Coach Captures Gen Z Wallets, Drives Tapestry's EPS Upgrade, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Tapestry Inc TPR with a price forecast of $92.

Tapestry remains strong despite a challenging macroeconomic environment, benefiting from solid revenue growth and effective cost controls, said the analyst.

The company’s third-quarter performance was driven by broad geographical growth (excluding Japan) and significant gross margin improvements.

Coach’s brand elevation strategy delivered strong results, particularly in leather goods and average unit retail (AUR) gains.

Tapestry also raised its FY25 EPS guidance for the third consecutive quarter, surpassing prior estimates. This increase, coming after a third-quarter EPS beat, reflects positive adjustments in tariff policies.

The company continues to show resilience despite global luxury market softness, noted the analyst.

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Coach continues to excel, driven by strong new customer acquisition, particularly Gen Z, and impressive performance in its core leather goods category. The brand achieved a 15% constant currency revenue increase in third quarter, with standout products like the Tabby Shoulder Bag 26 and the new Chain Tabby silhouette driving global success.

This focus on younger consumers is expected to benefit the company long-term, as Gen Z and Millennials are projected to drive most consumption in this category by 2030.

The younger demographic is also influencing other customer segments, contributing to growth across various age groups and income levels.

Tapestry’s strong direct-to-consumer (DTC) channel allows it to quickly adjust to demand signals and mitigate risks, especially in response to tariff pressures.

The company sources 70% of its products from Vietnam, Cambodia and the Philippines, with minimal exposure to China. Over the past year, about $900 million in cost of goods sold was related to U.S. imports, with a potential $90 million headwind from a 10% tariff.

Tapestry has proactively managed its inventory and supply chain to minimize exposure to tariffs and boost efficiencies with suppliers. Additionally, the company continues to raise average unit retail (AUR) prices, successfully driving value and protecting margins, noted the analyst.

TPR Price Action: Tapestry shares traded higher by 0.50% at $77.93 at publication on Friday.

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