Tapestry, Inc. TPR is a noteworthy investment option as the company is performing impressively on the back of solid growth efforts like brand transformation initiatives and acquisitions. Also, Tapestry is a great company from the Zacks Industry Rank perspective. Markedly, the company belongs to the Retail – Apparel and Shoes industry, which is currently placed among the top 30% of more than 250 industries.
Over the past month, this Zacks Rank #2 (Buy) stock has gained 12.5% compared with the industry’s growth of 13.4%. That said, let’s delve into the factors that make Tapestry a promising bet.
Tapestry is on track with investing in stores to enhance store sales productivity through product innovation, compelling pricing strategy, new merchandise assortments and a cost-effective global sourcing model. These efforts are likely to drive comparable-store sales and operating margins in the long run. The company’s expansion of global distribution model, venturing into under-penetrated markets and enhancement of digital and data analytics capabilities are likely to drive growth over the long haul.
Further, the company is undergoing brand transformation and introducing modern luxury concept stores in key markets. The acquisition of Stuart Weitzman and Kate Spade has been accretive to its performance and is being viewed as a significant step toward becoming a multi-brand company. Management expects to attain run-rate synergies of approximately $100-$115 million from Kate Spade buyout in fiscal 2019. The company envisions Kate Spade brand sales to reach $2 billion over a period of three years.
The company also plans to undertake strategic measures such as upgrading core technology platforms and enhancing international supply chain. These along with transformational initiatives are expected to facilitate the company to return to double-digit operating income and earnings per share growth in fiscal 2020.
Moreover, management has undertaken initiatives to have direct control over international distribution. The company concluded buybacks of the Kate Spade operations in Singapore, Malaysia and Australia. It also completed the buyback of the Stuart Weitzman business in Southern China. The company has entered into a deal to acquire the Stuart Weitzman business in Australia from its distribution partner. Such moves are likely to aid the company to directly operate these businesses, exploit growth opportunities in international markets and enhance brand development.
We expect the above-mentioned growth drivers to help the stock continue with its growth story.
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