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Tapestry Inc TPR

Morningstar Rating
$32.70 +1.03 (3.25%)
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Company Report

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.

Price vs Fair Value

TPR is trading at a 45% discount.
Price
$32.70
Fair Value
$56.00
Uncertainty
High
1-Star Price
$79.00
5-Star Price
$87.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Coach is one of the share leaders in the desirable category of handbags and other leather goods. Coach bags achieve better pricing than many others, allowing for gross margins above 70%.

Bears

Kate Spade and Stuart Weitzman do not have the pricing power or profitability of Coach and, therefore, detract from Tapestry’s overall profitability.

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News

Trading Information

Previous Close Price
$31.67
Day Range
$31.6132.76
52-Week Range
$25.9946.88
Bid/Ask
$32.66 / $33.00
Market Cap
$7.49 Bil
Volume/Avg
3.2 Mil / 3.6 Mil

Key Statistics

Price/Earnings (Normalized)
8.13
Price/Sales
1.17
Dividend Yield
3.82%
Dividend Yield (Forward)
4.28%
Total Yield
11.94%

Company Profile

Coach, Kate Spade, and Stuart Weitzman are Tapestry’s fashion and accessory brands. The firm’s products are sold through about 1,400 company-operated stores, wholesale channels, and e-commerce in North America (66% of fiscal 2023 sales), Europe, Asia (29% of fiscal 2023 sales), and elsewhere. Coach (75% of fiscal 2023 sales) is best known for affordable luxury leather products. Kate Spade (21% of fiscal 2023 sales) is known for colorful patterns and graphics. Women’s handbags and accessories produced 69% of Tapestry's sales in fiscal 2023. Stuart Weitzman (4% of sales) generates nearly all its revenue from women’s footwear. In August 2023, Tapestry agreed to acquire rival Capri and its three brands, Michael Kors, Versace, and Jimmy Choo.
Sector
Consumer Cyclical
Industry
Luxury Goods
Stock Style Box
Small Value
Total Number of Employees
20,600

Competitors

Valuation

Metric
TPR
RL
KER
Price/Earnings (Normalized)
8.1315.3813.56
Price/Book Value
3.103.653.30
Price/Sales
1.171.392.34
Price/Cash Flow
6.2110.849.71
Price/Earnings
TPR
RL
KER

Financial Strength

Metric
TPR
RL
KER
Quick Ratio
0.961.280.66
Current Ratio
2.022.111.46
Interest Coverage
35.1916.6621.65
Quick Ratio
TPR
RL
KER

Profitability

Metric
TPR
RL
KER
Return on Assets (Normalized)
14.11%8.78%10.46%
Return on Equity (Normalized)
43.55%25.07%25.39%
Return on Invested Capital (Normalized)
18.48%11.30%14.24%
Return on Assets
TPR
RL
KER

Luxury Goods Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
LVMHF
Lvmh Moet Hennessy Louis Vuitton SEKbvw$383.2 Bil
LVMUY
Lvmh Moet Hennessy Louis Vuitton SE ADRCvygn$383.2 Bil
HESAF
Hermes International SASrp$220.1 Bil
HESAY
Hermes International SA ADRJxfsd$220.1 Bil
CHDRF
Christian Dior SEJvfhs$133.8 Bil
CHDRY
Christian Dior SE ADRSfnk$133.8 Bil
SWGAY
The Swatch Group AG ADRZnjdh$13.5 Bil
CPRI
Capri Holdings LtdXltj$5.6 Bil
REAL
The RealReal IncFcrcm$246.0 Mil