Tapestry Hit by a Slew of Downgrades After Kate Spade Slumps
Tapestry Hit by a Slew of Downgrades After Kate Spade Slumps
(Bloomberg) -- Disappointing results at Tapestry Inc.’s Kate Spade line prompted a string of rating downgrades on the stock, with analysts saying a recovery may take several quarters.
After sliding 22% Thursday to a 10-year low, Tapestry shares pared some of the losses to rise as much as 3.4% in New York on Friday.
Here’s a round up of the analyst commentaries post-earnings.
Credit Suisse, Michael Binetti
“Kate outlook is now significantly reduced due to: 1) A big fourth-quarter same store sales miss; 2) Deteriorating near-term trends; 3) Elevated inventories which will pressure Kate same store sale and gross margin through fiscal 2020.”
“With Tapestry offering few details on the timeline back to profitable Kate growth, we downgrade to Neutral despite the stock already pulling back significantly.”
Downgrade to neutral from outperform, price target to $22 from $38.
MKM Partners, Roxanne Meyer
“Kate Spade’s outlook reflects a deterioration of trends that may take several quarters or more to repair.”
“While we see limited downside risk to the stock from here, we don’t see a positive catalyst to give us conviction in material upside.”
Downgrade to neutral from buy, price target to $21 from $52.
Piper Jaffray, Erinn Murphy
“While expectations weren’t lofty into this print, the magnitude of Kate Spade’s comp miss and quarter to date trends were far worse than expected.”
“We see pressure on the channels that Tapestry sells into (outlets, mall) and prefer to wait for more consistent positive signs of Kate Spade brand momentum and product balance improving.”
Downgrade to neutral from overweight, price target to $23 from $40.
Telsey Advisory, Dana Telsey
“Comp trends at Kate are deteriorating in the current quarter despite the full introduction of new creative director Nicola Glass’s product in full line stores by the end of June.”
“While current valuation can offer some downside protection, we see the lack of clarity around the direction of the Kate brand and a second consecutive year of expected flat earnings growth as weighing on upside potential as we enter a more uncertain macro environment.”
Downgrade to market perform from outperform, price target to to $22 from $42.
To contact the reporter on this story: Esha Dey in New York at edey@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Steven Fromm, Scott Schnipper
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