December 18, 2018

TPR – Strong fundamentals imply that market expectations for Uniform ROA compression to historical lows is far too bearish, though management has some near-term concerns


  • Tapestry, Inc. (TPR:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.6x Uniform P/E, implying expectations for profitability to fall to historically low levels, which, even despite management’s concerns in the near-term about integration of Kate Spade and headwinds in China, appears unwarranted given improving analyst expectations and recent tactical M&A activity
  • Specifically, management may have concerns about their ability to maintain strong sales growth, and about Chinese luxury spending in the near-term. Additionally, they may have concerns about the strength of their product teams and business analytics, and their ability to leverage their technology and digital platform to enhance the customer experience. Furthermore, they may be concerned about their progress integrating Kate Spade, and about their Make It Mine collection. They may also be concerned about their strategies for Stuart Weitzman, and about their ability to drive long-term benefits through those initiatives. Moreover, they may be exaggerating the synergies they have seen from their integration of Kate Spade so far, and may lack confidence in their ability to grow their men’s sales revenue. In addition, they may be concerned about the negative comparable store sales in China, and about the higher SG&A expenses. Finally, they may be concerned about their directly operated distribution plans by brand, and about the potential for global opportunities across their portfolio
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