Tapestry (TPR) - Shares Fall on Weak Outlook
Tapestry (TPR), parent of Coach and Kate Spade, dropped in double digits in early trade, down about 15-16%. This wiped out a big part of its gains this year, turning it from an outperformer into an underperformer versus the S&P 500. The stock is coming off a 52-week high of $164 and change.
The company beat on both earnings and revenue, but gave softer full-year guidance. Adjusted EPS came in at $1.32. Revenue was $1.88 billion, in line with expectations, while the bottom line beat.
Coach still carries the company. The brand keeps growing, helped by strong consumer demand and the viral Brooklyn bag. Strong handbag sales lifted average selling prices by mid-teens for both the quarter and full year.
Kate Spade stays the weak link. Its sales fell 7% to $235 million. Management has tried to steady the brand after several disappointing quarters. International was a bright spot: North America sales rose, China rebounded with revenue up 33%, and Europe grew more than 20%. Japan was the only weak international market.
Guidance is conservative. Q4 adjusted EPS is guided at $1.32, with revenue just over $1.8 billion. Fiscal 2027 guidance came in line to below expectations: revenue of $8.4 to $8.5 billion and EPS of $7.80 to $7.90. The quarter was strong, especially for Coach, but not enough given the road ahead. The company will continue its $1.35 billion buyback plan.
Five Below (FIVE) - Upgraded to Buy
Five Below (FIVE) got an upgrade and rose in early trade, continuing to outperform on both a year-over-year and year-to-date basis. Its one-year return is around 77%.
Jefferies upgraded it to buy from hold and raised the price target to $350 from $210, implying more than 40% upside from the prior close. The view: investors underestimate how much the business model has improved, and the gains are not only from the squishy toy craze. Beyond that viral toy popularity, other trending products are selling well.
The real driver is better merchandising, smarter pricing, and improved inventory management, which should bring customers back repeatedly. Jefferies also likes CEO Winnie Park, credited with turning Five Below into a strong retailer. She is making it more data-driven, using data to stock what customers want and what is trending, and expanding beyond the $5 price point. The growth story is intact.
Netflix (NFLX) - Ackman Takes New Stake
Netflix (NFLX) shares rose 2.8% after news that billionaire investor Bill Ackman took a new stake through Pershing Square. He famously exited his earlier stake in 2022 after losing more than $400 million, following Netflix's first subscriber decline in over a decade.
The fresh stake signals a shift in his view. He believes the story has improved and says Netflix has effectively "won the streaming wars." Since his exit, Netflix cracked down on password sharing and launched an ad-supported tier. Subscriber growth still matters and has returned along with revenue growth, but the core bet is that revenue will grow at a double-digit annual pace.
