Tapestry’s Operating Margin Jumps to 28.6% but Valuation Premium Sparks Downgrade
Tapestry’s Q2 revenue, operating profit and EPS all hit record highs, driven by Coach’s robust global growth. Operating margin rose to 28.6% from 22.4% and gross margin reached 75.5%, but the stock now trades at a significant premium, prompting a rating downgrade.
1. Strong Q2 Performance
Tapestry reported record Q2 revenue, operating profit and EPS, driven by strong global demand for its Coach brand and broad-based sales growth across regions.
2. Margin Expansion
Operating margin expanded to 28.6% from 22.4% year-over-year, while gross margin improved to 75.5%, reflecting higher full-price sales and cost efficiencies.
3. Valuation Premium and Downgrade
Despite robust fundamentals and an enhanced shareholder return program, shares trade at a significant premium to sector and historical multiples, leading to a rating downgrade.