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Tapestry (TPR) Gains Market Share on Brand & Digital Strength

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Although coronavirus-inflicted challenges persist, the Retail - Apparel And Shoes industry is steadily making its way out of the woods and is now set for a complete recovery in 2022. As the economy reopened, the pandemic-induced restrictions eased, and outdoor movement gathered pace. Evidently, the apparel industry blossomed. Without a doubt, Tapestry, Inc. (TPR - Free Report) is set to cash in on the opportunities. The company’s brand and digital strength, as well as growth in North America and China, have been tailwinds.

Let’s Introspect

Tapestry’s consumer-centric approach, omni-channel capabilities, brand awareness and emphasis on high growth areas position it well among peers. Also, its Acceleration Program has been a major contributing factor. The program is aimed at transforming the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities with a focus on enhancing digital and omni-channel capabilities and operating with a clearly defined path and strategy for each of its brands, namely Coach, Kate Spade and Stuart Weitzman.

The company continued with its sturdy e-commerce performance during second-quarter fiscal 2022. Global digital sales rose about 30% compared with the prior-year period and nearly tripled compared to pre-pandemic levels. Digital sales advanced over 30% at Coach and more than 35% at Stuart Weitzman when compared with the prior-year period. The metric surged roughly 30% at Kate Spade. Management envisions digital sales to reach $2 billion this fiscal year.


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Meanwhile, Tapestry's focus on optimizing its cost structure and attempt to lower promotional activity and improve Average Unit Retail across brands remain noteworthy. These provide a cushion to margins. Tapestry is on track to realize about $300 million in gross run-rate savings in fiscal 2022. The company has attained $200 million of gross expense savings in fiscal 2021.

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 mid-single-digit year-over-year growth in sales in Mainland China and more than 35% versus pre-pandemic levels.

Tapestry has been witnessing strong momentum in North America. During the second quarter, the company added nearly 3 million new customers across channels in North America, representing a low double-digit increase versus the prior year, with growth in both stores and online. Sales in North America surged more than 35% compared with the prior-year quarter and over 25% compared with pre-pandemic levels.

Wrapping Up

Tapestry’s long-term growth drivers include deepening engagement with consumers, creating innovative and compelling products, venturing into under-penetrated markets and enhancement of digital and data analytics capabilities. The company envisions revenues to be approximately $6.75 billion for fiscal 2022. This suggests growth of roughly 20% compared with the prior year on a 52-week, comparable basis, with strong double-digit growth at each brand. The company projected earnings in the band of $3.60-$3.65 per share. The current projection suggests a sharp increase from adjusted earnings of $2.97 per share reported in fiscal 2021.

Shares of this Zacks Rank #2 (Buy) company have fallen 11.1% year to date. In the said period, the industry declined 25.9%. In fact, Tapestry’s shares have risen 12.4% in the past month.

3 More Stocks Worth a Look

Here we highlight three other top-ranked stocks, namely, Target (TGT - Free Report) , Capri Holdings (CPRI - Free Report) , and Boot Barn Holdings (BOOT - Free Report) .

General merchandise retailer Target currently sports a Zacks Rank #1 (Strong Buy). TGT has an expected EPS growth rate of 16.5% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Target’s current financial-year sales and EPS suggests growth of 3.5% and 6.7%, respectively, from the corresponding year-ago period’s levels. TGT has a trailing four-quarter earnings surprise of 21.3%, on average.

Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1. The company’s bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters.

The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 37% and 215.8%, respectively, from the year-ago period. CPRI has an expected EPS growth rate of 53.9% for three-five years.

Boot Barn Holdings, the lifestyle retailer of western and work-related footwear, apparel and accessories, carries a Zacks Rank #2. BOOT has an expected EPS growth rate of 20% for three-five years.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period.