Coach parent Q1 tops Street fueled by triple-digit online growth, rebound in China

Marianne Wilson
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Tapestry got off to a strong start in its first quarter amid surging e-commerce sales.

The parent company of Coach, Kate Spade and Stuart Weitz reported that its net income rose to $231.7 million, or $0.83 per share, for the quarter ended Sept. 26, from $20 million, or $0.7 a share, in the year-ago period during which Tapestry recorded more than $70 million in impairment charges.

Excluding one-time charges, Tapestry earned $0.58 per share, easily topping analyst expectations for $0.23 per share.

Net sales fell 14% to $1.17 billion from $1.36 billion, fueled by strong online sales and double-digit year-over-year revenue growth in mainland China. Analysts had forecast sales of $1.07 billion.

By brand, Coach net sales fell 9% to $875.4 million, and Kate Spade net sales fell 21% to $240.4 million. Stuart Weitzman net sales were down 35% to $56.4 million.

Tapestry said it gained nearly 800,000 new customers across its three brands online in North America during the quarter. It expects e-commerce sales will make up nearly 50% of all North American holiday sales.

“We are very pleased with our first-quarter results, which exceeded expectations and demonstrated the bold actions we are implementing as part of our Acceleration Program,” said Joanne Crevoiserat, who was named permanent CEO on Oct. 27. “We delivered strong profit growth across our portfolio of brands in the face of an unprecedented and challenging backdrop. We drove a meaningful sequential improvement in topline trends, supported by strength in digital and China.”

At the same time, Crevoiserat added, the company expanded gross margin by deliberately reducing promotional activity and raising average unit retail while also tightly controlling SG&A expense. 

“Taken together, we achieved a significant increase in EPS and generated positive free cash flow,” she said.