Categories Analysis, Earnings, LATEST, Retail

Earnings preview: Tapestry set to come out with flying colors once again

The fact that Tapestry (TPR) managed to stay consistent in the highly competitive and crowded retail sector makes the stock an ideal choice for long-term investors. When the luxury apparel retailer reports its fourth-quarter results on August 14, analysts will be looking for earnings of $0.573 per share, up from $0.50 per share posted in the comparable period last year. The estimate for sales is $1.47 billion, which represents a 30% growth from the year-ago quarter. Going by the recent trend, the results are likely to top the consensus estimate.

In the third quarter, the company’s stock was hit by the unimpressive comparable sale performance of the Kate Spade brand and a bleak outlook for the Stuart Weitzman brand, despite registering better-than-expected overall earnings. Adjusted earnings climbed to 54 cents as sales jumped 33% to $1.32 billion.

While Tapestry’s sales and margins have been under pressure from production delays for quite some time, the management’s efforts to keep pace with the changing retail scenario and foray into new markets prove to be rewarding. In that respect, the future looks bright for the New York-based company that is currently expanding its store network to critical markets and revamping the brand portfolio.

Tapestry’s sales and margins have been under pressure from production delays for quite some time

The recent addition of the Kate Spade and Stuart Weitzman brands is widely viewed as strategic moves that enhanced Tapestry’s transformation into a multi-brand company.

For investors, the primary focus areas this time will be the newly launched smartwatch brand and Coach Create, an innovative offering that allows shoppers to customize bags. The new offerings are expected to complement the ongoing initiatives to expand the e-commerce platform and broaden the international supply chain, amidst mounting competition from online retailers. Still, the muted mall traffic across markets warrants additional promotional activities such as price reduction.

Among peers, last month Carters (CRI) reported better-than-expected earnings for its second quarter. Los Angeles, California-based Guess? (GES) is scheduled to release its second-quarter results on August 22 after the market closes.

Tapestry shares gained about 7% since the beginning of the year, all along witnessing significant volatility. The stock gained about 1% in early trading Monday, continuing the uptrend that began nearly a week ago.

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