Tapestry Stock To Trade Higher Post Fiscal Q2 Results?

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Trefis
TPR: Tapestry logo
TPR
Tapestry

Tapestry (NYSE: TPR), a luxury goods retailer of handbags, shoes, and accessories under the Coach, Kate Spade, and Stuart Weitzman brands, is scheduled to report its fiscal second-quarter results on Thursday, February 10. We expect the apparel retailer stock to trade higher post the fiscal Q2 release with revenues and earnings beating market expectations. It is worth mentioning that revenue trends accelerated compared to pre-pandemic levels, driven by continued growth in China as well as the Digital segment in the fiscal first quarter of 2022. These two key drivers represent a long-term growth opportunity going forward and we expect the company to navigate well based on these trends in the upcoming Q2, as well. After just a single quarter in this fiscal year, Tapestry raised its guidance – it increased its sales target from $6.4 billion to $6.6 billion, which would be a record number for the company. On the bottom line, the company increased its projected range for earnings per share from $3.30 to $3.35 up to a range of $3.45 to $3.50.

Our forecast indicates that Tapestry’s valuation is around $47 a share, which is 22% higher than the current market price of $39. Look at our interactive dashboard analysis on Tapestry’s Earnings Preview: What To Expect in Fiscal Q2? for more details.

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(1) Revenues expected to be well ahead of consensus estimates

Trefis estimates TPR’s Q2 2022 revenues to be around $2.1 Bil, 6% ahead of the consensus estimate. The company’s revenue grew 26% year-over-year (y-o-y) in fiscal Q1 and was also up 9% compared to pre-pandemic 2019 levels. Regional highlights included North American sales growth of 40% and growth of 25% in China. Its gross margin increased by approximately 140 basis points (bps) y-o-y and 450 bps from 2019 driven by higher average unit retail price at each brand.

2) EPS likely to comfortably beat the consensus estimates

TPR’s Q2 2022 ear1nings per share (EPS) is expected to be $1.25 per Trefis analysis, also 6% higher than the consensus estimate of $1.18. In Q1, the retailer’s adjusted earnings per share (EPS) came in at $0.82, up from $0.58 a year ago.

For the full year, we now forecast Tapestry Revenues to be $6.6 billion for fiscal 2022, up 15% y-o-y. We also expect EPS to come in at $3.56, up 21% y-o-y.

(3) Stock price estimate higher than the current market price

Going by our Tapestry’s Valuation, with an EPS estimate of around $3.56 and a P/E multiple of close to 13.2x in fiscal 2022, this translates into a price of $47, which is 22% higher than the current market price of around $39.

It is helpful to see how its peers stack up. TPR Peers shows how Tapestry compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Feb 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 TPR Return 2% -5% 10%
 S&P 500 Return -1% -6% 100%
 Trefis MS Portfolio Return 0% -10% 255%

[1] Month-to-date and year-to-date as of 2/8/2022
[2] Cumulative total returns since the end of 2016

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