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Tapestry (TPR) Outpaces Industry Year to Date: Here's Why

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Tapestry, Inc. (TPR - Free Report) has exhibited an impressive run on the bourses so far this year. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outperformed the Zacks Retail - Apparel And Shoes industry and the Retail-Wholesale sector. In the said period, shares of this New York-based company have surged about 37.3% compared with the industry’s rally of 33.5%. Meanwhile, the sector advanced 2.4%.

Additionally, an uptrend in the Zacks Consensus Estimate echoes the same sentiment. The consensus estimates for the current and next financial year have increased about 9.3% and 6.2% to $2.83 and $3.07, respectively, over the past 60 days. Notably, this Zacks Rank #2 (Buy) stock’s long-term earnings growth rate of 10% indicates its inherent strength.

Let’s Delve Deeper

Tapestry is benefiting from the successful execution of 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 of its brands namely Coach, Kate Spade and Stuart Weitzman.

Notably, the company continued with its sturdy e-commerce performance during the third quarter of fiscal 2021 with digital sales rising in triple digits compared with the year-ago period and accounting for roughly 30% of total revenues. The company attracted nearly 700,000 new customers via its e-commerce channels in North America and witnessed higher purchase frequency year over year.

Meanwhile, Tapestry's focus on optimizing its cost structure and attempt to lower promotional activity and improve Average Unit Retail across brands also remain noteworthy. These are providing cushion to margins. Notably, the company witnessed third successive quarter of operating income growth. Also, management remains on track to realize about $300 million in gross run rate expense savings, including $200 million projected for fiscal 2021.


Zacks Investment ResearchImage Source: Zacks Investment Research

Impressively, the company’s long-term growth drivers include deep engagement with consumers, innovative and compelling products, and entry into under-penetrated markets. Tapestry's compelling pricing strategy, smaller format locations and cost-effective global sourcing model have been enhancing store productivity.

From the 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, Tapestry registered revenue growth of about 175% in Mainland China during the third quarter of fiscal 2021 when compared with fiscal 2020 and 40% increase when compared with fiscal 2019.

Tapestry envisions fiscal 2021 revenues to improve at a mid-teens rate compared with prior year on a both 52 and 53-week basis. This includes the expectation for fourth-quarter sales to increase roughly 110% (on a 13-week basis). The company also anticipates operating income and earnings per share to increase compared with fiscal 2019 on a 52 and 53-week basis.

3 More Stocks Worth a Look

Hibbett Sports, Inc. (HIBB - Free Report) has a long-term earnings growth rate of 17.7%. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Boot Barn Holdings (BOOT - Free Report) has a trailing four-quarter earnings surprise of 51.7%, on average. It currently carries a Zacks Rank #1.

Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently flaunts a Zacks Rank #1.

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