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TPR – CDS 97bps, Base Case iCDS 76bps, Negative Case iCDS 87bps, 2027 4.125% Bond YTW of 2.402%, iYTW of 1.602%, Baa2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

September 3, 2021

  • Cash bond markets are overstating TPR’s credit risk with a YTW of 2.402% relative to an Intrinsic YTW of 1.602%
  • Incentives Dictate Behavior™ analysis highlights mostly positive signals for TPR equity holders. Management’s compensation framework should drive them to focus on all three value drivers; asset efficiency, margin expansion, and revenue growth, which may lead to Uniform ROA improvement and higher cash flows available for servicing obligations. In addition, management members are not well-compensated in a change-in-control scenario, indicating they are unlikely to pursue a sale or accept a buyout of the firm, limiting event risk
  • Earnings Call Forensics™ analysis of the firm’s Q4 2021 earnings call (8/19) highlights that management is confident their AUR and gross margin will continue benefiting from recent structural changes