Tapestry’s Q2 results fall short of expectations

Worldwide
Published:  14 February, 2019

The New York based fashion holding said the results were affected by increasingly volatile macroeconomic and geopolitical backdrop.

For its second quarter ending December 29, 2018, Tapestry’s net sales totalled US$1.80 billion compared with US$1.79 billion in the prior year; up +1% on a reported basis and + 2% in constant currency. Gross profit totalled US$1.20 billion on a reported basis, while gross margin for the quarter was 66.8% compared with US$1.18 billion and 65.9%, respectively, in the prior year. Net income for the quarter was US$255 million on a reported basis. Blaming falling tourist spending and a slowing global economy for disappointing holiday figures and a fall in sales at Kate Spade, the Group has cut its full-year forecast, leading to a sharp fall in Tapestry’s shares; -16.4%.

Net sales for the Coach brand totalled US$1.25 billion in the second fiscal quarter as against US$1.23 billion in the prior year (+2%), while net sales for Kate Spade totalled US$428 million, down from US$435 million in the prior year, representing a decrease of 1% on a reported and constant currency basis. Global comparable store sales for the label declined -11%, including the positive impact of approximately 200 basis points from global e-commerce. At Stuart Weitzman, sales totalled US$124 million for the second fiscal quarter compared with US$121 million reported in the same period of the prior year; up +3% on a reported basis and +4% in constant currency.

“In light of our second quarter results and the uncertain global environment, we are updating our outlook for the balance of the fiscal year revising our adjusted earnings per diluted share outlook for FY19 to US$2.55 to US$2.60”, said Victor Luis, CEO, Tapestry. “Importantly, we remain confident in our long-term roadmap. We are focussed on harnessing the power of our multi-brand model, unlocking the full potential of our strategic investments in our brands and operating platform, to drive a return to double-digit operating income and earnings per diluted share growth in fiscal 2020.”