April 1, 2019

Valens Research Weekly Equity Idea Highlight for March 20, 2019 – Tapestry, Inc.


Tapestry has been changing their colors operationally, with opportunity for significant return and growth recovery, but the market has not recognized this, and the company appears undervalued

TPR, formerly Coach, saw significant operational headwinds due to brand struggles earlier this decade, and the market still believes those issues will continue going forward. However, since the management change in 2014/2015, and the significant turnover of the C-suite, the company has reformulated their strategy in a new way that points to significant reason for optimism. Following in the LVMH model, a strategy that has not been pursued in the US so far, in buying up high quality luxury brands, sometimes at distressed prices, and running a portfolio approach, the company has already acquired Kate Spade and Stuart Weizman, and plans to continue to pursue this strategy. This has already led to significant potential
UAFRS -based (Uniform) ROA expansion forecast for the next two years, even as the market is pricing in profitability to collapse.

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