Note: Tapestry’s FY’23 ended July 1, 2023.
Tapestry (NYSE: TPR), a luxury goods retailer of handbags, shoes, and accessories under the Coach, Kate Spade, and Stuart Weitzman brands, is scheduled to report its fiscal first-quarter results on Thursday, November 9. We expect the apparel retailer’s stock to trade higher post the fiscal Q1 release with revenues and earnings beating expectations. 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 below $30 in the weeks that followed. That said, the Tapestry- Capri deal will create a huge portfolio of luxury brands as Tapestry’s Coach, Kate Spade, and Stuart Weitzman brands will be combined with Capri’s Versace, Jimmy Choo, and Michael Kors brands. Also, Coach has a more significant physical presence in China – where the luxury market is rapidly recovering from the pandemic with greater strength and resilience. It is expected to reach around $112 billion by 2025, or approximately 25% of the total global spending.
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