has proved they can talk the talk and walk the walk for a while now."
That has translated into plenty of stock gains. Tapestry has soared more than 200% in the past five years and jumped 60% since Barron's highlighted it in February 2025. In early May, Tapestry delivered a beat-and-raise fiscal third quarter, having attracted 2.4 million new, mostly younger customers. As Guggenheim analyst Simeon Siegel put it, "Coach continues to post meaningful industry-leading top- and bottom-line performance." Even so, the shares sold off, likely because of high expectations and a forecast that showed deceleration in the fourth quarter.
It's worth noting that the fourth quarter will have the toughest comparison of the year, so prudence seems warranted -- though the company still raised guidance, implying low-teens top-line growth. That's hardly shabby, albeit below the more than 20%-plus jumps in the fiscal second and third quarters.
On a two-year basis, revenue growth is projected to be almost 30%. Moreover, gross margins expanded a better-than-expected 0.8 percentage point, to more than 76%, despite the company's heavy investments in marketing (up some 50% in the past year), new stores, and fresh, fashionable products. Post-earnings declines have happened periodically in recent years, but have nearly always proved temporary.
"With numbers up and the stock down, it's a rare (and undeserved) discount on the Coach brand," writes Bernstein analyst Aneesha Sherman, who says the stock has more than 28% upside, to $180, from Wednesday's close of $139.61.
Upscale handbags might seem like a hard sell at a time when the affordability crisis is hitting younger generations the hardest. However, fashion rarely takes a back seat (recall the recessionistas of the 2008-09 financial crisis), and splurging on a highly customized, social-media-worthy bag seems more reasonable when milestone purchases like a house are out of reach. The big price gap between a Coach bag and something from LVMH Moët Hennessy Louis Vuitton means it's much more accessible to higher earners who haven't paused their spending, as well as those looking for a reasonable indulgence.
"This is a tough space because you have to ask yourself, is this just a poor man's version of real luxury? Or is it its own viable category with a substantial total addressable market?" muses Neuberger's McCarthy. "What we've seen, at least over the past couple of years, is that Coach surprised a lot of folks and has won the right to be a brand that is recognized and championed" by younger shoppers.
Tapestry isn't without risks. In contrast to Coach, its Kate Spade brand saw a 10% decline in sales. The stock's big rally means that it's now pricier than it was last year, with raised expectations and potentially less room to run. Its price gap with LVMH gives it some wiggle room to raise prices, but it can't try to match that tier of luxury (at least for now). Not to mention that fashion is fickle, and this year's "it" bag is tomorrow's thrift store fodder.
Those arguments are valid, but they might not give Tapestry enough credit. Consensus calls for earnings per share to climb by double digits this year and next, and Kate Spade is just 17% of its business. The company has navigated fashion cycles before, and is expanding internationally. Shares trade at less than 18 times next year's earnings, below its five-year average, and sport a 1.1% dividend yield. Tapestry bought back over a million shares in the most recent quarter, and is expanding its already remarkably high margins. The technicals also look to be in the stock's favor.
"Investors rightfully question whether there is an end in sight to Tapestry's remarkable performance...[but] Tapestry continues to focus on a winning formula -- training, executing, analyzing, tweaking its model and then reinvesting time and capital to drive even better performance," says Barclays analyst Adrienne Yih. "We often say gold medalists continue to win gold medals as each step they take pulls them further ahead in the competitive field."
In other words, Tapestry's momentum doesn't look tapped out yet.
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June 05, 2026 13:52 ET (17:52 GMT)
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