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Will Tapestry's (TPR) Omnichannel Initiatives Aid Growth?

Tapestry, Inc. TPR, one of the widely recognized names in the Retail - Apparel and Shoes industry, has been making tactical changes to its business operations to adapt and stay relevant in the competitive retail landscape. Its consumer-centric approach, omnichannel capabilities, brand awareness and emphasis on high-growth areas position it well among peers.

Growth Initiatives

Tapestry has been witnessing growth in the omnichannel. This can be attributed to a mid-single-digit jump in store revenues as consumers continue to embrace the return of in-person shopping during the fiscal third quarter. Also, in the aforementioned period, digital sales rose mid-single digits and remained three times of fiscal 2019 level. The company has been expanding its digital distribution channels. It is aiming to enhance curbside or store pickup service as well as contactless payment options and the opportunities to make virtual appointments.

Tapestry’s long-term growth drivers include deepening engagement with consumers, creating innovative and compelling products, venturing into under-penetrated markets and enhancement of digital capacities. The company’s compelling pricing strategy, smaller format locations and cost-effective global sourcing model have been enhancing store productivity.

From growth perspective, China remains one of the prominent markets for Tapestry. The company has been accelerating growth in the region through tailored and innovative product assortments, enhanced marketing and expanded reach across direct channels and third-party online distribution.

Owing to a robust performance in the fiscal third quarter, the company raised its guidance for fiscal 2023. It now envisions revenues to be approximately $6.7 billion for fiscal 2023, which is in line with the prior-year figures. On a constant-currency basis, revenues are estimated to grow 3% year over year. Earlier, the company projected revenues of approximately $6.6 billion for fiscal 2023.

TPR now guided earnings in the band of $3.85-$3.90, representing low-double-digit growth from the prior year on an adjusted basis. The company includes a currency headwind of approximately 40 cents.

Zacks Investment Research
Zacks Investment Research


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Wrapping Up

Tapestry has been facing adverse currency fluctuations for a while now.  Management expects FX pressure of roughly 320 basis points (bps) on the top line and approximately 40 cents a share on the bottom line in fiscal 2023. For the fiscal fourth quarter, management expects FX headwind of approximately 150 bps.

Nevertheless, the tailwinds mentioned above will partially offset such costs faced by the company.

Shares of this Zacks Rank #3 (Hold) company have rallied 14.2% in the past six months against the industry’s decline of 15.8%.

Stocks to Consider

Some top-ranked stocks are Shake Shack Inc. SHAK, The Kroger Co. KR and The TJX Companies TJX.

SHAK has a trailing four-quarter earnings surprise of 11.1%, on average. Shake Shack currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Shake Shacks’ current financial year sales and earnings suggests growth of 21.3% and 141.9%, respectively, from the year-ago reported numbers.

The Kroger Co., which operates in the thin-margin grocery industry, currently has a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for The Kroger’s current financial year sales and earnings suggests growth of 2.5% and 6.6%, respectively, from the year-ago reported numbers.

The TJX Companies is a leading off-price retailer of apparel and home fashions. It currently carries a Zacks Rank of 2. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.

The Zacks Consensus Estimate for TJX’s current financial year sales and earnings suggests growth of 6.2% and 14.5%, respectively, from the year-ago reported numbers.

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