Following the company’s announcement on Wednesday that it was selling its Stuart Weitzman footwear brand to Caleres Inc. for $105 million in cash, Tapestry Inc.’s stock dropped 1.1%.
Coach and Kate Spade, two of Tapestry’s (TPR) other brands, are well-known for their clothes, accessories, and handbags. Famous Footwear, Sam Edelman, Allen Edmonds, Naturalizer, and Vionic are among the footwear brands that are part of Caleres’ (CAL) portfolio.
In prepared remarks, Tapestry Chief Executive Joanne Crevoiserat stated, “This transaction ensures that all our brands are positioned for long-term success and that we maintain a sharp focus on our largest value creation opportunities. This is important because we are careful stewards of our portfolio and disciplined allocators of capital.”
The announcement follows a federal judge who, like regulators, ruled that Tapestry’s proposed $8.5 billion acquisition of Michael Kors parent company Capri Holdings Ltd. (CPRI) would harm competition in the handbag market.
The Versace and Jimmy Choo brands are also owned by Capri.
In April, the Federal Trade Commission filed a lawsuit to stop the transaction. U.S. District Judge Jennifer Rochon declared in November that the merger would lead to “loss of head-to-head competition” and that there was “persuasive additional evidence of unilateral effects of the merger causing anticompetitive harm.”
At the time, Tapestry expressed its disappointment with the decision and stated that it intended to file an appeal. Over the past 12 months, however, the stock has performed admirably, rising 91% to surpass the 22% rise of the S&P 500’s SPX.
Overall, analysts concurred While Capri is still under pressure from the weak demand for Michael Kors bags, Tapestry was well-positioned to go it alone.
In addition to citing some impressive performance data, such as a 12.6% rise in January web traffic to Coach, Jefferies stated on Tuesday that Tapestry’s stock is a top pick for 2025.
“Given the innovation focus (e.g. Brooklyn, Tabby, bag charms) and AUR runway,” analysts led by Randal J. Konik stated, “We expect continued momentum at Coach.”
Average unit retail, or AUR, is the average selling price of a product during a given period of time. Charms are embellishments used to adorn bags, and Coach’s Brooklyn is a wide shoulder bag, while the Tabby is a smaller, slimmer shoulder bag.
According to Jefferies, Coach has more website traffic than rivals Michael Kors, Versace, Ralph Lauren Corp. (RL), and Tory Burch.
The FTC has taken a tough stance on several transactions, including Kroger Co.’s (KR) effort to merge with rival grocery chain Albertsons Cos. (ACI), under former chairman Lina Khan.
Nine attorneys general from Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming, and the District of Columbia supported the FTC’s action, which was prompted by worries that the merger would hurt workers and product quality, reduce competition, and increase already high grocery prices.
