Tapestry shares hold as analyst reiterates buy rating

On Friday, Tapestry Inc. (NYSE:TPR) retained its buy rating and $52.00 price target from TD Cowen, following a performance update. The luxury fashion holding company, known for its Coach brand, delivered a fourth-quarter earnings per share (EPS) of $0.92, surpassing the expected $0.88, attributed to stronger gross margins and a tax benefit. The reported gross margins were 74.9%, higher than the anticipated 74.1%, and the tax benefit contributed approximately $0.02 to the EPS.

Coach, which accounts for 76% of Tapestry's revenue, has outperformed with a 0.2% increase compared to the Street's forecast of a 2.2% decline. This growth is credited to the brand's ability to drive sales and EPS upside through products that resonate with consumers.

Despite the positive performance in the fourth quarter, Tapestry's financial outlook for fiscal year 2025 is slightly below the Street's expectations and the management's original projections.

The analyst's reiteration of the buy rating and price target reflects confidence in Tapestry's brand strength and sales momentum, despite the external economic pressures and strategic adjustments. Tapestry's stock remains under watch as the company navigates the current financial landscape.

Tapestry Inc. has reported a slight increase in revenue and record earnings per share, according to their recent earnings call. The company's revenue grew by 1% on a constant currency basis, driven by growth in international markets, particularly Europe and Asia, despite a sales decline in North America. As part of their strategy, Tapestry's digital business now accounts for nearly 30% of its total revenue.

The company's brands are also demonstrating progress, with Coach achieving record annual revenue, Kate Spade focusing on profit growth, and Stuart Weitzman working towards increasing brand relevancy. Tapestry's outlook for fiscal year 2025 includes an estimated revenue of approximately $6.7 billion and earnings per share between $4.45 and $4.50.

Additionally, the company plans to invest around $190 million in capital expenditures and cloud computing costs.

InvestingPro Insights

Recent data from InvestingPro underscores the financial strengths and potential concerns for Tapestry Inc. (NYSE:TPR) as highlighted by their impressive gross profit margins of 73.29% over the last twelve months as of Q4 2024. This figure aligns with the strong gross margin performance reflected in their latest earnings report. Additionally, Tapestry has showcased its commitment to shareholder returns, having raised its dividend for 3 consecutive years and maintained payments for 16 consecutive years, with a notable dividend yield of 3.57% as of the latest data.

However, analysts have tempered expectations, with 3 analysts revising their earnings predictions downwards for the upcoming period. This caution could be reflective of the challenges Tapestry faces, such as foreign exchange headwinds. Despite these revisions, the company's stock has demonstrated resilience with a strong return over the last five years, and analysts predict the company will be profitable this year, which could be a signal for investors monitoring the stock's performance.

To gain a broader perspective on Tapestry's financial health and future prospects, there are additional InvestingPro Tips available for interested investors. These include insights on debt levels, asset liquidity, and profitability metrics, all of which are crucial for a comprehensive investment decision. Find more expert analysis and tips for Tapestry on InvestingPro.

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