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Tapestry (TPR) Stock Rises 62.5% in Six Months: Here's How
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Tapestry, Inc. (TPR - Free Report) has exhibited a decent run in the past six months. Driven by the company’s focus on customer acquisition, product innovation, omnichannel and balanced growth across regions, the accessories designer’s shares have gained 62.5% compared with the industry’s 41.2% growth over the said period.
The Zacks Consensus Estimate for the current and next fiscal years’ earnings per share is pegged at $4.23 and $4.57, indicating 9% and 8% growth from the year-ago levels, respectively. The Zacks Consensus Estimate for the current and next fiscal years’ sales is pegged at $6.75 billion and $6.98 billion, suggesting 1.3% and 3.4% increase from the prior-year figures, respectively.
This Zacks Rank #2 (Buy) company seems to be a decent investment pick at present. TPR's Value Score of A further adds to its strength.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Tapestry made significant strides in enhancing its brand strength and deepening customer engagement. Throughout the second quarter of fiscal 2024, the company acquired approximately 2.5 million new customers in North America, notably attracting younger demographics, with about half being Gen Z and Millennials. This success is indicative of the company's effective marketing and brand positioning strategies aimed at broadening its customer base and fostering brand loyalty.
Tapestry excelled in delivering seamless omnichannel experiences, achieving mid-single-digit growth in both physical stores and online sales on a constant currency basis in the fiscal second quarter. The digital segment, representing a third of the company's revenues, highlights Tapestry's strategic focus on digital innovation and its commitment to meeting customers across various shopping platforms.
The company demonstrated its global prowess with a 3% sales increase, underpinned by a robust and diversified business model. Internationally, the company saw 12% growth at constant currency, with remarkable performance in key markets such as Greater China, Japan, Other Asia and Europe. This global expansion underscores Tapestry's strategic market positioning and its capability to leverage international opportunities for growth.
Driving Tapestry's success further is its focus on product innovation and excellence, which has led to global handbag Average Unit Retail gains. Tapestry's approach to fashion innovation, coupled with a dedication to product quality, has supported strong sales in handbags, small leather goods and lifestyle offerings. This focus on creative product development and value proposition continues to drive consumer interest and sales.
Acquisition Strategy Bodes Well
Tapestry's acquisition of Capri Holdings is set to significantly enhance its value and financial performance. With Capri Holdings' standalone business projected to generate $500 million in free cash flow, the deal aims for rapid debt repayment and leverage reduction post-close. This transformative move will create a global luxury and fashion powerhouse, expanding Tapestry's portfolio across consumer segments and geographies.
The acquisition, backed by Capri Holdings' shareholders, is funded through diverse financing options. Despite suspending share repurchases, Tapestry maintains shareholder dividends, reflecting its commitment to shareholder returns.
Integration plans of TPR focus on achieving substantial cost synergies and leveraging the company's platform to elevate Capri Holdings' brands. This recent acquisition positions Tapestry to capitalize on the expansive and fragmented $200-billion market of accessories, footwear and apparel, driving sustainable growth. Tapestry has set a long-term leverage goal, aiming for a ratio of less than 2.5 times gross debt to adjusted EBITDA. The company anticipates meeting this target within two years following the completion of the Capri transaction.
Promising Outlook
Tapestry forecasts fiscal 2024 revenues of $6.7 billion, implying a modest increase from the fiscal 2023 actual on a reported basis and growth of 2% in constant-currency terms.
Regionally, the company anticipates mid-single-digit revenue growth in Greater China and Japan on a constant-currency basis. North American revenues are projected to be in line with or slightly above the prior year. Revenues are expected to see a low-double-digit increase in other Asia markets, whereas high-single-digit growth is anticipated in Europe in constant currency.
The company’s operational strategy aims for an operating margin expansion of about 100 basis points (bps). This includes projected gross margin gains of around 200 bps, partly due to moderating freight costs contributing approximately 120 bps. For fiscal 2024, the company expects adjusted EPS between $4.10 and $4.15, suggesting growth of 6-7% from the fiscal 2023 actual.
Three Other Solid Picks
A few other top-ranked stocks are Deckers Outdoor Corporation (DECK - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.
