Tapestry tops expectations; Coach could become $10B brand
Tapestry Inc. got off to a strong start in its first quarter, fueled by double-digital sales at its Coach brand, whose popularity continues to grow among Gen Z shoppers.
The parent company of Coach and Kate Spade raised its full-year earnings and sales outlook. (Tapestry sold its Stuart Weitzman brand to Caleres last year.)
“Overall, our performance continues to reinforce the power of Coach's expressive luxury positioning and the exceptional execution of our teams,” CEO Joanne Crevoiserat said on the company’s earnings call. “With a large addressable market and significant opportunity ahead, we see a clear path for Coach to become a $10 billion brand.”
Net income surged 30.9% to $360 million, or $1.76 a share, for the quarter ended Sept. 26. Adjusted earnings were $1.82 per share, far ahead of the $1.56 analysts forecast.
Sales rose 12% to $1.89 billion (the total excludes the impact of Stuart Weitzman). Analysts had expected sales of $1.85 billion.
Coach sales rose 16% to $1.7 billion, including 7% growth in North America and 30% growth internationally. Average unit retail prices on Coach handbags increased at low-double-digit rates in the quarter.
Sales at Kate Spade fell 10% to $233 million. Tapestry has been working to turn around the brand, with a strategy that includes streamlining the business, closing unproductive stores and stepping away from promotional activity. It recently tapped veteran designer Jonathan Saunders as the brand’s new executive creative director.
“He has an incredible sense of the brand DNA, and we're modernizing that for today's consumers,” Crevoiserat told analysts. “So I'm excited about the future of Kate Spade. Both in terms of the product, but also the storytelling and the investments that we're making.”
Direct-to-consumer revenue grew 9%, with store revenue growing low-double-digits and digital increasing mid-single-digits. Wholesale revenue grew approximately 30%. Tapestry said it acquired 2.6 million new consumers in the quarter, of which approximately 35% were Gen Z, while, at the same time, demand from existing customers increased.
“Our first quarter marked a powerful start to the year, with revenue, margin, and earnings growth ahead of expectations and strength around the world,” Crevoiserat stated in the earnings release. “Building on this outperformance, we are raising our full year outlook, reflecting our confidence in the durability of our growth.
For the full year, Tapestry now expects revenues 6% to 7% to $8.5 billion to $8.6 billion, with the range up $100 million from its initial forecast. It expects annual earnings per share of $8.25 to $8.35, compared with its previous forecast of $7.80 to $7.90.
[READ MORE: Tapestry obtains U.S. patent for enterprise AI tool]
As of Sept. 26, Tapestry operated 983 Coach stores, including 339 U.S. locations, and 318 Kate Spade stores, including 178 U.S. locations.
