Shares in Tapestry Inc. In Thursday’s pre-sell trade after the high-end fashion firm posted stronger-than-expected earnings in the first quarter of the year.
For the period ending September 26, Coach, Kate Spade and Stuart Weitzman recorded an adjusted earnings of 58 cents on a profit of $ 161 million, compared to last year’s earnings of 40 cents on a profit of $ 114 million. Wall Street expected a profit of only 23 cents. Revenue declined 14% to $ 1.17 billion, but still beat analysts’ forecasts of $ 1.07 billion.
As of 8:30 AM ET, Tapestry stock was up more than 10.3% to $ 23.52.
In a statement, CEO Joan Krivoyserat – who was permanently appointed to the position just days earlier, succeeding former CEO Jade Zeitlin – said the retail group had achieved financial results that exceeded management’s expectations.
“We have achieved robust profit growth across our portfolio of brands against an unprecedented and challenging background,” she explained. “We have made a meaningful sequential improvement in the top-line trends, buoyed by strength in the digital realm and China.”
The first quarter represents a period of three consecutive months of Tapestry’s three-digit e-commerce growth versus the previous year. It has added nearly 800,000 new customers across its North American brands through its online channels.
Moreover, the retail group recorded double-digit revenue growth year-on-year in mainland China through “compelling product assortments, improved marketing, expanded reach via direct channels and third-party online distribution”.
At Coach, which accounts for the lion’s share of Tapestry’s revenue, sales were down 9%, to $ 875 million. Kate Spade saw a 21% drop in sales to $ 240 million, while Stuart Weitzman posted a 35% drop to $ 56 million.
Nevertheless, the company expressed confidence in its transformation plan, which was introduced in mid-August to help improve the omnichannel experience in Coach, as well as return Kate Spade to a position of strength and restore profitability at Stuart Weitzman.
“Our performance highlights the strength of our brands, the agility of our talented teams and the competitive advantage of Tapestry’s enabling platform,” said Crevoiserat.
At the end of the quarter, Tapestry had $ 1.5 billion in cash and cash equivalents. While the group chose not to provide an outlook, it said it “still anticipates a reversal in the upper line” in the second half of the fiscal year, with sales and profit growth expected for 2021.
“As we enter the holiday season, our teams continue to focus on the factors that are within our control. We put the consumer first, offering an innovative, convenient and beautifully crafted product, while maintaining the unique intent of each of our brands.” “We also tend to have the opportunity to evolve with the changing landscape and change consumer needs and preferences. Given the strength of the first quarter, we are increasingly optimistic about our ability to drive sustainable growth from the top down through our planning horizon.”
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