Investing.com -- Shares of Tapestry, Inc. (NYSE:TPR), the parent company behind Coach , Kate Spade, and Stuart Weitzman, was down in pre-market trading on Tuesday following a downgrade from TD (TSX:TD) Cowen analysts.
The brokerage revised their rating on Tapestry to "hold" from "buy," citing concerns over both the stock’s recent rally and broader macroeconomic factors affecting consumer trends.
The analysts note that Tapestry's stock had surged nearly 40% year-to-date and over 85% in the last 12 months, bringing it close to TD Cowen’s price target of $52 per share.
However, analysts expressed caution over the company’s prospects, pointing to slowing discretionary spending in key markets like China and the U.S.
They emphasized that while margins have remained stable due to a focus on full-price selling, overall sales in the U.S. have either flattened or turned slightly negative.
In China, economic challenges, including youth unemployment and a sluggish property sector, have weakened consumer sentiment—factors that could weigh on Tapestry's future growth.
The downgrade also reflects potential risks surrounding Tapestry’s pending acquisition of Capri Holdings (NYSE:CPRI), which faces regulatory hurdles from the Federal Trade Commission.
TD Cowen analysts warned that while Tapestry’s acquisition strategy mimics the portfolio approach of European luxury houses, uncertainties around the merger and execution challenges across its brands raise concerns about the company’s ability to scale sustainably.
Within the Tapestry portfolio, Coach remains the strongest performer, contributing the majority of the company's revenue.
However, analysts flagged that Coach’s remarkable success sets a high bar for future growth, especially with reports from competitors like LVMH and Kering (EPA:PRTP) suggesting a softening luxury market in the second half of the year.
Meanwhile, the analysts suggest that Tapestry’s other brands—Kate Spade and Stuart Weitzman—continue to face challenges.
While Kate Spade has shown some signs of margin stability, analysts believe it still requires significant investment in product and store improvements.
Stuart Weitzman, which has struggled to maintain momentum since being acquired, could also see limited near-term growth.
Despite these challenges, TD Cowen maintains a long-term view that Tapestry is well-positioned to capture market share through operational efficiency and brand strength, particularly with Coach.
However, the downgrade reflects short-term caution driven by macroeconomic uncertainties and risks, suggesting that the stock’s upside may now be limited.