Tapestry's Improving Trends Despite Challenges Impress This Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Tapestry Inc TPR and raised the price target from $52 to $54.
TPR’s beat and raise are impressive, especially in light of the COVID disruptions in China for the quarter and following Capri Holdings Limited's CPRI significantly disappointing results yesterday, said the analyst.
In addition, the beat was nicely operational, with upside coming from gross margin while sales were only slightly below consensus (and in line with guidance) despite COVID pressures in China through the quarter, added the analyst.
Related: Coach Parent Tapestry Gains On Q2 Bottom-Line Beat, FY23 EPS Outlook Boost
Encouragingly, and in keeping with broader industry commentary, management noted in the release that China had shown a meaningful sequential improvement to-date in Q3 as well, the analyst remarked.
Since December, traffic trends have improved meaningfully in China, particularly around the important Lunar New Year period, with store traffic improving sequentially and performance in line YoY quarter-to-date.
The analyst adds that domestic travel is improving, notably in Macau and Hainan, and there remains further opportunity as international travel recovers.
Also Read: Capri Holdings Reports Q3 Earnings Below Street View; Cuts Q4, FY23 Outlook
The analyst sees TPR as emerging as a leaner, more profitable business, with brands that are now cleaner with marketing and infrastructure support behind them to drive profitable AUR growth.
Price Action: TPR shares are trading lower by 1.01% at $44.26 on the last check Friday.

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