On Monday, BofA Securities increased the price target for Tapestry Inc. (NYSE: NYSE:TPR), a New York-based luxury fashion holding company, from $65.00 to $75.00, while reaffirming a Buy rating on the stock. The adjustment follows Tapestry's recent completion of a $2 billion accelerated share repurchase (ASR) agreement.
The new target reflects strong momentum in Tapestry's stock, which has delivered an impressive 74% return year-to-date. According to InvestingPro analysis, the stock is currently trading slightly above its Fair Value, with 11 analysts recently revising their earnings expectations upward.
According to the details provided, Tapestry received approximately 28.4 million shares on November 26, which accounts for 12% of the company's shares outstanding. This initial transaction represents 80% of the total expected shares to be repurchased under the ASR.
The remaining shares are scheduled to be acquired no later than the first quarter of fiscal year 2026. With a current market capitalization of $14.5 billion and strong liquidity position evidenced by a current ratio of 4.93, Tapestry demonstrates robust financial capacity to execute this buyback program.
To finance the ASR, Tapestry utilized a variety of funding sources. The company secured $750 million under a new term loan credit agreement and drew $1 billion from its revolving credit facility. Additionally, $250 million in cash was used. The strategic financial move aims to manage the company's share count and bolster shareholder value.
Further financial restructuring involved Tapestry pricing two senior unsecured notes offerings. The offerings include $750 million at a 5.1% interest rate due in 2030 and another $750 million at a 5.5% interest rate due in 2035. Tapestry plans to use the proceeds from these notes, along with its available cash, to repay the borrowings on both the revolving credit and term loan. The funds will also cover general corporate expenses.
The company's financial decisions, including the ASR and the management of its debt through strategic notes offerings, signal a proactive approach to capital management. Tapestry's actions are reflective of its broader corporate strategy to optimize its financial structure and deliver value to its investors.
InvestingPro data reveals the company maintains a strong dividend track record with 16 consecutive years of payments and a current yield of 2.25%. For deeper insights into Tapestry's financial health, which currently rates as GREAT according to InvestingPro's comprehensive scoring system, subscribers can access the detailed Pro Research Report, available among 1,400+ top US stocks analyzed on the platform.
In other recent news, Tapestry Inc. has experienced a series of notable developments. S&P Global Ratings revised Tapestry's financial outlook to stable from negative, following the termination of its merger agreement with Capri Holdings (NYSE:CPRI) Ltd. due to regulatory approval uncertainties. The stable outlook is based on projections of steady sales in the coming year, with a slight increase expected in 2026 and beyond.
Tapestry's financial risk profile has been reassessed to modest from intermediate, with expectations of sustained leverage in the high-1x area for the fiscal year 2025 and modest improvements in subsequent years.
TD (TSX:TD) Cowen maintained its Hold rating on Tapestry, citing the success of the Coach brand in defying negative industry trends. Baird maintained its Outperform rating on Tapestry shares and increased the price target to $64.00 from $58.00, following the termination of a potential deal and the unveiling of a $2.8 billion stock buyback plan. Telsey Advisory Group also adjusted its outlook on Tapestry, increasing the price target to $67 from $58 while retaining an Outperform rating on the stock.
These recent developments follow the termination of a merger agreement and the company's decision to contest an injunction blocking the acquisition of Capri Holdings. Tapestry's financial policy post-merger termination aims to keep leverage under 2.5x and maintain solid investment-grade capital allocation plans. Tapestry's Coach brand demonstrated resilience with a 2% increase in constant currency in the last quarter, while Stuart Weitzman had an unexpected sales increase. However, Kate Spade experienced a sales dip.
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