Tapestry beats Street as Coach sales rise
The parent company of Coach, Kate Spade and Stuart Weitzman reported better-than-expected income and revenue for its second quarter, fueled by good holiday results and the resurgence of Coach.
Tapestry net income totaled $63.2 million, or 22 cents per share, down from $199.7 million, or 71 cents per share, in the year-ago period, due to charges related to new tax legislation. Its adjusted EPS was $1.07, better than analysts' forecast of 89 cents.
Revenue rose 35% to $1.79 billion, up from $1.32 billion last year, and better than the $1.77 billion analysts had forecast.
By brand, Coach sales rose 2% to $1.23 billion. Coach global same-store sales rose 3%. Kate Spade revenue was $435 million, and global same-store sales fell 7%, which the company attributed, in part, to a strategic reduction in wholesale distribution and online flash sales. Stuart Weitzman sales rose 2% to $121.0 million.
“Most pleasing is the return to growth of the Coach brand which has, for some time, seen revenue slide as the result of a pullback from a number of sales channels, including department stores,” said Neil Saunders, managing director of GlobalData Retail. “Coach's game plan of becoming less ubiquitous and selling more at higher price points is now delivering.”
Saunders adding that Tapestry wants to take Kate Spade through the same process used to rebuild Coach.
“In our view, this is a necessary step to bolster brand value as Kate Spade had become too value-oriented and overly reliant on excessive, and margin depleting, promotions to drive results,” he said.
Tapestry continues to expect fiscal 2018 revenue of $5.8 billion to $5.9 billion, up about 30% with Kate Spade adding more than $1.2 billion. The company now sees EPS in the range of $2.52 to $2.60, including mid-to-high single digit accretion from Kate Spade.
“Given our strong year-to-date financial performance, we expect that we will be able to fund these strategic actions while maintaining our operating income growth targets for the year,” said Victor Luis, CEO, Tapestry. “In addition, in January, we used excess cash to pay down $1.1 billion in debt, increasing our financial flexibility and reducing our interest expense. Taken together with the anticipated benefits from a lower tax rate, we expect to drive strong double-digit adjusted earnings growth and exceed the annual earnings guidance we set out for Tapestry at the beginning of the fiscal year.”
Tapestry net income totaled $63.2 million, or 22 cents per share, down from $199.7 million, or 71 cents per share, in the year-ago period, due to charges related to new tax legislation. Its adjusted EPS was $1.07, better than analysts' forecast of 89 cents.
Revenue rose 35% to $1.79 billion, up from $1.32 billion last year, and better than the $1.77 billion analysts had forecast.
By brand, Coach sales rose 2% to $1.23 billion. Coach global same-store sales rose 3%. Kate Spade revenue was $435 million, and global same-store sales fell 7%, which the company attributed, in part, to a strategic reduction in wholesale distribution and online flash sales. Stuart Weitzman sales rose 2% to $121.0 million.
“Most pleasing is the return to growth of the Coach brand which has, for some time, seen revenue slide as the result of a pullback from a number of sales channels, including department stores,” said Neil Saunders, managing director of GlobalData Retail. “Coach's game plan of becoming less ubiquitous and selling more at higher price points is now delivering.”
Saunders adding that Tapestry wants to take Kate Spade through the same process used to rebuild Coach.
“In our view, this is a necessary step to bolster brand value as Kate Spade had become too value-oriented and overly reliant on excessive, and margin depleting, promotions to drive results,” he said.
Tapestry continues to expect fiscal 2018 revenue of $5.8 billion to $5.9 billion, up about 30% with Kate Spade adding more than $1.2 billion. The company now sees EPS in the range of $2.52 to $2.60, including mid-to-high single digit accretion from Kate Spade.
“Given our strong year-to-date financial performance, we expect that we will be able to fund these strategic actions while maintaining our operating income growth targets for the year,” said Victor Luis, CEO, Tapestry. “In addition, in January, we used excess cash to pay down $1.1 billion in debt, increasing our financial flexibility and reducing our interest expense. Taken together with the anticipated benefits from a lower tax rate, we expect to drive strong double-digit adjusted earnings growth and exceed the annual earnings guidance we set out for Tapestry at the beginning of the fiscal year.”