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Bull of the Day: Tapestry (TPR)

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Formerly known as Coach, Inc., Tapestry (TPR - Free Report) is a luxury retailer that owns and operates the Coach, Kate Spade & Company, and Stuart Weitzman brands. All three offer popular lifestyle products like handbags, clothes, shoes, and fragrance.

Q1 Earnings Recap

Last month, Tapestry reported first quarter fiscal 2021 results that significantly beat consensus estimates on the top and bottom lines.

Net income skyrocketed more than 11-fold from $20 million to $213.7 million, while operating profit nearly tripled from $51.6 million to $150.6 million. Revenue beat expectations, but fell 14% year-over-year to $1.2 billion.

Additionally, TPR generated free cash flow of a healthy $64 million.

CEO Joanne Crevoiserat said there were two main things that contributed to the company’s outperformance and recovery in Q1.

First, the retailer achieved triple-digit digital channel growth, and this resulted in e-commerce representing almost 25% of total revenue.

Second, Tapestry has seen huge growth in China thanks to successful marketing strategies, product variety, and wide-ranging customer engagement; Coach was recently ranked as the number one handbag brand on Alibaba’s (BABA - Free Report) T-mall platform.

TPR Breaks Out



Since March 23, shares of Tapestry have climbed over 100%. Estimates have been rising too, and TPR is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, eleven analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $1.84 per share to $2.23 per share. Earnings are expected to grow about 130% compared to the prior year, and in 2021, Tapestry’s bottom line should continue positive year-over-year growth.

Beyond the near-term setback that is Covid-19, Tapestry and its management team are ready and determined to build on recent momentum. The company has also provided customers more buying options, like curbside pickup, contactless payment, shopping appointments, and virtual queues that show how busy it is in some North American stores.

Tapestry’s many brands have built a large customer following over the years. Brand loyalty and renewed growth should help bolster the retailer amid the coronavirus pandemic.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep TPR on your shortlist.

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