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The owner of modern luxury lifestyle brands Coach, Kate Spade New York and Stuart Weitzman, has reported second quarter results for the period ending December 30, 2017 that exceeds the Group’s expectations.
Tapestry’s net sales totalled US$1.79 billion for the second fiscal quarter of 2018 against US$1.32 billion in the prior year, up +35% on both a reported and constant currency basis. Gross profit for the Group totalled US$1.18 billion on a reported basis, while gross margin for the quarter was 66% on a reported basis compared with 68.6% in the prior year. Total operating income for the quarter was US$346 million on a reported basis, while operating margin was 19.4% versus 21% in the prior year. “Our second quarter performance exceeded our expectations, driven by a return to growth for Coach, sales gains at Stuart Weitzman and the contribution of Kate Spade as we continued to make progress on the brand’s integration,” said Victor Luis, CEO, Tapestry.
Net sales for the Coach brand totalled US$1.23 billion in the period, up from US$1.20 billion in the prior year; +2% on a reported and constant currency basis. Global comparable store sales rose 3%, including a benefit of approximately 100 basis points driven by an increase in global e-commerce, according to the Group. Gross profit for Coach totalled US$846 million on a reported and non-GAAP basis.
The Kate Spade brand recorded sales of US$435 million. Global comparable store sales declined -7%, including the negative impact of approximately 400 basis points from a decline in global e-commerce. Gross profit totalled US$258 million on a reported basis, while gross margin for the period was 59.4%.
Footwear brand Stuart Weitzman recorded total net sales of US$121 million for the second fiscal quarter compared with US$118 million a year ago, up +2%. Gross profit totalled US$73 million on a reported basis, while gross margin for the quarter was 60.8% on a reported basis against 64.3% in the prior year.
The Group announced several important business development initiatives, which will allow each brand to assume greater direct control over their international distribution. Tapestry says it has now taken full operational control of the Kate Spade joint ventures, for Mainland China, Hong Kong, Macau and Taiwan, and has entered into a purchase agreement to acquire the Stuart Weitzman business in Northern China from its distributor. In addition, it has announced the buyback of the Coach business in Australia and New Zealand from its distributor, with an expected closing in the third fiscal quarter. “As a result, we will be creating a Tapestry hub and centre of excellence in Sydney to drive growth across our portfolio, further unlocking the value of a multi-brand operating model”, says a statement.
The leather accessories and fashion Group expects to fund these strategic actions while maintaining its operating income growth targets for the year.