Tapestry (TPR) Gains on Product Innovation, Customer Engagement
Tapestry, Inc.’s TPR success in launching products, particularly in the handbags and small leather goods segment, has been a key driver for its revenue growth. This success reflects the company's commitment to innovation and understanding of the evolving market trends and customer preferences.
Gaining more than 1.2 million customers in North America highlights Tapestry's effective engagement strategies. Growth in direct-to-consumer sales, including a boost in brick-and-mortar store sales, showcases the effectiveness of its omnichannel approach, blending online and offline retail experiences seamlessly.
The company experienced a 2% year-over-year increase in constant-currency revenues, underscoring the success of its global diversification strategy. Particularly noteworthy is 9% revenue growth in Greater China, highlighting Tapestry's growing influence in the key international markets.
Driven by the company’s focus on customer acquisition, product innovation, omni-channel and balanced growth across regions, the accessories designer’s shares have risen 31.3% compared with the industry’s 35.1% growth over the past three months. This Zacks Rank #3 (Hold) company seems to be a decent investment pick at present. TPR's Value Score of B further adds to its strength.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is pegged at $6.7 billion and $4.14, respectively, indicating year-over-year growth of 1% and 6.7%. For fiscal 2025, the consensus estimate for sales and EPS is pegged at $7 billion and $4.47, respectively, suggesting year-over-year improvements of 3.8% and 8%.
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Acquisition Strategy Bodes Well
Tapestry's acquisition of Capri Holdings is set to significantly enhance its value and financial performance. With Capri Holdings' standalone business projected to generate $500 million in free cash flow, the deal aims for rapid debt repayment and leverage reduction post-close. This transformative move will create a global luxury and fashion powerhouse, expanding Tapestry's portfolio across consumer segments and geographies.
The acquisition, backed by Capri Holdings' shareholders, is funded through diverse financing options. Despite suspending share repurchases, Tapestry maintains shareholder dividends, reflecting its commitment to shareholder returns.
Integration plans of TPR focuses on achieving substantial cost synergies and leveraging Tapestry's platform to elevate Capri Holdings' brands. This recent acquisition positions Tapestry to capitalize on the expansive and fragmented $200-billion market of accessories, footwear and apparel, driving sustainable growth.
Promising Outlook
Tapestry forecasts fiscal 2024 revenues of $6.7 billion, implying a modest increase from the fiscal 2023 actual on a reported basis and growth of 2-3% in constant-currency terms.
Regionally, the company anticipates mid-single-digit revenue growth in Greater China and Japan on a constant-currency basis. Revenues are expected to see a low-double-digit increase in other Asia markets, whereas high-single-digit growth is anticipated in Europe in constant currency.
Tapestry projects an operating margin expansion exceeding 70 basis points for fiscal 2024, driven by an increase in the gross margin and reduced freight expenses. For fiscal 2024, the company expects adjusted EPS between $4.10 and $4.15, suggesting growth of 6-7% from the fiscal 2023 actual.
Three Solid Picks
A few better-ranked stocks are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s current fiscal-year sales indicates growth of 387.5% from the previous year’s reported figures. GPS has a trailing four-quarter average earnings surprise of 138%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank #1. ANF delivered a 60.5% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 15.1% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 713%.
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 21.9% and 11.7%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.
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