U.S. Markets open in 9 hrs 28 mins

Tapestry's (TPR) Operational Efforts Put Stock on Growth Path

  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Tapestry, Inc. TPR, one of the widely recognized names in the apparel and footwear industry, continued with its impressive performance in third-quarter fiscal 2021 as well, despite a challenging backdrop. This house of modern luxury accessories and lifestyle brands witnessed significant improvement in sales trends.

Management highlighted that strength in e-commerce and sales growth in Mainland China acted as tailwinds. Also, the company attained a meaningful improvement in earnings per share. Tapestry’s impressive results validate significant progress on previously announced Acceleration Program.

Given stronger-than-expected results year to date and anticipation of sustained recovery, Tapestry now envisions fiscal 2021 revenues to improve at a mid-teens rate compared with prior year on a both 52 and 53-week basis. This includes the expectation for fourth-quarter sales to increase roughly 110% (on a 13-week basis). The company also anticipates operating income and earnings per share to increase compared with fiscal 2019 on a 52 and 53-week basis.

Let’s Delve Deeper

Tapestry, which shares space with Boot Barn Holdings BOOT, The Children's Place PLCE and Capri Holdings CPRI, is benefiting from the successful execution of Acceleration Program. The program is aimed at transforming the company into a leaner and more responsive organization. It also intends to build significant data and analytics capabilities with focus on enhancing digital and omnichannel capabilities, and operating with a clearly defined path and strategy for each of its brands namely Coach, Kate Spade and Stuart Weitzman.

Notably, the company continued with its sturdy e-commerce performance during the third quarter of fiscal 2021 with digital sales rising in triple digits compared with the year-ago period and accounting for roughly 30% of total revenues. The company recruited nearly 700,000 new customers via its e-commerce channels in North America and witnessed higher purchase frequency year over year.

Meanwhile, Tapestry's focus on optimizing its cost structure and attempt to lower promotional activity and improve Average Unit Retail across brands also remain noteworthy. These are providing cushion to margins. Notably, the company witnessed third successive quarter of operating income growth. Also, management remains on track to realize about $300 million in gross run rate expense savings, including $200 million projected for fiscal 2021.

Impressively, the company’s long-term growth drivers include deep engagement with consumers, innovative and compelling products, and entry into under-penetrated markets. Tapestry's compelling pricing strategy, smaller format locations and cost-effective global sourcing model have been enhancing store productivity.

From the growth perspective, China remains one of the prominent markets for Tapestry. The company has been accelerating growth in the region through tailored and innovative product assortments, enhanced marketing and expanded reach across direct channels and third-party online distribution. Impressively, Tapestry registered revenue growth of about 175% in Mainland China during the third quarter of fiscal 2021 when compared with fiscal 2020 and 40% increase when compared with fiscal 2019.

Wrapping Up

Quite apparently, the fashion and apparel space is brimming with optimism, courtesy of rapid inoculation drive and coronavirus relief package worth $1.9 trillion that entitles eligible Americans to $1,400 stimulus checks. The return to active social lifestyle, events and occasions are likely to spur demand, and Tapestry looks well-poised to tap the same. The company remains committed to drive organic growth, profitability and shareholder value.

Bitcoin, Like the Internet Itself, Could Change Everything

Blockchain and cryptocurrency has sparked one of the most exciting discussion topics of a generation. Some call it the “Internet of Money” and predict it could change the way money works forever. If true, it could do to banks what Netflix did to Blockbuster and Amazon did to Sears. Experts agree we’re still in the early stages of this technology, and as it grows, it will create several investing opportunities.

Zacks’ has just revealed 3 companies that can help investors capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 3 crypto-related stocks now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report
 
The Childrens Place, Inc. (PLCE) : Free Stock Analysis Report
 
Tapestry, Inc. (TPR) : Free Stock Analysis Report
 
Capri Holdings Limited (CPRI) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research