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Tapestry (TPR) Stock Rises 62.5% in Six Months: Here's How
Tapestry, Inc. (TPR - Free Report) has exhibited a decent run in the past six months. Driven by the company’s focus on customer acquisition, product innovation, omnichannel and balanced growth across regions, the accessories designer’s shares have gained 62.5% compared with the industry’s 41.2% growth over the said period.
The Zacks Consensus Estimate for the current and next fiscal years’ earnings per share is pegged at $4.23 and $4.57, indicating 9% and 8% growth from the year-ago levels, respectively. The Zacks Consensus Estimate for the current and next fiscal years’ sales is pegged at $6.75 billion and $6.98 billion, suggesting 1.3% and 3.4% increase from the prior-year figures, respectively.
This Zacks Rank #2 (Buy) company seems to be a decent investment pick at present. TPR's Value Score of A further adds to its strength.
Image Source: Zacks Investment Research
Let’s Delve Deeper
Tapestry made significant strides in enhancing its brand strength and deepening customer engagement. Throughout the second quarter of fiscal 2024, the company acquired approximately 2.5 million new customers in North America, notably attracting younger demographics, with about half being Gen Z and Millennials. This success is indicative of the company's effective marketing and brand positioning strategies aimed at broadening its customer base and fostering brand loyalty.
Tapestry excelled in delivering seamless omnichannel experiences, achieving mid-single-digit growth in both physical stores and online sales on a constant currency basis in the fiscal second quarter. The digital segment, representing a third of the company's revenues, highlights Tapestry's strategic focus on digital innovation and its commitment to meeting customers across various shopping platforms.
The company demonstrated its global prowess with a 3% sales increase, underpinned by a robust and diversified business model. Internationally, the company saw 12% growth at constant currency, with remarkable performance in key markets such as Greater China, Japan, Other Asia and Europe. This global expansion underscores Tapestry's strategic market positioning and its capability to leverage international opportunities for growth.
Driving Tapestry's success further is its focus on product innovation and excellence, which has led to global handbag Average Unit Retail gains. Tapestry's approach to fashion innovation, coupled with a dedication to product quality, has supported strong sales in handbags, small leather goods and lifestyle offerings. This focus on creative product development and value proposition continues to drive consumer interest and sales.
Acquisition Strategy Bodes Well
Tapestry's acquisition of Capri Holdings is set to significantly enhance its value and financial performance. With Capri Holdings' standalone business projected to generate $500 million in free cash flow, the deal aims for rapid debt repayment and leverage reduction post-close. This transformative move will create a global luxury and fashion powerhouse, expanding Tapestry's portfolio across consumer segments and geographies.
The acquisition, backed by Capri Holdings' shareholders, is funded through diverse financing options. Despite suspending share repurchases, Tapestry maintains shareholder dividends, reflecting its commitment to shareholder returns.
Integration plans of TPR focus on achieving substantial cost synergies and leveraging the company's platform to elevate Capri Holdings' brands. This recent acquisition positions Tapestry to capitalize on the expansive and fragmented $200-billion market of accessories, footwear and apparel, driving sustainable growth. Tapestry has set a long-term leverage goal, aiming for a ratio of less than 2.5 times gross debt to adjusted EBITDA. The company anticipates meeting this target within two years following the completion of the Capri transaction.
Promising Outlook
Tapestry forecasts fiscal 2024 revenues of $6.7 billion, implying a modest increase from the fiscal 2023 actual on a reported basis and growth of 2% in constant-currency terms.
Regionally, the company anticipates mid-single-digit revenue growth in Greater China and Japan on a constant-currency basis. North American revenues are projected to be in line with or slightly above the prior year. Revenues are expected to see a low-double-digit increase in other Asia markets, whereas high-single-digit growth is anticipated in Europe in constant currency.
The company’s operational strategy aims for an operating margin expansion of about 100 basis points (bps). This includes projected gross margin gains of around 200 bps, partly due to moderating freight costs contributing approximately 120 bps. For fiscal 2024, the company expects adjusted EPS between $4.10 and $4.15, suggesting growth of 6-7% from the fiscal 2023 actual.
Three Other Solid Picks
A few other top-ranked stocks are Deckers Outdoor Corporation (DECK - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.8% from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company flaunts a Zacks Rank #1 at present.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank #1. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.