Tapestry (TPR), the parent company of Coach, reported better-than-expected results for the second quarter of Fiscal 2025 and raised its full-year guidance. The company benefited from strong demand for its Coach brand. Following the release of Q2 FY25 results, TPR stock surged over 12% on Thursday.
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The company reported adjusted earnings per share of $2, which beat analysts’ expectations of $1.75 and increased 22.7% year-over-year. Also, revenue rose 5% to $2.20 billion, surpassing the Street’s estimates of $2.11 billion.
These strong results came in after Tapestry abandoned its merger with Capri Holdings (CPRI) in November 2024 following a court battle. This merger would have combined iconic fashion brands like Coach, Kate Spade, and Stuart Weitzman with Versace, Jimmy Choo, and Michael Kors.
Coach Drives Tapestry’s Q2 Sales Higher
Tapestry’s strong performance was driven primarily by the Coach brand, which delivered a 10% increase in revenue. The top line growth was fueled by new product innovations, a 4% rise in direct-to-consumer sales, and strong digital channel sales.
Meanwhile, the Kate Spade brand saw a 10% revenue decline and the Stuart Weitzman brand witnessed a 15% drop, reflecting challenges in these segments.
Nevertheless, the company’s customer base improved in Q2, particularly among younger people. In North America, Tapestry added over 2.7 million new customers, with the majority being Gen Z and Millennials.
Tapestry Raises Fiscal 2025 Outlook
Based on the strong Q2 FY25 results, Tapestry raised its Fiscal 2025 earnings guidance to a range of $4.85 to $4.90 per share, up from the previous range of $4.50 to $4.55. The company also increased its revenue forecast to $6.85 billion from its prior estimate of over $6.75 billion.
Additionally, Tapestry plans to return over $2 billion, reflecting 100% of free cash flow, to shareholders in FY25 through dividends and share buybacks.
The company remains focused on driving growth at Coach while implementing strategies to improve performance at Kate Spade and Stuart Weitzman. Also, Tapestry anticipates its operational efficiencies and strategic market initiatives will continue to support performance.
Analysts Bullish Post Q2 Results
Following the release of results, two analysts reiterated a Buy rating on Tapestry stock.
Among these, J.P. Morgan analyst Matthew Boss noted that Tapestry’s efforts, like marketing reinvestments and productivity boosts, might keep growing revenue and earnings per share. Also, the company’s strong balance sheet, cash holdings, and share buyback program further enhance its positive outlook, making it a good investment.
Is Tapestry a Good Stock to Buy?
Turning to Wall Street, Tapestry stock has a Strong Buy consensus rating based on 13 Buys and four Holds assigned in the last three months. At $78.19, the average Tapestry price target implies 4.88% downside potential. TPR stock has gained 129.74% in the past six months.
Investors should note that estimates will likely change following today’s earnings report.
