Tapestry Q4 revenue misses amid continuing weakness at Kate Spade
Don’t look for Tapestry to make any acquisitions in the near future.
Tapestry, the parent company of Coach, Kate Spade and Stuart Weitzman, on Thursday reported sales that fell short of Street estimates and cut estimates as it forecast earnings and revenue declines in its fiscal first quarter.
In a statement, CEO and chairman Victor Luis said the company does not expect to pursue a strategic acquisition in 2020. It also is slowing store expansion of Kate Spade.
“Looking ahead, we are revising our outlook for fiscal 2020 to reflect the current trends in our business, notably at Kate Spade,” Luis said. “We believe this is prudent, particularly in light of the uncertain environment in North America, and as we build the brand’s global awareness. As part of this strategy, we are deliberately pulling back on the number of new store openings for the brand while we seek to focus on maximizing productivity.”
On a call with investors, the retailer said it projects 30 to 40 net openings for Kate Spade this year, which represents a modestly slower pace of openings at the brand as compared to fiscal 2019.
Tapestry reported net income of $148.9 million, or $0.51 a share, for the quarter ended June 29, down from $211.7 million, or $0.73 a share, in the year-ago period. Excluding items, Tapestry earned $0.61 per share, in line with analysts’ estimates.
Revenue rose 2% to $1.51 billion, missing the $1.53 billion analysts were expecting. Global same-store store sales increased 2% at Coach and fell 6% at Kate Spade, which the company acquired in 2017.
“The brand’s financial results did not meet our expectations and more time is required to drive a positive inflection in the business, particularly in light of the traffic-challenged and competitive retail environment in North America,” Luis stated. “We acknowledge that there are opportunities to improve performance and we are addressing those areas with a sense of urgency.”
Tapestry now expects low single-digit increases in revenue and flat earnings for the upcoming fiscal year. Previously, it said that it expected double-digit earnings per share growth for the year.
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