Jim Cramer discusses the factors influencing Tapestry’s stock.

Tapestry’s Strategic Moves: Insights from Jim Cramer

On Monday, CNBC’s Jim Cramer shared his thoughts on Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman. He noted how after deciding to back out of an acquisition, Tapestry made some rather strategic business choices.

“Ultimately, walking away from the acquisition of Capri Holdings turned out to be beneficial for Tapestry,” he remarked. “Instead of taking on several struggling brands, they focused on their own stocks, sold off Stuart Weitzman, and strengthened the core Coach brand into a major player.”

Following the Federal Trade Commission’s blocking of the deal late last year, Tapestry abandoned plans to acquire Capri—parent to brands like Jimmy Choo, Versace, and Michael Kors. Notably, since then, Tapestry’s stocks have surged, recently hitting a 52-week high with a remarkable 69% increase since January.

Cramer pointed out that Wall Street was hesitant about the Capri acquisition due to the underperformance of some of its brands. There was significant concern that integrating a weak brand would negatively impact Tapestry, especially when its own primary brand was facing challenges. Investors were also wary of Tapestry potentially overextending itself financially to fund such a deal.

After the deal was dropped, Cramer noted some impressive moves from Tapestry. They also decided to hold off on acquiring more from Kate Spade until a more favorable situation arises. The sale of Stuart Weitzman underscored Tapestry’s focus on its key brands, Coach and Kate Spade.

Recently, Tapestry exceeded earnings expectations, primarily thanks to strong sales in their Coach handbag division. Cramer remarked on the growing popularity of Coach products, suggesting consumers view them as high quality and reasonably priced. He seemed optimistic about Tapestry’s trajectory, as management reported strong appeal among younger consumers.

While Kate Spade remains in a challenging position, Tapestry beat forecasts, indicating that its branding could provide a significant advantage moving forward.

Looking ahead to the revenue report in August, Cramer suggested there might be a chance to purchase Tapestry shares at a better value should the market react to high expectations for the next quarter.

“Ideally, I’d like Tapestry to have a solid quarter that doesn’t fully satisfy its shareholders, leading to a dip where buyers can snag shares at a lower price,” Cramer noted. “But if you’re interested in the company, I’d say it’s fine to take a small position beforehand, as I believe the management is making sound decisions.”