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 fourth-quarter results on Thursday, August 18. We expect the apparel retailer stock to see little to no movement post the fiscal Q4 release with revenues beating expectations but earnings missing marginally. The retailer’s revenue trends have accelerated compared to pre-pandemic levels, driven by continued growth in China as well as the Digital segment so far in fiscal 2022. While China’s recent Covid outbreak may impact the company’s FYQ4 margins (as it accounts for about 20% of revenues), we still expect the company to navigate well – thanks to its Acceleration Program. This program is focused on cost-cutting, improving margins, and prioritizing more on digitization. The retailer achieved approximately $200 million of gross run-rate expense savings in fiscal 2021 and is on track to realize gross run-rate savings of $300 million in FY 2022.
Tapestry’s fiscal 2022 outlook reflects a $0.25 to $0.30 headwind from incremental Covid-related pressure in China and changes to trade regulations. That said, China’s demand issues are complemented by supply issues such as production delays and inflation-induced price hikes, which reduced margins by 170 basis points from last year in FYQ3. Even so, gross margins for the luxury brand remained extremely high at 69.9% in Q3.
Our forecast indicates that Tapestry’s valuation is around $36 a share, which is 3% lower than the current market price. Look at our interactive dashboard analysis on Tapestry’s Earnings Preview: What To Expect in Fiscal Q4? for more details.
(1) Revenues expected to be slightly ahead of consensus estimates
Trefis estimates TPR’s Q4 2022 revenues to be around $1.7 Bil, marginally ahead of the consensus estimate. In Q3, the company’s revenue grew 13% year-over-year (y-o-y) to $1.4 billion. The retailer continued to leverage its digital scale to bring in new customers and develop a sustainable advertising budget during the quarter. It’s worth noting that the company acquired 1.4 million new customers and enjoyed a 13% increase in sales despite slowdowns in Asia. For the full year, we now forecast Tapestry Revenues to be $6.8 billion for fiscal 2022, up 18% y-o-y.
2) EPS likely to marginally miss the consensus estimates
TPR’s Q4 2022 ear1nings per share (EPS) is expected to be 75 cents per Trefis analysis, slightly below the consensus estimate of 77 cents. In Q3, the retailer’s adjusted earnings per share (EPS) came in at 51 cents, flat from a year ago levels.
(3) Stock price estimate appropriately priced with the current market price
Going by our Tapestry’s Valuation, with an EPS estimate of around $3.47 and a P/E multiple of close to 10.4x in fiscal 2022, this translates into a price of $36, which is fairly priced compared to the current market price.
It is helpful to see how its peers stack up. TPR Peers shows how Tapestry’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
With inflation rising and the Fed raising interest rates, Tapestry has fallen 9% this year. Can it drop more? See how low can TPR stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||4%||-10%||92%|
|Trefis Multi-Strategy Portfolio||8%||-7%||268%|
 Month-to-date and year-to-date as of 8/17/2022
 Cumulative total returns since the end of 2016
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