On Monday, TD Cowen maintained its Hold rating on shares of Tapestry Inc. (NYSE:TPR), with a consistent price target of $52.00. The firm's analysis highlighted Tapestry's Coach brand, noting its defiance of negative industry trends through average unit retail (AUR) growth, new customer acquisition, and inventory management. These achievements are credited to the brand's focus on simpler and stronger product platforms.
The commentary from TD Cowen also pointed out key factors that could influence Tapestry's performance going forward. These include the prevailing industry headwinds, the progress of the Kate Spade brand's turnaround, and the potential for Coach to accelerate its growth. Amidst these considerations, management at Tapestry has expressed confidence in Coach's success across various sales channels and has identified China as a significant market with considerable opportunities for expansion.
Tapestry's management team has reiterated the brand's positive momentum, which is particularly evident in the Coach segment. Despite challenges in the broader industry, Coach has managed to attract new customers and manage its inventory effectively, which has contributed to its growth in AUR.
The TD Cowen report reflects a cautious but stable outlook for Tapestry, with no change to the price target or rating from previous assessments. The firm's position indicates an expectation that Tapestry will continue to navigate the current retail landscape without significant shifts in its stock value in the near term.
Investors and market watchers will be keeping an eye on Tapestry's ability to sustain its performance, especially in light of the factors mentioned by TD Cowen. The company's success in China and the evolution of the Kate Spade brand will be particularly important in determining Tapestry's future trajectory in the competitive luxury goods market.
In other recent news, Tapestry Inc. has experienced several significant developments. The company's shares saw an adjusted target increase from Baird, following the termination of a potential deal and the unveiling of a $2.8 billion stock buyback plan. Telsey Advisory Group also raised Tapestry's price target, citing strong earnings growth potential due to the new buyback authorization and a focus on the Kate Spade brand.
Tapestry's first-quarter results were robust, exceeding expectations and leading to an increase in full-year revenue and earnings guidance. The company's Coach brand demonstrated resilience with a 2% increase in constant currency in the last quarter, while Stuart Weitzman experienced an unexpected sales increase. However, the Kate Spade brand saw a sales dip.
Tapestry also updated its fiscal year 2025 guidance, surpassing previous consensus estimates. The company reported a 27% increase in total revenue in Europe and a 5% decrease in Greater China. Despite these mixed results, Tapestry remains optimistic about its future, aiming for a full-year revenue growth of 1-2% and expecting to expand its gross margin by over 50 basis points by fiscal 2025.
These recent developments follow the termination of a merger agreement and the company's decision to contest an injunction blocking the acquisition of Capri Holdings (NYSE:CPRI).
InvestingPro Insights
Tapestry Inc.'s recent performance aligns with several InvestingPro Tips that underscore the company's financial strength and market position. The stock's impressive 99.51% total return over the past year reflects the positive momentum highlighted in TD Cowen's analysis, particularly for the Coach brand. This strong performance is further supported by InvestingPro data showing a 42.64% price total return over the last three months.
InvestingPro Tips indicate that Tapestry "has raised its dividend for 4 consecutive years" and "has maintained dividend payments for 16 consecutive years," demonstrating financial stability that could appeal to income-focused investors. The current dividend yield stands at 2.38%, according to InvestingPro data.
Moreover, Tapestry's "impressive gross profit margins" mentioned in the InvestingPro Tips are quantified by a robust 73.91% gross profit margin over the last twelve months. This aligns with TD Cowen's observations on Coach's success in average unit retail growth and effective inventory management.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide further insights into Tapestry's market position and financial health.
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