Will Tapestry’s Stock Trade Higher Following Q3 Results?

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TPR: Tapestry logo
TPR
Tapestry

Note: Tapestry’s FY’22 ended on July 2, 2022.

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 third-quarter results on Thursday, May 11. We expect the apparel retailer stock to trade higher post the fiscal Q3 release with revenues and earnings beating expectations marginally. Despite the increase in transportation costs and higher inflationary pressures,  revenue and earnings have performed well in the fiscal first half of 2023, continuing the positive trend following the recovery from the year of the pandemic. Also, Coach has a more significant physical presence in China, which is expected to be the key beneficiary of China’s reopening. China’s luxury market is rapidly recovering from the pandemic with greater strength and resilience. It is expected to reach around $112 billion by 2025, or approximately 25% of the total global spending.

Our forecast indicates that Tapestry’s valuation is around $44 a share, which is 15% higher than the current market price. Look at our interactive dashboard analysis on Tapestry’s Earnings Preview: What To Expect in Fiscal Q3? for more details.

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

Trefis estimates TPR’s Q3 2023 revenues to be around $1.54 Bil, marginally ahead of the consensus estimate. In the fiscal first half of 2023, TPR reported sales of $3.5 billion, down 2% year-over-year (y-o-y). Sales in Japan and Europe were cited as particularly strong in the holiday quarter, helping to offset weakness in China. For the full year, we now forecast Tapestry Revenues to be around $6.6 billion for fiscal 2023, down marginally y-o-y. The company set some ambitious targets for FY 2025, forecasting $8 billion in revenue by that time along with over $5 in EPS by that period. Each of its three brands is also expected to retain strong margins through the next three years for an overall operating margin in the area of 19%, 100 basis points above FY 2022 levels.

2) EPS likely to marginally beat the consensus estimates

TPR’s Q3 2023 earnings per share (EPS) is expected to be 61 cents per Trefis analysis, slightly above the consensus estimate of 59 cents. TPR’s earnings of $2.14 per share were up 10% y-o-y during the first six months of the year.

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

Going by our Tapestry’s Valuation, with an EPS estimate of around $3.76 and a P/E multiple of close to 11.8x in fiscal 2023, this translates into a price of $44, which is 15% higher than 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.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 TPR Return -6% 1% 9%
 S&P 500 Return -1% 7% 84%
 Trefis Multi-Strategy Portfolio -1% 7% 238%

[1] Month-to-date and year-to-date as of 5/10/2023
[2] Cumulative total returns since the end of 2016

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