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Here's How Tapestry (TPR) Looks Just Ahead of Q1 Earnings

Tapestry, Inc. TPR is likely to register a decline in the top line when it reports first-quarter fiscal 2021 numbers on Oct 29, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $1,056 million, suggesting a decline of 22.2% from the prior-year reported figure. Nonetheless, we note that the rate of sales decline is likely to decelerate sharply on a sequential basis. The company had witnessed a decline of 53% in the last-reported quarter.

The Zacks Consensus Estimate for earnings for the quarter under review has increased by a penny to 23 cents over the past seven days. The current Zacks Consensus Estimate indicates that the company is likely to swing back to profit following a loss in the last-reported quarter. However, the consensus estimate still suggests a sharp decline from earnings of 40 cents reported in the year-ago quarter.

Notably, the provider of luxury accessories and branded lifestyle products has a trailing four-quarter negative earnings surprise of 0.1%, on average. In the last reported quarter, the company’s bottom line outperformed the Zacks Consensus Estimate by a wide margin.

Factors to Note

Despite the reopening of stores, the impact of coronavirus on Tapestry's first-quarter performance cannot be ignored. On its last earnings call, management informed that top line is likely to remain under pressure during the first half of fiscal 2021. Industry experts are of the opinion that a highly promotional environment, soft store traffic and uncertainty related to consumer shopping dynamics are some of the issues that the company might have encountered in the quarter to be reported.

We note that the Zacks Consensus Estimate for first-quarter revenues at Coach, Kate Spade and Stuart Weitzman brands are pegged at $734 million, $239 million and $59 million, indicating declines of 24%, 21.9% and 32.2%, respectively, year over year.

Nonetheless, Tapestry's focus on enhancing omni-channel and e-commerce capabilities, and optimizing cost structure are likely to have favorably impacted the to-be-reported quarter’s performance. The company’s attempt to lower promotional activity and improve Average Unit Retail across brands remains noteworthy. These are likely to have cushioned gross margin. Notably, the company has been targeting reductions in SG&A expenses and right sizing store fleet.

Additionally, Mainland China remains a bright spot for the company, and is likely to have contributed to the company’s top line. Also, the company has been benefiting from a solid online business, especially amid the pandemic.

Tapestry, Inc. Price, Consensus and EPS Surprise

Tapestry, Inc. Price, Consensus and EPS Surprise

Tapestry, Inc. price-consensus-eps-surprise-chart | Tapestry, Inc. Quote

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Tapestry this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Tapestry has a Zacks Rank #2 but an Earnings ESP of -12.66%.

Stocks With a Favorable Combination

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Wolverine World Wide WWW has an Earnings ESP of +17.86% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gap GPS has an Earnings ESP of +12.68% and a Zacks Rank #3.

Foot Locker FL has an Earnings ESP of +22.42% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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