Bernstein reiterates Tapestry stock rating on Coach brand momentum

Bernstein SocGen Group reiterated its Outperform rating and $100 price target on Tapestry (TPR), citing Coach's sustainable brand momentum driven by attracting younger consumers and strong brand health metrics, including increasing average prices and low markdowns. Tapestry's Q3 fiscal year 2025 results surpassed expectations with EPS of $1.03 and revenue of $1.6 billion, leading to raised fiscal 2025 revenue guidance to $6.95 billion and price target increases from BMO, Citi, Raymond James, and Morgan Stanley; Coach's 15% currency-neutral sales increase was a key driver, while Kate Spade's performance lagged.

Analysis

Bernstein SocGen Group's reiteration of an Outperform rating and $100.00 price target for Tapestry Inc. (TPR) highlights the sustained momentum within its Coach brand, a sentiment underpinned by direct engagement with Tapestry's leadership. This positive outlook is substantially validated by Tapestry's third-quarter fiscal year 2025 results, which surpassed analyst expectations with an EPS of $1.03 (versus $0.88 forecasted) and revenue of $1.6 billion (versus $1.53 billion anticipated), prompting an increase in the company's fiscal 2025 revenue guidance to $6.95 billion. The Coach brand's vitality is demonstrated by its success in attracting and retaining younger consumers, its ability to increase average unit retail prices for 18 of the last 20 quarters, low markdown levels, and a broad sales base where no single franchise accounts for over 10% of sales. This robust brand health translated into a 15% currency-neutral sales increase for Coach in Q3 and has enabled Tapestry to achieve a 15-year high gross profit margin of 76.1%. Consequently, TPR's stock has appreciated 30.11% year-to-date and 105.63% over the past year, outperforming the broader luxury sector, and has garnered price target upgrades from multiple firms including BMO ($80), Citi ($94), Raymond James ($85), and Morgan Stanley ($90). Tapestry's financial strategy includes robust shareholder returns, evidenced by a recently completed $2 billion accelerated share repurchase program, and strong free cash flow projections nearing $1.3 billion by fiscal year 2026. While the Kate Spade brand's performance has lagged, revitalization efforts are ongoing, and management does not expect anticipated tariffs to significantly impact fiscal 2025 results. It is worth noting, however, that InvestingPro's AI valuation tools did not identify TPR as a top undervalued stock, suggesting that its current market price, trading at $83.40 within an analyst target range of $64 to $104, may already reflect much of the positive news.

Key Decisions for Investors

• Investors should recognize the strong fundamental drivers at Tapestry, particularly the Coach brand's pricing power and appeal to younger demographics, which support the positive analyst sentiment and recent stock outperformance.
• Monitor the progress of the Kate Spade brand's turnaround efforts, as any significant improvement could provide an additional catalyst for growth, while also considering the stock's valuation in light of its substantial recent appreciation and the current analyst price target consensus.
• Factor in Tapestry's commitment to shareholder returns via share repurchases and its strong free cash flow generation when assessing the overall investment case, alongside the minimal expected impact from anticipated tariffs on FY25 earnings.