A Pandemic Winner You May Not Have Considered

Tapestry

Chic bags and accessories are always in demand – even during the crisis, and especially during the recovery. As the world recovers from the pandemic, people are clamoring for social interaction. And they want to look good in their post-lockdown social lives. That’s driving demand for boutiques and fine accessory stores. Companies like Tapestry (NYSE:TPR) can benefit from this – as its financials show. 

First, a few words about the company itself. Tapestry (formerly Coach) was founded in 1941 in New York. It operates mainly as an exclusive designer, manufacturer and retailer of handbags and accessories under its flagship Coach New York brand. However, its product range also includes shoes (Tapestry owns the Kate Spade and Stuart Weitzman brands), jewelry, clothing, travel bags and sunglasses. International expansion is underway as the company enters the European and Asian markets. 

Tapestry Margins are Rising

Tapestry’s share price has recovered strongly since the middle of last year. It previously was trading near book value for the first half of the year. 

Tapestry

One particular growth and restructuring initiative, the “Acceleration Program,” has quickly borne fruit. A “digital-first mindset” is a cornerstone of the initiative. An increased presence on social media added 700,000 new e-commerce customers in the U.S. in Q3. The digital sales channel saw triple-digit growth.

The market in China continues to gain importance and also recorded high growth rates (+175% year-on-year and +40% compared to 2019). These positive developments have contributed to a 126% year-over-year increase in revenue. Thanks to low promotional costs and higher average selling prices, gross margin climbed from 57.4 to 71.6%.

Profits are Recovering

After heavy losses in the previous year, Tapestry is back in the black. Operating profit and operating margin are not only over their levels from the prior year, which was heavily impacted by COVID-19, but also over 2019 levels. 

The crown jewel in its portfolio remains the Coach brand, which reported 25% growth and an operating margin of 26.1%. Kate Spade and Weitzman, on the other hand, generated operating losses. Thanks to restructuring measures like the Acceleration Program, there is a good chance that the group will emerge from the crisis with market share gains and higher profitability than before the pandemic. That is impressive. And if that’s not enough for you, the stock pays a 2.48% dividend.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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