Tapestry Earnings: Margin Gains Despite Tough Demand Environment; Shares Attractive

Coach’s high profitability allowed narrow-moat Tapestry to overcome subpar sales for each of its brands in its (March-ended) fiscal 2024 third quarter. The results were something of an afterthought following the news that the US Federal Trade Commission intends to block the firm’s proposed acquisition of no-moat Capri (see our April 23 note). Our assumption remains that Tapestry and Capri will prevail in court as there is little precedent for antitrust action in the apparel and accessories industry. We do not expect to make any material change to our $60 per share fair value estimate on Tapestry, which is based on a post-merger model. Shares are attractive at 50% upside to our valuation.