Tapestry tops estimates fueled by strong demand for Kate Spade

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Tapestry tops estimates fueled by strong demand for Kate Spade

By Marianne Wilson - 08/14/2018
Tapestry (formerly known as Coach) beat the Street in its fourth quarter amid a resurgence of sales at its Kate Spade brand.

Net income rose nearly 40% to $211.7 million, or 73 cents per share, in the period ended June 30. Excluding one-time items, earning came in at 60 cents per share, beating estimates.

Net sales rose 31% to $1.48 billion, also slightly better than expected. For the full year, Tapestry’s net sales totaled $5.88 billion, compared to $4.49 billion in the prior year.

Coach, Tapestry's biggest brand, had net sales of $1.10 billion for the fourth quarter, up from $1.05 billion last year. Same-store sales rose 2%. Same-store sales at Kate Spade fell 3%, which was much less than the 7.1% drop the Street predicted.

Some analysts speculated that the death of designer Kate Spade in June helped sparked interest and demand for the brand. (Tapestry bought Kate Spade in July 2017.). But GlobalData Retail’s Neil Saunders noted that, under its new owner, the brand has been making progress of a number of fronts, including rebuilding its brand equity by pulling back on excessive promotional activity and reducing its exposure in “unfavorable wholesale channels.”

“This effort is now almost complete and while global comparable sales were down 3%, margins are strengthening and topline revenue is starting to look more favorable,” commented Saunders. “In our view, the brand is now in a better position and should start making a solid top and bottom line contribution over the next fiscal year.”

For fiscal 2019, Tapestry said it expects to generate $6.1 billion to $6.2 billion in revenue, surpassing expectations of $6.08 billion.

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