What Happened?

Shares of luxury fashion conglomerate Tapestry (NYSE:TPR) jumped 13.2% in the afternoon session after the company announced it agreed to terminate its proposed merger with Capri. In addition, the company's board approved an additional $2 billion share repurchase program. 

Overall, the stock's reaction signals confidence in management's capital allocation strategy, as the additional share buyback demonstrates the company's dedication to returning value to shareholders.

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What The Market Is Telling Us

Tapestry’s shares are not very volatile and have only had 3 moves greater than 5% over the last year. Moves this big are rare for Tapestry and indicate this news significantly impacted the market’s perception of the business. 

The previous big move we wrote about was 20 days ago when the stock gained 16.9% on the news that a US district judge halted its merger with Capri Holdings. According to the ruling, Tapestry and Capri are "close competitors," and the merger would lead to "the loss of head-to-head competition," raising prices for shoppers. 

This followed the FTC's (Federal Trade Commission) move to block the deal in April 2024 amid concerns that the merger could stifle competition in the affordable luxury handbag arena.

Tapestry is up 51.7% since the beginning of the year, and at $57.89 per share, has set a new 52-week high. Investors who bought $1,000 worth of Tapestry’s shares 5 years ago would now be looking at an investment worth $2,219.

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