Coronavirus impacting Tapestry business in China

Worldwide
Published:  12 February, 2020
Credit: Kate Spade

The owner of Coach, Kate Spade and Stuart Weitzman brands has reported net sales of US$1.82 billion for its fiscal second quarter 2020, up from US$1.80 billion in the corresponding quarter of the prior year, a 1% increase on both reported and constant currency basis.

Tapestry’s gross profit totalled US$1.21 billion on a reported basis, while gross margin for the quarter was 66.6% compared with US$1.20 billion and 66.8%, respectively, in the prior year. Operating income was US$363 million on a reported basis, while operating margin was 20% versus approximately US$376 million and an operating margin of 20.9% in the prior year. The Group’s net income for the quarter came in at US$299 million on a reported basis, with earnings per diluted share of US$1.08, compared with US$255 million and US$0.88 in the prior year period.

Delivering its ninth consecutive quarter of positive comparable store sales growth, net sales for Coach totalled US$1.27 billion for the Group’s fiscal second quarter, 2% above prior year on both a reported and constant currency basis. Global comparable store sales for the brand increased 2%. Net sales for Kate Spade totalled US$430 million compared to US$428 million in the prior year, despite global comparable store sales declining 4%. The Stuart Weitzman brand recorded sales of US$116 million, down from US$124 million reported in the same period of the prior year (-7%).

“At Tapestry, we entered our third fiscal quarter with strong underlying trends, notably at Coach, as sales growth accelerated from the holiday period. Therefore, we had anticipated maintaining our FY20 guidance despite continuing headwinds in Hong Kong and challenges at Stuart Weitzman. However, the escalating coronavirus outbreak is now significantly impacting our business in China, resulting in the closure of the majority of our stores on the Mainland”, said Jide Zeitlin, Chairman and CEO, Tapestry. “We now expect that our second half results could be negatively impacted by approximately US$200 - US$250 million in sales and US$0.35 - US$0.45 in earnings per diluted share, given current trends in China. If the situation further deteriorates, or the outbreak affects demand outside of the country, this impact could be worse”, he added, highlighting that China continues to represent a significant opportunity for Tapestry’s brands.

Stuart Wetizman Della bags