Core Viewpoint - Tapestry, Inc. stock has declined as analysts reassess its valuation despite the ongoing strength of the Coach brand, leading to a downgrade from Buy to Hold by Bank of America Securities analyst Lorraine Hutchinson, while raising the price forecast from $95 to $115 [1][2]. Group 1: Financial Performance and Projections - Tapestry has traded at an average P/E of 13x over the past decade, currently sitting at the upper end of the range, which has influenced the downgrade to a Neutral stance [2]. - Hutchinson forecasts a solid fourth quarter with EPS of 98 cents, matching management's guidance, alongside expected sales growth of 5.4% and an operating margin of 16.4% [3]. - Fiscal year 2026 guidance will be closely monitored, with expectations for mid-single-digit sales growth and stable margins, balancing tariff-related pressures with SG&A efficiency [3]. Group 2: Brand Performance and Market Dynamics - The Coach brand continues to perform well due to effective marketing and premium product appeal, although management is not expected to forecast double-digit growth for the brand this year [4]. - There is potential for upside in fiscal year 2026 estimates, but limited long-term margin expansion is anticipated beyond Coach's current operating margin of 33.6% [4]. Group 3: Tariff Impact and Profitability - Management is expected to maintain profitability over time despite tariff pressures, with a projected 60 basis points decline in gross margin for fiscal year 2026 due to tariffs, with full recovery anticipated by fiscal year 2027 [5].

About this content About Angela Harmantas Angela Harmantas is an Editor at Proactive. She has over 15 years of experience covering the equity markets in North America, with a particular focus on junior resource stocks. Angela has reported from numerous countries around the world, including Canada, the US, Australia, Brazil, Ghana, and South Africa for leading trade publications. Previously, she worked in investor relations and led the foreign direct investment program in Canada for the Swedish government. S ...

Acquisition & Strategy - Tapestry's attempted $85 billion acquisition of Capri Holdings was blocked by the FTC due to concerns about creating an excessively concentrated player in the accessible luxury handbags market [1][2] - Wall Street disliked the Capri deal, fearing Tapestry would overstretch its balance sheet to acquire a consistently worse operator [3] - Tapestry redeemed deal debt and announced a $28 billion buyback program, including a $2 billion accelerated share repurchase program, representing roughly 15% of shares outstanding [6][7] - Tapestry sold its Steuart Weitzman brand to focus on the core Coach brand and turning around Kate Spade [8][9] Financial Performance & Market Dynamics - Tapestry's stock has increased 148% since the merger was blocked and is up 69% for the year [2] - Coach's revenue growth accelerated from 2% to 15% on a constant currency basis [11][12] - Tapestry delivered substantial top and bottom-line beats, raising full-year earnings forecast by $025 [10] - Kate Spade's constant currency revenue growth has declined for eight straight quarters, down 12% [16] Future Outlook & Risks - Tapestry aims to turn around Kate Spade by emulating Coach's strategies, targeting younger consumers and developing new products [17] - The stock trades at just under 22 times this year's earnings estimate, with 18% earnings growth, but is considered inherently risky given its recent performance [19][20] - The report suggests a potential buying opportunity if Tapestry reports a good quarter that doesn't fully satisfy shareholders, leading to a sell-off [20]

Core Insights - Tapestry, Inc. (TPR) shares reached a new 52-week high of $102.31, closing at $102.16, with a stock rise of 56.4% compared to a 12.3% decline in the Zacks Retail-Apparel and Shoes industry [1] - The company's diversified business model and strong omnichannel presence position it to outperform the broader Retail Wholesale sector and the S&P 500 index [1] Stock Performance - Tapestry is currently trading above its 50-day and 200-day simple moving averages of $84.69 and $69.85, indicating price stability and long-term bullish trends [2][4] - The technical strength reflects positive market sentiment and growing investor confidence in TPR's financial health and growth potential [2] Growth Drivers - Tapestry's leadership in the global affordable luxury market is driven by focused brand strategies, strong customer engagement, and operational excellence [5] - The Coach brand is a key growth driver, posting a 15% year-over-year revenue increase and achieving a record 79% gross margin [6][10] - Coach added 900,000 new North American customers, with nearly 70% from Gen Z and Millennials [8][9] International Performance - International markets contributed significantly, with Europe's revenues growing 35% at constant currency and Asia-Pacific rising 4%, including a 5% gain in Greater China [11] - The omnichannel model remains a competitive advantage, with direct-to-consumer sales up 9% [11] Financial Health - Tapestry returned over $2 billion to shareholders through dividends and share repurchases in fiscal 2025, supported by strong free cash flow [12] - The company maintains a gross leverage of 1.6 times adjusted EBITDA, well below the target of under 2.5 times, indicating financial flexibility [12] Future Outlook - For fiscal 2025, Tapestry raised its full-year guidance, expecting net sales of approximately $6.95 billion, representing about 4% year-over-year growth [13] - Earnings per share are projected at $5, indicating high-teens growth over the prior year [13] - Regional sales growth is expected to be 3-4% in North America, approximately 30% in Europe, and low-single-digit growth in Greater China [14] Profitability Expectations - The company anticipates operating margin expansion of about 100 basis points year-over-year, driven by gross margin improvements [15] - Free cash flow for fiscal 2025 is forecasted to be approximately $1.3 billion, supporting continued investments in store enhancements and digital infrastructure [15]

