Tapestry: Stuart Weitzman Sale Has No Effect on Moat or Competitive Edge; Shares Overvalued

Tapestry announced that it has agreed to sell Stuart Weitzman to footwear brand and store operator Caleres. This move is not surprising as recent media reports had suggested that the brand was being shopped around and as Tapestry had revealed little about its plans to fix it. The sale has no effect on our narrow moat rating, which is based solely on the brand value of Coach, or our Standard Capital Allocation Rating. We are also holding our fair value estimate at $62 per share as the sale has no material effect on Tapestry’s future cash flows or capital return plans. We regard Tapestry’s shares, which have soared since the collapse of its attempted acquisition of no-moat Capri, as overvalued.