Holy mackerel, have you taken a look at Tapestry (TPR) lately? The former cult-like stock, perhaps better known as Coach prior to the ill-fated (in my view) 2017 name change, has continued a slide that long pre-dated the Covid pandemic. Shares are down about 50% since mid-February, and now trade below 2008/2009 levels. As surprising as that may seem on the surface, when you put it into context- as horrible as the 2008/2009 era economy was, retail remained open for business the entire time- it actually makes sense.
The company was back in the news Tuesday following the seemingly sudden resignation of CEO Jide Zeitlin, reportedly for "personal" reasons, and it sounds like this one might get ugly. TPR named CFO Joanne Crevoiserat interim CEO. Shares were up 4% on the day, but this is not the type of PR that you'd want for your company.
The name change from Coach was driven by the company's broadening of brands through acquisitions, including the May, 2017 purchase of Kate Spade for $2.4 billion. I'm not sure the new name has stuck, and believe the company would be well-served by changing it back to Coach. "Tapestry" simply lacks the brand power that Coach had, but this ship has already sailed.
The company did just over $6 billion in revenue in 2019, an all-time high, but the net profit margin, which was 20.4% in 2013, and 16.3% in 2014, was about 10% last year. That's still a nice margin, but nowhere near it once was. Consensus estimates for next year of $1.59 imply a forward price earnings ratio of about 8.5, and that's with a huge number (28) of analysts following the name.
The latest reported quarter (Q3, ending March 28th) was not a good one, but was a partial Covid quarter. Revenue of $1.07 billion was just under consensus estimates, but down 19.5% versus the same quarter last year, while the loss per share of 27 cents, missed the 11.5 cent estimated loss. The company ended the quarter with $898 million or about $3.25 per share in cash and short-term investments, and $1.6 billion in debt. However, like many other companies, TPR drew down $700 million from its $900 million revolver in May.
If you are enamored by the fat 10+% dividend yield that's some sites are still reporting for TPR, don't be. The company suspended the 33.8 cent quarterly dividend in May, along with its stock buyback program. Again, not an uncommon move in this unprecedented environment.
I've always thought of Coach (Tapestry) as that one store in the outlet mall that seemed to always have a line well out the door. While I am intrigued by the company's apparent move deeper into value territory, I'm still not waiting in line for shares, just yet.