Jim Cramer Applauds Tapestry's Strategic Turnaround Under Crevoiserat

Tapestry executed a significant 2025 restructuring after abandoning its planned acquisition of Capri Holdings due to regulatory roadblocks. The move forced a sharp strategic reset, including the divestiture of the underperforming Stuart Weitzman brand and an accelerated focus on its core labels, Coach and Kate Spade. This pivot immediately resonated with investors. Coach's handbag sales, leveraging premium yet accessible pricing appealing to Gen Z, surged and became the primary engine for growth. The company simultaneously boosted capital returned to shareholders via stock buybacks. The market reaction was swift and substantial, propelling Tapestry's stock up 69% year-to-date following several quarters of earnings beat.

Jim Cramer, host of "Mad Money," publicly endorsed this redirected strategy, calling the abandonment of the Capri deal a "brilliant move". He highlighted Coach's strong performance and the disciplined approach to refocusing resources as key positives driving the stock surge. Cramer positioned Tapestry as a value play within the luxury goods sector, suggesting potential buying opportunities for investors if near-term earnings, particularly in August, fell short of high market expectations, citing confidence in management's execution capabilities. However, Cramer also noted a persistent challenge: Kate Spade's ongoing struggles within the portfolio pose a continued risk to the company's overall performance outlook.

Growth Engine: Penetration & Brand Momentum

Tapestry Inc. is leveraging Coach's premium yet accessible pricing to appeal to Gen Z shoppers, boosting its penetration in the accessible luxury segment. . This strategy has driven strong sales and improved market share, although Kate Spade's ongoing challenges continue to limit overall growth potential. The company anticipates mid-single-digit annual revenue growth, fueled by omni-channel retail experiences and expanding global reach, as part of its "Amplify" growth initiative. Looking ahead, Tapestry targets $8 billion in revenue with a 6-7% compound annual growth rate, supported by EPS growth expected to reach low-double-digits, highlighting the critical role of sustained brand momentum across its portfolio.

Execution Risks & Operational Constraints

Tapestry's 2025 growth strategy faces three key frictions that could dampen progress toward its financial targets: persistent challenges at Kate Spade, reduced brand diversification, and external economic pressures. Jim Cramer acknowledged that Kate Spade's ongoing struggles remain a risk despite the company's strategic refocus, noting management's confidence but cautioning that this brand's weakness could weigh on overall performance. The divestiture of Stuart Weitzman further concentrates the company's portfolio around Coach and Kate Spade, amplifying vulnerability to brand-specific setbacks. Meanwhile, Tapestry's exposure to China's luxury market introduces macroeconomic risks; weakening consumer demand in the region-exacerbated by broader economic uncertainty-could constrain revenue growth, particularly given the brand's reliance on discretionary spending according to business analysts.

The interplay of these risks underscores that Tapestry's stock surge and margin expansion targets may face headwinds if Kate Spade fails to stabilize, Coach encounters saturation, or China's luxury slowdown persists. While the company's disciplined approach provides a buffer, execution risks remain material.

Tapestry's valuation remains below that of many high-growth AI peers, despite its solid performance in the recent market rally. Its current price-to-earnings multiple trades at a meaningful discount to sector averages, reflecting comparatively moderate growth expectations.

Catalysts include ongoing progress on global expansion, with Coach targeting $10 billion in long-term revenue and Kate Spade expected to return to profitable growth by 2027 according to company strategy documents. Share repurchase activity is accelerating, supported by strong free cash flow, with a $3 billion buyback program announced according to company announcements.

Long-term upside hinges on achieving operating margins exceeding 22% by 2028. However, execution risks remain significant given the margin expansion challenge, and the valuation gap compared to AI stocks reflects Tapestry's lower growth trajectory.