Goldman Sachs Bullish On Tapestry, VF Corp, Tiffany; Says Sell PVH

Goldman Sachs took a bullish stance on three apparel stocks this week, a neutral stance on a luxury outerwear maker and a bearish position on one American clothing company. 

The Analyst

Goldman Sachs’ Alexandra Walvis initiated the following coverage: 

• Tapestry Inc TPR: initiated with a Buy and $56 price target
• VF Corp VFC: initiated with a Buy and $96 price target
• Tiffany & Co. TIF: initiated with a Buy and $165 price target
• Canada Goose Holdings Inc GOOS: initiated with a Neutral and $92 price target
• PVH Corp PVH: initiated with a Sell and U.S. dollar equivalent price target of $69.15. 

The Thesis

Goldman Sachs sees multiple tailwinds ahead for its apparel and accessories coverage, including strong product cycles, faster fashion cycles, faster supply chains and digital enabling of director-to-consumer communication and commerce, Walvis said in a Monday note. 

Tapestry, Tiffany Among Goldman's 'Best Ideas' 

Goldman Sachs added Tapestry to its Americas Conviction List, calling it an undervalued growth story with an attractive risk-reward profile and valuation.

“Coach is a healthy brand with strong control, Kate Spade is poised for an inflection in growth and these tailwinds outstrip the challenges at Stuart Weitzman,” Walvis said. 

The analyst also sees upside in potential future acquisitions for Tapestry.

New creative direction is breathing life into Tiffany & Co, the analyst said. After a long period of lackluster growth, new management is creating an acceleration in brand momentum at the apparel retailer, she said. 

VF Corp is an underappreciated growth asset comprised of brands with momentum like Vans and ones with turnaround potential like The North Face and Wrangler. The company could be boosted by a channel shift in digital, Walvis said, adding that M&A could also be a potential catalyst.

Walvis is bearish on PVH Corp. The company has benefited from Calvin Klein and Tommy Hilfiger growth, but its momentum appears to be peaking as a number of tailwinds fade, she said. 

PVH's recent growth has been driven by share gains in wholesale, which is viewed as less favorable than a retail-led growth strategy, according to Goldman Sachs. 

Canada Goose Product Expansion Should Drive Growth

Canada Goose has the most margin upside in Walvis' coverage, and it's driven by a shift to direct-to-consumer, after launching e-commerce sites and "highly productive stores," the analyst said. 

Canada Goose is an underpenetrated brand in spring wear and has the fastest growth profile in Walvis' coverage, “with considerable pent-up demand in existing distribution channels and opportunities from new product and geographies,” she said. 

Canada Goose could capitalize on its notoriously loyal following if it continues to boost its product lineup, the analyst said. 

“The brand’s point of difference based on craftsmanship, product quality and protection from the elements attracts a growing loyal following; 84 percent of customers are likely to make a repeat purchase according to GOOS’s spring investor presentation." 

Related Links:

Barclays: Canada Goose Is Taking Flight

UBS Initiates Coverage On Apparel Retailers, Calls Aerie A $2 Billion Brand

Photo by Fashionmouse/Wikimedia.