Time to Step Back into Tapestry Stock Ahead of the Holidays

Luxury consumer apparel and accessories producer Tapestry (NYSE: TPR) shares have been declining despite a solid fiscal Q4 2021 earnings report that saw 60% YoY growth in Mainland China and triple-digit full-year global digital gains. The high-end retail manufacturer of brands includes Coach, Kate Spade and Stuart Weitzman has transformed its e-commerce and omnichannel funnels out of necessity during the pandemic while bolstering its appeal to the younger Millennials and Gen-Z demographic. The Company has come out of the pandemic as a more optimized organization as evidenced by its turnaround. The reopening trend should continue accelerate with COVID vaccinations. Supply chain issues have plagued other retailers for the upcoming holiday season and could be the underlying reason for the sell-off despite raising fiscal full-year 2022 top and bottom-line revenues. With gross margins hitting 74%, the Company is running on all cylinders. Inflation fears don’t seem to have much of an effect on luxury items. Prudent investors seeking to gain exposure in the higher end luxury fashion segment can watch for opportunistic pullbacks in shares of Tapestry for the holiday shopping season.

Q4 FY Fiscal 2021 Earnings Release

On Aug. 19, 2021, Tapestry released its fourth-quarter fiscal 2021 results for the quarter ending June 2021. The Company reported earnings-per-share (EPS) of $0.74 excluding non-recurring items versus consensus analyst estimates for a profit of $0.69, a $0.05 per share beat. Revenues rose 126% year-over-year (YoY) to $1.62 billion, beating consensus analyst estimates for $1.56 billion. The Company declared a $0.25 per share dividend and intends to raise its dividend rate faster. The Company plans to pay off its July 2022 bonds totaling $400 million. The Company achieved triple-digit fiscal 2021 global digital gains to $1.6 billion in e-commerce sales. Tapestry CEO Joanne Crevoiserat commented, “We delivered standout results in Fiscal 2021 – a transformational year for Tapestry. Through our Acceleration Program, we sharpened our focus on the consumer, leaned into digital and data, and became a more agile organization. We reached customers in new ways and adapted to a rapidly changing environment, fueled by the power of our brands and passionate teams. Importantly, the traction of our strategy is clearly evidenced by our financial performance. We achieved a record annual operating margin as Tapestry, outperforming our expectations across Coach, Kate Spade and Stuart Weitzman, while investing for our future. The year was capped by a successful fourth quarter, highlighted by revenue exceeding pre-pandemic levels led by Digital and China – two areas of significant opportunity.” She continued, “Building on this momentum and the increasing demand for our categories, we are focused on driving our next phase of growth. We are in a position of strength, supported by our clear strategy, compelling brands and differentiated platform. We believe these competitive advantages will enable us to win with consumers and capture market share. Our conviction is underscored by the plans announced today to return over $750 million to shareholders in Fiscal 2022 alone. Overall, we remain confident in our ability to accelerate growth and profitability across our portfolio long-term, enhancing value for all stakeholders.”

Raised Fiscal 2022 Guidance

Tapestry raised EPS guidance for fiscal year 2022 to come in between $3.30 to $3.35 versus $3.18 consensus analyst estimates. The Company sees full-year fiscal 2022 revenues to come in around $6.4 billion compared to the $6.04 billion consensus analyst estimates.

Conference Call Takeaways

CEO Crevoiserat set the tone, “We've sharpened our focus on the consumer and clarified the unique positioning of each of our brands. This drove improvements in key customer metrics, including recruitment, retention, and reactivation. We enhanced our digital capabilities highlighted by our global e-commerce channel, a margin business for Tapestry, reaching approximately $1.6 billion in revenue. Nearly doubling versus prior-year, and over $1 billion ahead of pre-pandemic level. This was fueled by the acquisition of nearly 4 million new customers in North America alone including a growing number of millennial and Gen Z consumers and we sustained double-digit e-commerce sales growth in the fourth quarter even as we lapped more difficult comparisons online. At the same time, we drove continued sequential sales improvement for our global store fleet with operating margins that were once again above pre-pandemic levels.”

China Growth

CEO Crevoiserat commented on its exploding growth in China, “We further strengthened our positioning in China, which still has tremendous runway supported by the growth of the rising middle-class. In fact, Tapestry's business in Greater China reached $1.1 billion in sales this fiscal year, led by over 60% growth on the Mainland. And at the same time, we grew our business with Chinese consumers globally, increasing at a high single-digit rate as compared to pre-pandemic levels. We successfully leveraged data and analytics, embedding capabilities across the Company to enhance our understanding of the customer, increased responsiveness, and drive faster, more effective decision-making.”

TPR Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for TPR stock. The weekly rifle chart has an inverse pup breakdown with a falling 5-period moving average (MA) near the $39.91 Fibonacci (fib) level. The weekly lower Bollinger Bands (BBs) sit at $36.88 as the stochastic daily mini inverse pup gains momentum. The daily rifle chart also has a bearish inverse pup breakdown with lower BBs at $36.87 as the daily stochastic has a mini inverse pup with falling 5-period MA resistance at $38.69. Each bounce attempt has been sold thus making the weekly market structure low (MSL) buy trigger at a lofty $43.63 breakout. Prudent investors can watch for opportunistic pullback levels at the $37.29 fib, $36.44 fib, $35.46 fib, $33.62 fib, $32.46, and the $30.79 fib level. Upside trajectories range from the $47.02 fib up towards the $63.05 fib.