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Tapestry was formed in late 2017 following its Kate Spade acquisition, as it looked to expand beyond its core Coach brand.
Brent Lewin/Bloomberg
Tapestry
shares have slumped in 2020, as the pandemic weighed on demand for upscale shoes and handbags, although the company’s struggles predate Covid-19. Cowen & Co. now argues that it is finally time to buy the stock.
Analyst Oliver Chen boosted his rating on Tapestry (ticker: TPR) to Outperform from Market Perform, and raised his price target to $30 from $25. He also raised his 2021 and 2022 earnings estimates for the owner of Coach, Kate Spade, and Stuart Weitzman, following upbeat findings from the firm’s consumer research.
Chen highlights Tapestry’s agility and high-value consumer data, which it has leveraged to raise prices and margins, while doing fewer promotions. He thinks the company’s ability to beat earnings expectations in recent quarters and improve its revenue outlook going forward could signal more profit growth ahead.
He is also impressed with the company’s direct-to-consumer marketing strategy aimed at a younger demographic. The Outlet business—about half of Tapestry’s sales—has seen an uptick in customers recently and carries higher margins than its full-price business.
Looking ahead, Chen notes that Tapestry’s e-commerce sales should continue to log impressive growth for the company. Separately, he points to its business in China as another catalyst, especially as that region has the highest prices and gross margins for Tapestry.
Other analysts have also argued it is time to buy the stock.
The company was formed in late 2017, following its Kate Spade acquisition, as it looked to expand beyond its core Coach brand. The stock has largely drifted lower since, hurt by management changes and several earnings misses before the start of the pandemic.
Tapestry shares were up 1.4% to $26.36 shortly after the market opened on Wednesday. The
Dow Jones Industrial Average
was up 0.2%. The stock is down 3% year to date.
Write to Teresa Rivas at [email protected]
