The ongoing economic recovery amid market reopening and improving labor market conditions has lifted consumer confidence and people are once again spending on discretionary items. The pandemic-relief package and vaccination drive are also contributing to the demand recovery.
Tapestry, Inc. (NYSE: TPR), a leading fashion and lifestyle brands company, registered strong sales growth this year, to the extent that the latest quarterly numbers even surpassed the pre-pandemic levels. Having tackled supply chain issues effectively ahead of the holiday season, the company looks to strengthen the business further in fiscal 2022.
The New York-based firm, which owns high-end handbag brand Coach New York, adopted prompt measures to ramp up its eCommerce capabilities after being hit by the pandemic. The other leading business divisions are luxury apparel and accessory brands Stuart Weitzman and Kate Spade-New York. The share of digital sales increased steadily even as the customer base continued to expand.
Tapestry’s stock rebounded this month after several weeks of lackluster performance and stayed above its 52-week average. TPR is favorably undervalued and there is ample room for growth. With market watchers predicting a double-digit growth over the next twelve months, the stock is worth keeping on the watch-list, especially in the current inflationary environment.
From Tapestry’s first quarter 2022 earnings conference call:
“Coach continues to stand out even amid external pressures. Customers are engaging with the brand at an increasing rate given the traction of our product and marketing. We’re driving continued momentum as we enter the important holiday quarter. The brand has proven that the foundational changes we’ve made are working and our results are sustainable. We are increasingly confident in our ability to drive both revenue and profit gains for fiscal ’22 and beyond.”
The company is probably leveraging the success of its Acceleration Program, with focus on streamlining the business and enhancing the digital channels with the support of data and analytics. The data-driven model helps in developing targeted products and achieving marketing and pricing efficiency.
It is worth noting that eCommerce sales grew about 50% in the latest quarter, aided by continued strength in North America and China. SG&A expenses, as a percentage of sales, were almost flat year-over-year. A cut-down in promotional activities is also having a positive effect on margins.
Profitability improved and the numbers topped expectations in recent quarters as the company shrugged off the COVID-induced headwinds, which had dragged the bottom-line into negative territory last year. In the September quarter, Net income was almost flat at $227 million but exceeded analysts’ estimates. Net sales increased 26% to $1.48 billion and topped experts’ projections. Taking a cue from the positive outcome, Tapestry executives raised their full-year guidance.
After dipping to multi-year lows in the first half of 2020, TPR bounced back towards the end of the year and maintained the uptrend since then. In the past twelve months, its value nearly doubled. The stock traded slightly lower early Monday, after closing the previous session at $45.53.
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