Group 1: Market Trends - Several luxury brands are adjusting their strategies in the Chinese market, with Gucci closing 6 stores in a year and Burberry's sales in Greater China declining by 21% year-on-year [1] - The Zegna Group reported a 14.5% decrease in revenue in China, and a total of 14 stores were closed by six top luxury brands in mainland China throughout 2024 [1] - Bain & Company forecasts a 2% decline in global personal luxury goods consumption in 2024, marking the first drop in a decade [1] Group 2: Brand Strategy Insights - Zhang Chunyu, a brand management expert, emphasizes the importance of establishing genuine connections with consumers rather than merely focusing on product sales [1][3] - The shift from heavy flavors to lighter, more refreshing tastes in snack foods reflects changing consumer preferences, as seen in the successful launch of Lay's cucumber-flavored chips [4][5] - Cartier's strategy to reposition its wedding rings involved shifting the narrative from traditional luxury to focusing on emotional connections in relationships, leading to increased consumer engagement [6][7] Group 3: Cultural Relevance - International brands are facing challenges in connecting with Chinese consumers, as traditional marketing approaches feel disconnected [9][10] - The collaboration between Coach and the iconic Chinese brand White Rabbit represents a significant cultural crossover, allowing Coach to resonate more deeply with local consumers [10][11] - The success of this collaboration demonstrates the potential for international brands to use local cultural symbols to create emotional connections with consumers [10][11] Group 4: Brand Growth Principles - Zhang Chunyu has developed a "brand growth principles" methodology that emphasizes understanding consumer needs, establishing strategic brand positions, and ensuring consistent brand expression across all touchpoints [12][13] - This approach aims to transition brands from price competition to value-driven engagement, aligning with modern consumer expectations for brand values and experiences [12][13]

Core Insights - Gen Phoenix has announced an expanded partnership with Tapestry, including a three-year supply agreement and a $15 million investment round led by Material Impact, increasing Tapestry's equity stake to 9.9% [1][5] - The partnership aims to innovate sustainable materials, enhancing the supply chain resilience and aligning with consumer values for sustainability [4][7] Company Overview - Gen Phoenix specializes in sustainable recycled leather fiber materials, utilizing a circular process to transform leather offcuts into premium materials [6][8] - Tapestry is a global house of brands, including Coach, Kate Spade, and Stuart Weitzman, committed to craftsmanship, innovation, and sustainability [9] Partnership Dynamics - The collaboration has evolved into a strategic partnership, focusing on co-creating sustainable solutions and sharing resources such as R&D and design insights [3][4] - The partnership is positioned as a blueprint for integrating material innovation with brand heritage, aiming for a significant impact on the fashion industry's sustainability efforts [3][5] Investment and Growth - Tapestry's investment will enable Gen Phoenix to scale production, expand into new markets, and enhance R&D for fully circular leather solutions [7] - Gen Phoenix's production facility in the U.K. has the capacity to produce over 60 million square feet of material annually, supporting the growing demand for sustainable luxury materials [7][8]

Core Insights - Karthik Sarma, a prominent investor and former Tiger Cub, has shifted his investment focus from Nvidia to Tapestry, a luxury handbag company, indicating a strategic pivot away from AI-related stocks [2][10]. Investment Strategy - Sarma typically holds positions for the long term but recently sold his Nvidia shares after holding them for less than two years, capitalizing on significant price appreciation [3][5]. - The decision to sell Nvidia was influenced by its rising valuation, with the forward P/E ratio exceeding 40, prompting Sarma to take profits [6][8]. Company Performance - Nvidia remains a leading player in the GPU market, but competition may impact its market share in the coming years [7]. - Tapestry, which owns brands like Coach and Kate Spade, has seen Coach account for nearly 80% of its sales, with expectations for improved profitability through strategic management of its brands [11][12]. Financial Metrics - Tapestry's management anticipates free cash flow of $1.3 billion for the current year, an increase from $1.1 billion the previous year, supporting share repurchase initiatives [13]. - Tapestry's stock trades at a forward P/E of 18, significantly lower than Nvidia's 38, although it represents the highest valuation for Tapestry in years [14].

