Tapestry swings to Q3 profit; Coach sales hit pre-pandemic levels
Tapestry reported a better-than-expected third-quarter with gains on its top and bottom lines as demand for luxury goods rebounds after plunging during the pandemic.
The parent company of Coach, Kate Spade and Stuart Weitzman reported that its net income rose to $91.7 million, or $0.32 per share, for the quarter ended March 27, compared with a net loss of $677.1 million, or $2.45 per share, in the year-ago period. Excluding one-time charges, Tapestry earned $0.51per share, easily beating the $0.31 cents expected by analysts.
Net sales rose 19% to $1.27 billion, beating analysts’ estimates of $1.22 billion.
By brand, sales rose 25% (compared to a year earlier) at Coach to $964 million, which represented a return to pre-pandemic revenue levels. Sales were flat compared with the same period in 2019. Sales at Kate Spade grew 1% to $252 million, and were down 10% compared with 2019. Sales at Stuart Weitzman rose 13% over last year to $257 million, but on a two-year basis dropped 33%.
Tapestry had triple-digit revenue growth in Mainland China, with revenues jumping 175% compared to the year-ago period, and 40% compared to the third quarter of 2019. The retailer’s digital business also experienced triple-digit growth compared to last year.
The company said it continued to make progress in its strategy to sharpen its focus on the consumer, leverage data to lead with a digital-first mindset and transform into a leaner and more responsive organization. It noted that, to date, it has reduced SKU counts by 30% to 50% and improved assortment productivity. It also has had 49 net store closures year-to-date, representing a net decrease of 94 locations from the prior year.
“Our third-quarter results significantly outpaced expectations, underscoring the power of the Acceleration Program and enthusiasm for our brands,” said Joanne Crevoiserat, CEO. “Through a sharpened focus on the consumer, we fueled new customer acquisition at Coach, Kate Spade, and Stuart Weitzman and delivered robust sales growth led by digital and China. Importantly, for the third consecutive quarter, we achieved operating income gains – compared to both FY20 and FY19 – supported by a continued reduction in promotional activity, higher AUR, and disciplined expense management.”
Tapestry ended the quarter with $1.65 billion in cash and cash equivalents, $1.59 billion in long-term debt and 1,460 stores (944 Coach, 413 Kate Spade and 103 Stuart Weitzman locations).