Tapestry Beats Q1 Expectations; Shares Rise 8.4%

Tapestry, Inc. (TPR) has delivered outstanding first-quarter results on the back of strong customer engagement and growing demand for its brands. The company has also increased its full-year fiscal 2022 outlook.

Following the news, shares of the American multinational luxury fashion holding company jumped 8.4% to close at $46.18 on November 11.

Stellar Results

The company reported earnings of $0.82 per share, up 41.4% year-over-year and 12 cents more than analysts’ estimate of $0.70 per share.

Furthermore, net sales rose 26% year-over-year to $1.48 billion, surpassing the Street’s estimate of $1.44 billion. Compared to the prior-year quarter, all of Tapestry’s brands witnessed significant revenue growth, with Coach growing 27%, Kate Spade rising 25%, and Stuart Weitzman climbing 18%.

Notably, Tapestry’s digital channel saw a 50% revenue growth compared to the first quarter of FY21, and a whopping 275% revenue growth compared to pre-pandemic levels.

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Management Comments

Joanne Crevoiserat, the CEO of Tapestry, said, “Revenue trends accelerated compared to pre-pandemic levels driven by North America, as well as continued growth in Digital and China – two key drivers of long-term opportunity. Tapestry’s standout results highlight our teams’ extraordinary execution and the foundational changes we’ve made to transform into a more consumer-centric, data-driven, and responsive organization through the pillars of our Acceleration Program.”

Updated Guidance

Based on the strong business momentum witnessed in the first quarter, Tapestry has increased its full-year fiscal 2022 outlook. The company forecasts FY22 net sales of $6.6 billion, higher than the consensus estimate of $6.42 billion. Additionally, earnings are expected to be between $3.45 per share to $3.50 per share against the consensus estimate of $3.36 per share.

Shareholder Rewards

Meanwhile, based on the company’s strong first-quarter performance, robust balance sheet and cash flow generation, the company’s Board of Directors has increased the FY22 share buyback program by $1 billion.

Moreover, it has declared a quarterly cash common dividend of $0.25 per share, which will be payable on December 27 to shareholders on record as of December 3.

Wall Street’s Take

Impressed with Tapestry’s strong performance, analyst Robert Drbul of Guggenheim Securities maintained a Buy rating on the stock and lifted the price target to $60 from $55 (29.9% upside potential).

Drbul said, “We are raising our estimates to reflect continued solid execution at TPR, anchored by steady and strong performance for the Coach brand, while Kate Spade and Stuart Weitzman delivered material sequential improvements and trends. We expect continued margin gains for TPR, with supportive gross margin and selling, general & administrative expense tailwinds.”

The analyst’s optimistic view on the stock is based on expectations of a stable and consistent top-line growth, and execution of numerous margin initiatives.

Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 3 Holds. The average Tapestry price target of $55.56 implies 20.31% upside potential to current levels. Shares have gained 82.7% over the past year.

Website Traffic

TipRanks’ Website Traffic tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into TPR’s performance.

In October, Tapestry website traffic recorded an 11.74% year-over-year monthly decline in visits. Similarly, year-to-date website traffic growth decreased 8.03% compared to the same period last year.

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