Tapestry Inc TPR

Tapestry Earnings: Coach Performing Well as Capri Deal Moves Forward; Shares Very Attractive

Powered by Coach’s 3% sales growth, narrow-moat Tapestry’s fiscal (September-ended) 2024 first-quarter profitability eclipsed our expectations despite demand challenges for its smaller Kate Spade and Stuart Weitzman brands. Tapestry continues to work toward its acquisition of no-moat Capri for $57 per share, expected in calendar 2024. Although Tapestry’s shares have been very weak since the deal was announced in August (down by about 33%), we believe the acquisition price is a fair one and that the addition of Capri’s brands will bolster Tapestry’s standing in midprice handbags and luxury. We do not expect to make any change to our $60 fair value estimate, leaving Tapestry’s shares very attractive. Our valuation is based on a model that combines Tapestry and Capri as we expect the deal to close.