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Tapestry Stock Soared on Q3 Earnings and Share Buyback Plan

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May. 10 2019, Published 6:02 p.m. ET

Fiscal Q3 results

Tapestry (TPR) stock rose 8.5% on May 9 after the company announced better-than-expected earnings for the third quarter of fiscal 2019 and a new share repurchase plan. The owner of luxury brands Kate Spade, Coach, and Stuart Weitzman announced a $1 billion share repurchase plan.

Tapestry’s net sales grew 0.7% to $1.33 billion against analysts’ forecast of $1.34 billion. Tapestry’s top-line growth was driven by strength in the Kate Spade brand. Excluding the impact of currency headwinds, Tapestry’s sales grew 2% in the third quarter. The Kate Spade and Stuart Weitzman brands reported a 4.4% and 1.8% rise in the third-quarter net sales, partially offset by a 0.4% decline in the Coach sales. Improvement in Kate Spade’s sales was attributed to the new collection of the brand’s creative director Nicola Glass.

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Tapestry’s adjusted EPS of $0.42 in the third quarter exceeded analysts’ estimate of $0.41 but declined 22.2% on a year-over-year basis. The decline in the company’s adjusted EPS was mainly due to higher expenses to support the company’s growth initiatives.

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Outlook

Tapestry continues to expect its full-year fiscal 2019 EPS in the range of $2.55 to $2.60. The company expects its sales to rise by low to mid-single digits in fiscal 2019.

Tapestry stock declined 1.2% on a YTD basis as of May 9. In comparison, the stock of closest rival Capri Holdings (CPRI) has risen 13.6%, while the S&P 500 Index moved up by 14.5% on a YTD basis.

Tapestry is optimistic about returning to double-digit operating income and EPS growth in fiscal 2020.

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