Tapestry's (TPR) Growth Strategies Appear Encouraging
Tapestry, Inc. TPR has been making smart moves to enhance customers’ shopping experience. We note that the company has been expanding its digital distribution channels with a focus on enhancing curbside or store pickup service as well as contactless payment options, and the opportunity to make virtual appointments.
Over the past three months, the accessories designer’s shares have risen 25.7% compared with the industry’s 21% growth.
Analysts seem quite optimistic about the company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $6.7 billion and $4.14, respectively, indicating year-over-year corresponding growth of 1% and 6.7%. For fiscal 2025, the consensus estimate for sales and EPS is currently pegged at $7 billion and $4.47, respectively, indicating corresponding growth of 3.8% and 8.2% year over year.
Let’s Delve Deeper
Tapestry has been experiencing momentum in the omnichannel, led by an increase in direct-to-consumer sales at constant currency. This included a low single-digit rise in brick-and-mortar sales buoyed by the company’s field organization and a highly profitable store fleet.
TPR also retains momentum in Digital, leveraging its established capabilities to connect with consumers in their purchase journey. For the Kate Spade brand, the company has launched a dedicated Kate Spade Outlet.com site, thereby replacing the brand's surprise site to offer a more unified way for outlet consumers to shop online.
The company’s 2025 Growth Strategy focuses on four priorities that include customer acquisition, retention and reactivation; product innovation and excellence; robust omnichannel experience; and balanced growth across regions, principally its largest markets, which are North America and China, and harness opportunities in under-penetrated regions such as Southeast Asia and Europe. For products, Tapestry intends to focus on core handbags and small leather goods, while accelerating gains in footwear and lifestyle products.
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Tapestry is set to acquire Versace and Jimmy Choo’s parent company, Capri Holdings Limited. The deal, which is likely to conclude in the next calendar year, will unite the six distinctive iconic brands into a powerful global house of luxury portfolio. The acquisition looks to accelerate Tapestry’s strategic agenda and create a significant value opportunity.
The acquisition deal will develop Tapestry’s portfolio into a $200+ billion global luxury market for handbags, accessories, footwear and apparel categories and widen product offerings via higher penetration of lifestyle categories like footwear and ready-to-wear. This all-cash deal has been approved unanimously by both the companies’ board of directors.
What Else?
Management reiterated its earnings and operating cash flow view for the current fiscal year. For fiscal 2024, the company projects revenues of approximately $6.7 billion, indicating a slight year-over-year increase on a reported basis and 2-3% at constant currency.
In Greater China, it expects revenues to rise in mid-single digits at constant currency. In Japan, the company forecasts revenues to grow in mid-single digits while the metric in other Asia is likely to increase at a low double-digit rate at constant currency. In Europe, management anticipates high single-digit revenue growth at constant currency.
Further, the company expects an operating margin expansion of more than 70 basis points for the fiscal year on a higher gross margin, which is likely to benefit from moderating freight expenses. It reaffirmed its EPS view on better-than-anticipated margins, gains from the agile platform, disciplined execution and brand management. For fiscal 2024, Tapestry envisions adjusted EPS to be in the $4.10-$4.15 range, implying nearly 6-7% growth from the prior-year level.
To wrap up, this currently Zacks Rank #3 (Hold) company seems to be a decent investment pick at present. A Value Score of A further adds to its strength.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Gap GPS and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, 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 Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS indicates growth of 387.5% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in each of the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 4% and 39.2%, respectively, from the year-ago reported figures.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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Tapestry, Inc. (TPR) : Free Stock Analysis Report
