TPR Tapestry, Inc.
Coach's strength is real, but the price already assumes peak margins will last.
The story
Tapestry is an accessible-luxury house whose value rests mainly on Coach, which keeps pulling in younger customers with full-price leather goods and is lifting both revenue and gross margin. Kate Spade is still being turned around and Stuart Weitzman has been sold, so the portfolio is now more focused. The company is mature but growing again, generates strong cash, and carries moderate leverage. The brand moat is real, but the current 23.9% operating margin reflects a cyclical peak in pricing power, not a steady state.
These are nearly unchanged from nine days ago. I nudged Y1 growth to 6% and the target margin to 21.5% because TTM revenue of $8.0B (+14%) shows Coach's momentum lasting longer than I had assumed. I still expect margins to fade from 23.9% toward the low 20s as tariffs, promotions and Kate Spade weakness wear the peak down, and none of these moves is material.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 7y |
| Target operating margin | 21.5% |
| Years to target margin | 5 |
| Sales-to-capital | 2.50 |
| Beta | 1.05 |
| Failure probability | 3.0% |
| Cost of capital (WACC) | 9.6% |
| Terminal WACC | 9.4% |
Valuation bridge
| PV of explicit FCFF | 7.84B |
| PV of terminal value | 13.96B |
| Equity value | 19.78B |
| ÷ shares → per share | $99.21 |
News
bearish -0.20 · 8 articles
- 1 Cash-Producing Stock with Solid Fundamentals and 2 Facing Challenges
- MarketBeat Week in Review – 09/21 - 09/25
- Is Tapestry Stock Underperforming the Nasdaq?
- Is PVH Corp. (PVH) Stock A Deep Value Bargain Or A Value Trap?
- Tapestry to sell via Google’s Gemini app, AI Mode
- 3 Reasons TPR is Risky and 1 Stock to Buy Instead
- Capri shares jump as potential buyers circle luxury fashion group
- Coach’s Momentum Powers Tapestry Despite the Stock’s Sharp Pullback
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 8.48B | 6.0% | 23.4% | 1.63B | 192.10M | 1.44B | 1.32B |
| 2 | 8.96B | 5.6% | 23.0% | 1.69B | 189.49M | 1.50B | 1.25B |
| 3 | 9.42B | 5.2% | 22.5% | 1.74B | 185.14M | 1.55B | 1.18B |
| 4 | 9.87B | 4.8% | 22.0% | 1.78B | 179.00M | 1.60B | 1.11B |
| 5 | 10.30B | 4.3% | 21.5% | 1.82B | 171.05M | 1.65B | 1.04B |
| 6 | 10.70B | 3.9% | 21.5% | 1.89B | 161.31M | 1.73B | 996.63M |
| 7 | 11.07B | 3.5% | 21.5% | 1.95B | 149.79M | 1.81B | 950.18M |
Key risks
- Coach demand normalizes after an unusually strong run, compressing full-price selling and margins
- Tariffs and sourcing costs hit gross margin in a category with limited pricing headroom
- Kate Spade keeps declining, requiring more impairments and distracting management
Catalysts
- Continued Coach growth with Gen Z and in China, supporting margins above 22%
- Large buybacks funded by free cash flow and the Stuart Weitzman sale proceeds