Note: Tapestry’s FY’23 ended on July 1, 2023.
After a 26% fall year-to-date, at the current price of around $29 per share, we believe Tapestry (NYSE: TPR), a luxury goods retailer of handbags, shoes, and accessories could see long-term growth. TPR stock has declined from around $38 to $28 YTD, compared to an 11% rise in the S&P index. Tapestry’s organic improvements haven’t resulted in increased share prices due to the compression of valuation multiples. To add to this, the company announced the acquisition of Capri Holdings, formerly known as Michael Kors, in a transformative deal. But the deal was not taken well by the market. Tapestry plans to finance the $8.5 billion deal in debt, with its own net debt reported around $900 million, for a $9.4 billion pro forma net debt load. Upon the announcement of the deal, TPR shares fell from the low-forties to $35, and then further to $30 in the weeks that followed. That said, we expect TPR’s stock price to be pressured in the short-term, due to a lot of uncertainty and debt concerns for the upcoming period.
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