Coach Bags A 32% Upside, But Kate Spade Lags Behind In Tapestry's Playbook

JPMorgan projects a 32% upside for Tapestry (TPR) driven by Coach's strong performance, citing pricing power and new customer acquisition, particularly among Gen-Z and Millennials. While Coach experiences revenue growth through price increases and unit sales, Kate Spade is facing sales declines and a cautious outlook due to macroeconomic uncertainty, creating a divergence in brand performance within Tapestry's portfolio.

Analysis

JPMorgan has issued a bullish outlook on Tapestry Inc. (TPR), projecting a significant 32% upside for the stock by year-end, underpinned by the strong performance of its Coach brand. This positive thesis highlights Coach's resurgence as the primary growth engine for Tapestry, driven by a balanced multi-year revenue growth strategy that includes both increased average unit retail (AUR) prices and sustainable unit sales growth. Management attributes this to improved full-price selling and innovative product lines, which are successfully attracting new Gen-Z and Millennial customers. These younger buyers are showing higher spending per purchase and increased frequency, positively influencing older customers to re-engage. Coach's growth is further supported by strong momentum in footwear and international store expansions, indicating a durable and diversified growth runway. In contrast, the Kate Spade brand is facing headwinds, evidenced by revenue declines this year and cautious fourth-quarter guidance from management, which suggests a drop in sales amid uncertain macroeconomic conditions. Consequently, Tapestry's upside potential, reflective of JPMorgan's $104 price target, is largely dependent on Coach's continued revival and ability to drive growth while Kate Spade navigates its current challenges.

Key Decisions for Investors

• Investors should consider the bullish case for Tapestry (TPR) given JPMorgan's projected 32% upside and $104 price target, primarily driven by the robust turnaround and growth momentum at the Coach brand.
• Closely monitor Coach's ability to sustain its pricing power, product innovation, and appeal to younger demographics, as these factors are critical for realizing Tapestry's growth forecast.
• Evaluate the ongoing underperformance of Kate Spade, as its revenue declines and cautious outlook represent a key risk and a drag on overall group performance; any significant change in Kate Spade's trajectory could impact TPR's valuation.