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Tapestry's (TPR) Operational Strength Fuels Its Bull Run

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Tapestry, Inc. TPR, one of the widely recognized names in the apparel and footwear industry, has exhibited an outstanding run on the bourses in the past three months. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outpaced the Zacks Retail - Apparel And Shoes industry and the Retail-Wholesale sector. In the said period, shares of this New York-based company have soared about 78.3% compared with the industry’s rally of 54.4%. Meanwhile, the sector declined 2.3%.

Additionally, an uptrend in the Zacks Consensus Estimate also echoes the same sentiment. The consensus estimates for the current and next financial year have increased about 5.6% and 3.2% to $2.27 and $2.61, respectively, over the past 60 days. Notably, this Zacks Rank #1 (Strong Buy) stock’s long-term earnings growth rate of 11.7% reflects its inherent strength. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s Introspect

This provider of luxury accessories and branded lifestyle products is poised to benefit from its Acceleration Program. The program is aimed at transforming the company into a leaner and more responsive organization. It also intends to build significant data and analytics capabilities with focus on enhancing digital and omnichannel capabilities, and operating with a clearly defined path and strategy for each brand namely Coach, Kate Spade and Stuart Weitzman.

As part of its Acceleration Program, Tapestry collaborated with Google Cloud to migrate its SAP software environment to the cloud. Clearly, the company aims to drive digital sales to beat COVID-19 blues. Undoubtedly, it has been investing in IT systems and accelerating digital transformations to provide customers seamless online shopping experience.

Meanwhile, Tapestry's focus on optimizing cost structure and attempt to lower promotional activity and improve Average Unit Retail across brands also remain noteworthy. These are likely to cushion gross margin. Notably, the company has been targeting reductions in SG&A expenses and right sizing store fleet. Management remains on track to realize about $300 million in gross run rate expense savings, including $200 million projected for fiscal 2021.

The company’s long-term growth drivers include deepening engagement with consumers, creating innovative and compelling products, and venturing into under-penetrated markets. Notably, the company’s compelling pricing strategy, smaller format locations and cost-effective global sourcing model have been contributing in enhancing store productivity.

From growth perspective, China remains one of the prominent markets for Tapestry. The company has been accelerating growth in the region through tailored and innovative product assortments, enhanced marketing and expanded reach across direct channels and third-party online distribution. Impressively, the company registered double-digit year-over-year increase in sales in Mainland China during the first quarter of fiscal 2021.

Again, considering a stellar start to the fiscal 2021 and expectations of a sustained recovery, Tapestry continues to expect a top-line inflection in the second half of the fiscal year. It now envisions top and bottom-line growth for fiscal 2021. Tapestry now anticipates mid-single-digit growth in revenues for fiscal 2021.

3 More Stocks Looks Red Hot

Hibbett Sports HIBB has a long-term earnings growth rate of 17%. It currently flaunts a Zacks Rank #1.

DICK’S Sporting Goods (DKS - Free Report) has a long-term earnings growth rate of 5.6%. It presently sports a Zacks Rank #1.

Michaels Companies MIK has a trailing four-quarter earnings surprise of 54.1%, on average. The stock carries a Zacks Rank #1.

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