Tapestry's Triumphant Quarter: Impressive Q2 Earnings, Optimistic Projections, and Soaring Share Price
Tapestry, Inc. (NYSE: TPR), the fashion powerhouse behind iconic brands like Coach, Kate Spade, and Stuart Weitzman, has been on an impressive roll since the beginning of 2024. Its stock has soared, easily outpacing the S&P 500's modest 27% gain, with a staggering 120% increase as of January 14, 2025. Even its closest competitor, Ralph Lauren (NYSE: RL), has only managed a meager 20% raise during the same period.
The company's stellar Q2 results, coupled with a positive forecast for full-year 2025, have fueled TPR's growth surge. Bye-bye to the previous EPS expectation of $4.50-$4.55, welcome to the new expected range of $4.85-$4.90. And get ready for an estimated revenue of $6.85 billion, up from the initially anticipated 1-2% increase, now projected as a 3% year-on-year rise.
The Coach brand has been the main driving force behind Tapestry's success, with steady sales holding strong at $1.3 billion. Tapestry's international sales also saw an impressive 6% growth at constant currency in FY24, backed by substantial increases in various regions, including Europe, Other Asia, Japan, and Greater China.
TPR's direct-to-consumer sales have also been performing well, with a stable performance during FY24 at the same level as the previous year, and a 4% increase at constant currency in Q2 2025.
Gross margin expansion has also played a significant role in Tapestry's growth, with a 250-basis-point increase in FY24, attributable to lower freight expense, operational outperformance, and favorable foreign exchange rates. Q2 2025 saw even more impressive growth, with a 270-basis-point increase, largely thanks to a 260-basis-point operational outperformance and a 20-basis-point benefit from lower freight expense.
Tapestry's strategic focus on digital growth and omnichannel experiences has paid off, with revenue triple pre-pandemic levels, now contributing 30% of total sales. Digital sales have grown high single-digits and brick and mortar stores have seen a low single-digit increase, showing a strong online presence and customer engagement.
In 2021, Tapestry made headlines with the acquisition of Capri Holdings, giving it control over the Michael Kors, Versace, and Jimmy Choo brands. This strategic move has significantly expanded Tapestry's portfolio and market position, and is expected to contribute to accelerated growth in the future.
The market has taken note of Tapestry's impressive expansion, leading several analysts to upgrade the stock's price target. Redburn-Atlantic set a new target of $110.00, highlighting the Coach brand's accelerated momentum and potential for further sales growth and margin expansion.
All of this growth and expansion have also translated into operational efficiency and strong cash flow generation for Tapestry, with a robust balance sheet providing flexibility for value creation and shareholder returns. In fact, free cash flow has topped $1.2 billion, a clear indication of Tapestry's financial health and growth potential.
So, is there more upside for Tapestry stocks? With its strong performance and bullish outlook, it would certainly seem so. And for those seeking diversified, lower-volatility exposure, the High Quality Portfolio can be an excellent choice, with an impressive 91% return since inception and a track record of outperforming the S&P 500.
Tapestry, Inc.'s TPR revenue significantly increased, exceeding the initial expectation by 3%, reaching an estimated $6.85 billion for full-year 2025. Due to the success of the TPR brand, its stock valuation on the NYSE also saw an uptick, with a 120% increase as of January 14, 2025. The company's acquisition of Capri Holdings in 2021, which includes the Michael Kors, Versace, and Jimmy Choo brands, has contributed to TPR's expansion and is anticipated to fuel further growth. Analyst Redburn-Atlantic upgraded TPR's stock price target to $110.00, citing the Coach brand's accelerated momentum and potential for further sales growth and margin expansion.
