Tapestry Stock Eyes Worst Day in Months on Kate Spade Sales, Margin Decline

No analysts have yet weighed in on the stock

by Josh Selway

Published on May 1, 2018 at 9:24 AM

Luxury fashion stock Tapestry Inc (NYSE:TPR) is getting rocked in pre-market trading, last seen down 12.5%. Even though the company topped earnings estimates on an adjusted basis in the third quarter and executives highlighted growth in the Coach business, same-store sales for its Kate Spade unit fell more than expected, while margins also declined during the period. The company also said there's been production issues with its Stuart Weitzman brand, which could continue to pressure profitability this year.

If the pre-market losses hold, it would mark TPR stock's biggest one-day drop since an August bear gap. The shares had actually been performing tremendously well in 2018, up almost 22% as of Monday's close at $53.77. Still, this pullback would put the equity in the $47 area, which is right where it opened after last quarter's post-earnings bull gap. Chart watchers may also note that the closely monitored 200-day moving average sits at $45.61.

It doesn't appear any analysts have yet to weigh in on the retailer's quarterly update, but shareholders may be wary of bearish attention from this bunch. That's because 16 of the 24 brokerage firms with coverage on Tapestry have "strong buy" ratings, while the consensus 12-month price target stands at $56.70. A round of downgrades and/or price-target reductions could further weigh on TPR.

Elsewhere, a number of short sellers seemingly exited their positions a bit too early. Over the last two reporting periods, short interest on the security fell by almost 20%. Other bears may have profited from put options, though, since put buying outpaced call buying by an unusual amount during the past 10 days across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). More specifically, the 10-day put/call volume ratio across these exchanges is 1.14, and ranks in the 72nd annual percentile.


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