TPR: Tapestry, Inc. - Neutral Outlook, Mixed Signals

Tapestry, Inc. operates as a house of accessories and lifestyle brands, uniting 'Coach' and 'kate spade new york'. Each brand functions independently, focusing on distinct products and customer experiences. The company's core business involves designing, marketing, and distributing accessories and lifestyle collections through direct-to-consumer (DTC), wholesale, and licensing channels. 'Coach' offers accessories and lifestyle collections. 'Kate Spade' provides colorful and optimistic designs across handbags, ready-to-wear, jewelry, and home decor. Tapestry targets a broad customer base through retail stores, outlet stores, e-commerce sites, and wholesale partnerships, aiming to build lasting customer relationships and deliver compelling omni-channel experiences. The company differentiates itself by leveraging its brand recognition, focusing on fashion innovation, and powering global growth through balanced regional strategies.

TPR's technical outlook is mildly bearish. The recent price action shows a clear downtrend from a high of $118.56 in mid-October to the current price of $106.28. The price has fallen below the 21-day EMA, which now acts as resistance. The 50-day SMA is at 110.58, and the price is trending downward toward it, suggesting further potential for losses. The MACD is negative and diverging further below its signal line, indicating increasing bearish momentum. The RSI is at 34.66, indicating the stock is oversold, which could lead to a short-term bounce; however, the overall downtrend suggests this would likely be a temporary reprieve. Although the Stochastic Oscillator is showing oversold conditions, it has not yet confirmed a bullish divergence. The ADX is relatively low at 16.71, indicating a weak trend, but the recent price action suggests the bears are gaining control. Therefore, TPR is likely to continue its downtrend over the next 1-3 months, potentially testing lower support levels.

Tapestry's MD&A presents a mixed but overall stable picture. `Net sales` for the third quarter of fiscal 2025 increased by 6.9% to $1.58 billion compared to $1.48 billion in the prior year, and for the nine-month period, `Net sales` increased 4.1% to $5.29 billion. The `Gross profit` margin increased to 76.1% for the quarter, up from 74.7% in the same period last year, attributed to 'net pricing improvements.' For the nine-month period, gross margin increased 240 basis points to 75.2%. `Net cash provided by operating activities` decreased $229.8 million for the nine-month period to $769.8 million, primarily due to changes in operating assets and liabilities. The company is selling the Stuart Weitzman business for $105.0 million, expected to close in the summer of 2025. Management acknowledges a 'challenging and volatile' macroeconomic environment and currency fluctuations impacting net sales by $22.5 million for the quarter. They are closely monitoring these trends and taking strategic actions, but anticipate a potential 'material negative impact' on results of operations in fiscal 2026 and beyond depending on trade negotiations. The company is prepared to mitigate this negative impact. Tapestry terminated the Capri acquisition, incurring significant costs, including a $45.1 million reimbursement to Capri. They also redeemed all outstanding Capri Acquisition Senior Notes.

Tapestry's earnings call paints a moderately bullish picture, underpinned by strong performance and strategic brand management. Joanne Crevoiserat highlighted a 'breakout year' with $7 billion in revenue and adjusted EPS of $5.10. Coach's success is a key driver, with a 10% revenue increase for the year and a 13% constant currency top-line gain in Q4. Todd Kahn noted an acceleration from the Q4 exit rate into the new quarter, driven by lower promotions year-on-year, demonstrating brand heat. New customer acquisition is strong, particularly with Gen Z and millennials. However, the company faces headwinds from tariffs, expected to impact profitability by $160 million. Despite this, Tapestry is guiding for mid-single-digit revenue growth and operating margin expansion. While Kate Spade is undergoing a strategic reset, Coach is expected to maintain its operating margin even with tariff pressure. The board authorized a 14% quarterly dividend increase, signaling confidence in future performance.

TPR's financial performance reveals a concerning trend. While revenue has fluctuated, it ended lower than where it began, decreasing from $1513.2M in Q1 2024 to $1723.2M in Q4 2025, after peaking at $2195.4M in Q2 2025. The gross profit ratio has remained relatively stable, hovering around 0.7, but net income has swung dramatically, with the most recent quarter showing a significant net loss of -$517.1M. Operating cash flow has been highly volatile, with a recent value of $446.8M in Q4 2025, this follows a period of lower and unstable cash flow. A significant area of concern is the company's debt, which has increased substantially from $3247.2M in Q1 2024 to $3899.2M in Q4 2025. The combination of increased debt, volatile cash flow, and a large net loss in the most recent quarter raises substantial concerns about TPR's near-term financial health and sustainability.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.