Tapestry (TPR) Stock Forecast & Price Target

Tapestry is projecting a gross margin expansion of 200 basis points to 75.3%, driven by improvements in Average Unit Retail (AUR) and Average Unit Cost (AUC). The company’s digital business, which now represents approximately one-third of revenue, is experiencing healthy growth, with its North American revenues increasing by 4% at constant currency and significant international gains, particularly a 42% increase in Europe. The strong performance is reinforced by consistent AUR growth in Coach, particularly in handbags, with a notable increase in spending from Gen Z and Millennial consumers, indicating robust demand for Tapestry’s product offerings.

Tapestry's fiscal second quarter performance indicated substantial revenue declines, with Kate Spade witnessing a 9.6% year-over-year drop, and Stuart Weitzman experiencing a 15.2% decline, primarily due to weak consumer demand in key markets like Greater China and North America. These deteriorating sales figures come amid broader concerns regarding the company's ability to effectively execute growth initiatives while facing risks such as increased consumer spending pullback, foreign exchange volatility, and potential long-term impacts from COVID-19 disruptions. Furthermore, Tapestry's heavy reliance on Coach for approximately 80% of its sales and over 90% of its operating profit raises additional concerns about the company's financial stability if current trends continue.