TPR - Embedded Expectations Analysis - 2019 02 22
Tapestry, Inc. (TPR:USA) currently trades below corporate averages relative toUAFRS-based (Uniform) Earnings, with a 14.9x Uniform P/E, implying expectations for profitability to fall to historically low levels. Despite management's concerns in the near-term about Chinese sales, marketing efforts, and ERP implementations, these expectations are overly bearish, and upside is likely warranted
Specifically, management may be concerned about partnerships with Chinese brand ambassadors, their ability to sustain Chinese sales growth, and their Stuart Weizman business in Northern China. Also, they may lack confidence in their ability to highlight the brand's core attributes through marketing efforts, and may be concerned about showcasing new products in specialty stores and concepts stores. Furthermore, they may lack confidence in their ability to analyze store density and identify geographical whitespace, and may be concerned about their ERP system implementation progress and costs
That said, market expectations are overly bearish, and even with potential near-term headwinds, long-term outperformance remains warranted should TPR maintain profitability near current levels.
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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