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Tapestry hit with steep decline at Kate Spade

Lifestyle accessories retailer Tapestry benefited from a strong first quarter performance by its Coach brand, but its Kate Spade banner turned in weak results.

Along with reporting its quarterly results, the company on Tuesday also said it was hit with production delays and lower sales of key “carryover” styles. It expects some of the issues to continue through the fall/winter season.

Tapestry reported net income of $140 million, or 48 cents a share, compared with $122 million, or 43 cents per share, in the year-ago period. Excluding one-time items, the company earned 54 cents per share, which was 4 cents better than what analysts expected.

Sales rose 33% to $1.32 billion, fueled by the company's acquisition of Kate Spade last July and topping analysts' expectations. Same-store sales fell 9% at Kate Spade amid “the purposeful reduction of promotional sales online,” CEO Victor Luis said during the company’s quarterly call. Sales rose 3% at Coach. (Tapestry doesn't break out the same-store sales for Stuart Weitzman.)

“The next step in the evolution of Kate Spade is to rebuild the brand with a much more distinct image and to ensure that collections align with this,” commented Neal Saunders, president, GlobalData Retail. “The appointments of Anna Bakst as CEO and brand president and Nicola Glass as creative director are good first steps.”

Tapestry said it now expects full-year earnings of $2.57 to $2.60 per share, compared to its prior guidance of $2.52 to $2.60 per share. It still anticipates revenue in a range of $5.8 billion to $5.9 billion. Analysts expect earnings of $2.59 per share on revenue of $5.86 billion.
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