On Tuesday, Citi revised its stock price target for Tapestry Inc. (NYSE: NYSE:TPR), the parent company of luxury brands including Coach and Kate Spade, from $49.00 down from the previous target of $50.00. The firm has retained its Buy rating on the stock. The adjustment comes ahead of the company's fourth-quarter earnings report, which is anticipated to align with market expectations.
The report is expected to show a slight decline in sales, with Citi projecting a 2.8% decrease compared to the consensus estimate of a 2.2% drop. This is in line with management's guidance of an approximate 3% decline. Earnings per share (EPS) are also forecasted to be close to consensus and guidance figures, with Citi estimating $0.87 against a consensus of $0.89 and guidance of around $0.85.
While Citi anticipates management to express caution regarding the fiscal year 2025 (F25) and to project flat sales, which is below the consensus expectation of a 2.5% increase, the firm also expects positive commentary on gross margin (GM) and expense management. The EPS guidance for F25 is estimated to be in the range of $4.45-4.50, slightly under the consensus of $4.53.
Furthermore, Citi predicts that management will reaffirm its support for the deal with Capri Holdings Limited (NYSE:CPRI). Despite the forecast of weaker sales guidance for F25, Citi believes that improved margins could offset the impact on the company's stock value.
This is particularly relevant as the stock has seen an 8% decline month-to-date. The overall expectation is that the combination of lower sales but better margins will have a neutral effect on Tapestry's stock on the day of the earnings announcement.
In other recent news, Tapestry Inc. has seen significant developments. The luxury fashion holding company recently announced the appointment of Eva Erdmann as the new CEO and Brand President of Kate Spade. Erdmann, credited with revitalizing the Urban Decay Cosmetics brand during her tenure at L'Oréal, will replace outgoing CEO Liz Fraser in October.
Financially, Tapestry reported mixed results in its third-quarter earnings call. Total revenue remained constant on a constant currency basis, despite sales declines in Greater China and North America. However, the company reported a significant gross margin expansion and a strong customer acquisition rate, with over half of the 1.2 million new customers being Gen Z and millennials.
In terms of analyst notes, Baird adjusted its price target for Tapestry from $52.00 to $50.00 due to softer sales trends in North America and China. Despite this, Baird maintained an Outperform rating on the stock. The company's management team expressed confidence in their long-term financial goals, including achieving its fiscal year 2025 targets, which are projected to be around $4.65 excluding foreign exchange impacts.
Tapestry's strategic developments include potential benefits from the acquisition of Capri Holdings Limited. The company continues to navigate the current economic headwinds, focusing on long-term growth and profitability. These are the recent developments for Tapestry, as the company remains committed to innovation, sustainability, and diversity across its brand portfolio.
InvestingPro Insights
As Tapestry Inc. (NYSE: TPR) approaches its fourth-quarter earnings report, a closer look at the company's financial health and market performance through InvestingPro data reveals some notable aspects. With a market capitalization of $8.47 billion and a P/E ratio that stands at 9.62, Tapestry appears to be valued reasonably in the market. The company's gross profit margin is particularly impressive at 72.71% for the last twelve months as of Q3 2024, highlighting its ability to maintain profitability despite challenges.
Investors may also find Tapestry's commitment to shareholder returns reassuring; the company has not only maintained but also increased its dividend payments for 16 consecutive years, with a dividend yield currently at 3.8%. This consistent return to shareholders is complemented by the fact that Tapestry's liquid assets exceed its short-term obligations, indicating a solid liquidity position.
For those considering adding Tapestry to their portfolio, it's worth noting that InvestingPro offers additional insights and metrics. Currently, there are 9 more InvestingPro Tips available, which can provide a deeper understanding of the company's financial nuances and market position. These tips, along with a comprehensive analysis, can be found at InvestingPro, offering valuable guidance for both seasoned investors and those new to the market.
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