Tapestry, a luxury goods retailer known for brands like Coach, Kate Spade, and Stuart Weitzman, is set to report its fiscal third-quarter results on May 9. The company is expected to perform well, with revenues and earnings surpassing expectations. Tapestry recently announced plans to acquire Capri Holdings, which owns brands like Versace, Jimmy Choo, and Michael Kors, in an $8.5 billion deal financed largely by debt. This acquisition will create a massive portfolio of luxury brands, positioning Tapestry as a major player in the luxury goods market.
In the second quarter, Coach saw strong sales growth of 6% year-over-year, while Kate Spade and Stuart Weitzman experienced declines of 6% and 4%, respectively. The Coach brand contributes significantly to Tapestry’s overall revenue, accounting for approximately 75% of total sales. Geographically, sales in the U.S. remained flat year-over-year, while Europe saw an 11% increase and Greater China experienced a 19% revenue growth. The Chinese luxury market is expected to reach $112 billion by 2025, making it a key area of focus for Tapestry’s expansion.
Despite its strong performance, Tapestry’s stock returns have been inconsistent, with negative returns in recent years. In comparison to the S&P 500 index, Tapestry underperformed in 2023, highlighting challenges faced by individual stocks in outperforming the broader market. The Trefis High Quality Portfolio, which includes 30 stocks, has consistently outperformed the S&P 500, showcasing the benefits of a diversified investment strategy. Moving forward, Tapestry faces uncertainties related to macroeconomic factors like high oil prices and elevated interest rates, which could impact its stock performance.
Trefis estimates that Tapestry’s valuation is currently around $47 per share, representing a 21% premium over the current market price. Revenue for the third quarter of fiscal 2024 is expected to be approximately $1.6 billion, slightly above consensus estimates. Tapestry’s full-year revenue forecast stands at $6.7 billion, with projected earnings per share of $4.20 to $4.25, reflecting an 8-9% year-over-year increase. The company’s operating margin improved by 220 basis points year-over-year in the second quarter, leading to a 20% growth in earnings per share.
With an estimated EPS of $4.23 and a P/E multiple of 11.2x in fiscal 2024, Trefis projects Tapestry’s stock price to reach $47, surpassing the current market price. Tapestry’s valuation will be affected by factors like earnings per share and market conditions. By analyzing Tapestry’s performance compared to its peers, investors can gain insights into how the company stacks up against competitors in the luxury goods industry. Overall, Tapestry’s upcoming fiscal Q3 results and future performance are closely watched by investors as the company continues to navigate challenges and opportunities in the luxury retail sector.
