Tapestry, Inc. TPR, which was formerly known as Coach, Inc., is expected to release first-quarter fiscal 2018 results on Nov 7. In the trailing four quarters, this designer and marketer of fine accessories and gifts as well as house of lifestyle brands, has outperformed the Zacks Consensus Estimate by an average of 2.9%. In the preceding quarter, the company witnessed a positive earnings surprise of 2%.
Investors are keeping their fingers crossed and hoping that Tapestry surpasses earnings estimate in the to-be-reported quarter as well. Let’s delve deep and find out the factors impacting the results.
How are Estimates Shaping Up?
After registering an increase of 11% in the bottom line, Tapestry is likely to witness a year-over-year decline in the first quarter of fiscal 2018. The current Zacks Consensus Estimate for the quarter under review is 36 cents compared with 45 cents posted in the year-ago period. We note that the Zacks Consensus Estimate has remained stable in the past 30 days.
Meanwhile, analysts surveyed by Zacks expect revenues of $1,302 million up from $1,038 million reported in the year-ago quarter. The year-over-year increase in the top line may come as a big relief for investors, as the company’s net sales have declined 1.8% and 4% in the fourth and third quarter of fiscal 2017, respectively.
Factors at Play
Sluggish mall traffic, increased online competition and aggressive pricing strategy are headwinds plaguing the industry, and Tapestry is not immune to it. These along with Kate Spade integration-related costs are likely to hurt the margins and consequently the bottom line.
Nevertheless, Tapestry looks much more disciplined in its approach to adapt to the changing retail landscape. The company is undergoing a brand transformation and introducing modern luxury concept stores in key markets. The acquisitions of Stuart Weitzman and Kate Spade are being viewed as a significant step in efforts toward becoming a multi-brand company. Moreover, management has undertaken transformation initiatives revolving around product, stores and marketing, which are likely to have a favorable impact in the quarter to be reported.
Tapestry also registered positive comps at its North American segment for the fifth consecutive quarter and sees growth prospects in China, Japan and Europe.
What Does the Zacks Model Unveil?
Our proven model shows that Tapestry is likely to beat estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Tapestry carries a Zacks Rank #3 and has an Earnings ESP of +0.65%. This makes us reasonably confident that bottom line is likely to outperform the estimate.
Other Stocks with Favorable Combination
Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:
Burlington Stores, Inc. BURL has an Earnings ESP of +1.58% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Home Depot, Inc. HD has an Earnings ESP of +0.76% and a Zacks Rank #2.
Wal-Mart Stores, Inc. WMT has an Earnings ESP of +0.26% and a Zacks Rank #3.
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