Core Insights - Tapestry, Inc.'s omnichannel strategy enhances customer engagement and drives revenue growth and profitability through the integration of digital and physical retail channels [1][6] Financial Performance - In Q3 of fiscal 2025, direct-to-consumer sales increased by 9% year-over-year, with digital sales growing in the mid-teens and brick-and-mortar sales seeing mid-single-digit growth [2] - Total net sales reached $1,584.6 million, marking a 6.9% year-over-year increase and an 8% growth on a constant-currency basis [2] Customer Engagement - The omnichannel model improves customer experience and captures full-price demand across various touchpoints, particularly appealing to Gen Z consumers through innovative retail formats [3] - Tapestry acquired over 1.2 million customers in North America in Q3, with two-thirds being Gen Z and Millennials, indicating strong future lifetime value [5] Marketing Strategy - Marketing investments have increased to nearly 10% of sales, up from 3-4% pre-pandemic, focusing on effective media planning and emotional storytelling [4] Valuation Metrics - Tapestry is currently trading at a forward P/E multiple of 16.93X, which is lower than the Retail-Apparel and Shoes industry's average of 17.99X and the Retail-Wholesale sector's average of 24.97X [7] Stock Performance - Tapestry's shares have risen by 44.3% over the past three months, outperforming the Zacks industry growth of 25.5% and the S&P 500 index's growth of 18.2% during the same period [11] - The stock closed at $92.21, near its 52-week high of $93.48, and is trading above its 50 and 200-day SMAs of $80.65 and $67.92, respectively [14] Earnings Estimates - The Zacks Consensus Estimate for Tapestry's earnings has increased by seven cents to $5.05 per share for the current fiscal year, indicating a year-over-year growth of 17.7% [16]

Group 1 - FGI Industries Ltd. is part of the Retail-Wholesale group, which ranks 12 out of 16 in the Zacks Sector Rank [2] - FGI Industries Ltd. has a Zacks Rank of 1 (Strong Buy), indicating a favorable outlook for the stock [3] - The Zacks Consensus Estimate for FGI's full-year earnings has increased by 100% in the past quarter, reflecting improved analyst sentiment [4] Group 2 - FGI Industries Ltd. has returned 5.2% year-to-date, outperforming the Retail-Wholesale sector average return of 4.1% [4] - FGI belongs to the Retail - Home Furnishings industry, which is ranked 90 in the Zacks Industry Rank, while this industry has seen an average loss of 8.6% this year [6] - Tapestry, another stock in the Retail-Wholesale sector, has a year-to-date return of 41.2% and a Zacks Rank of 2 (Buy) [5][6] Group 3 - Both FGI Industries Ltd. and Tapestry are expected to continue their strong performance, making them noteworthy for investors in the Retail-Wholesale sector [7]

Core Insights - Tapestry, Inc. (TPR) is focusing on international expansion as a key growth strategy, reporting an 8% increase in international revenues at constant currency for Q3 fiscal 2025 [1][9] - Europe has shown exceptional performance with a 35% revenue growth rate, driven by strong local consumer demand and significant customer acquisition, particularly among Gen Z [2][9] - The Asia-Pacific region saw a 4% revenue increase, with Greater China achieving 5% growth, attributed to targeted marketing towards younger consumers and strong brand positioning [3][9] International Growth - Tapestry's supply chain is diversified, with approximately 70% of manufacturing outside China, primarily in Vietnam, Cambodia, and the Philippines, which helps mitigate geopolitical risks [4] - Digital sales have grown at a mid-teens rate, now accounting for about 30% of total revenues, complementing the mid-single-digit growth in brick-and-mortar retail [5] - The Coach brand is a significant driver of international momentum, with successful collections resonating with global consumers, especially Gen Z [6] Financial Outlook - The company raised its fiscal 2025 revenue outlook to $6.95 billion, indicating a 4% growth from the previous year, with expectations of 30% growth in Europe and low-single-digit growth in Greater China [7][9] - TPR is currently trading at a forward P/E multiple of 16.08X, which is below the industry average of 17.41X and the Retail-Wholesale sector's average of 24.33X [8] Stock Performance - TPR shares have increased by 18.4% over the past three months, outperforming the Zacks industry growth of 7.3% and the S&P 500 index's growth of 5.2% [11] - As of the latest close, TPR stock is trading at $87.26, which is 4% below its 52-week high of $90.85 [12] Earnings Estimates - The Zacks Consensus Estimate for TPR's earnings has been revised upward, with current fiscal year estimates at $5.05 per share, reflecting a year-over-year growth of 17.7% [15]