Narrow-Moat Tapestry’s Coach Holds Brand Strength Through Turnaround; Shares Still Attractive
We are maintaining our narrow-moat rating on Tapestry but reduce our fair value estimate to $44 from $45, and still view shares as attractive. Although we expect Coach will account for most of Tapestry’s revenue and profits for many years, Kate Spade and Stuart Weitzman are important parts of Tapestry’s strategy. We have reduced our gross margin expectations for Tapestry, having lowered our 10-year forecast of average annual gross margins to 67.5% from 68.1%. We also have reduced our forecast of...Tapestry is a lifestyle company. The company's primary product offerings, manufactured by third-party suppliers, include women's and men's bags, small leather goods, footwear, ready-to-wear including outerwear, watches, weekend and travel accessories, scarves, eyewear, fragrance, jewelry and other lifestyle products. The company has three reportable segments: Coach, which includes sales of Coach brand products to customers through Coach operated stores; Kate Spade, which includes sales primarily of Kate Spade New York brand products to customers through Kate Spade operated stores; and Stuart Weitzman, which includes sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores.
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