Tapestry ahead of expectations with pre-pandemic level results

The group’s net sales totalled US$1.27 billion for the third quarter as compared to US$1.07 billion in the prior year, representing a 19% increase. Gross profit totalled US$912 million, while gross margin was 71.6% on both a reported and non-GAAP basis. This compared to prior year reported gross profit of US$616 million and gross margin of 57.4%. On a non-GAAP basis, prior year gross profit was $720 million, while gross margin was 67.1%.

Operating income was US$117 million on a reported basis, while operating margin was 9.2% versus an operating loss of US$685 million and an operating margin of 63.9% in 2020. Net interest expense was US$17 million in the quarter as compared to approximately US$13 million in the prior year.

Net income for the quarter was US$92 million on a reported basis. This compared to a net loss of US$677 million with a loss per diluted share of US$2.45 in same period in 2020.

Results by brand

Coach
Net sales for U.S. fashion house Coach totalled US$964 million for the fiscal third quarter as compared to approximately US$772 million in 2020, representing an increase of 25% and a return to pre-pandemic revenue levels.

Gross profit for Coach totalled US$718 million, while gross margin was 74.5% on both a reported and non-GAAP basis. This compared to 2020 gross profit of US$476 million and gross margin of 61.6% on a reported basis. On a non-GAAP basis, gross profit was $538 million, while gross margin was 69.6% in the year ago quarter.

Operating income for Coach was US$251 million compared to reported operating income of US$38 million in the same period of 2020, while operating margin was 26.1% versus 4.9%.

Kate Spade
Net sales for U.S. fashion design house Kate Spade totalled US$252 million for the fiscal third quarter as compared to US$250 million in 2020, representing an increase of 1%, which included an impact related to a strategic pullback in lower margin wholesale disposition sales.

Gross profit for Kate Spade totalled US$160 million, while gross margin was 63.5% on a reported and non-GAAP basis. This compared to a gross profit of approximately US$123 million and gross margin of 49.1% in 2020 on a reported basis, and US$155 million and 62%, respectively, on a non-GAAP basis.

Operating loss for Kate Spade was US$9 million on a reported basis, representing an operating margin of 3.4%. This compared to an operating loss of US$91 million and an operating margin of 36.6% on a reported basis in the same period a year prior.

Stewart Weitzman
Net sales for U.S. footwear brand Stuart Weitzman totalled US$57 million for the fiscal third quarter compared to US$51 million in the same period in 2020, representing a 13% increase. These results included the negative impact of a North America wholesale timing shift into the fourth fiscal quarter.

Gross profit for Stuart Weitzman totalled US$34 million on both a reported and non-GAAP basis, while gross margin for the quarter was 58.9%. This compared to prior year reported gross profit of US$18 million and gross margin of 35.4%.

Operating loss for Stuart Weitzman was approximately US$18 million on a reported basis, compared to an operating loss of US$531 million in the same period in 2020. On a non-GAAP basis, operating loss was US$8 million versus an operating loss of $35 million in the prior year.

Outlook

The company is not providing detailed guidance for fiscal 2021 due to the unpredictability of Covid-19. However, given Tapestry’s better-than-anticipated results year-to-date, and assuming a continued recovery emerging from the pandemic, the company now expects revenue for the fiscal year to increase at a mid-teens rate compared to the prior year on both a 52 and 53-week basis. This outlook now includes the expectation for fiscal year 2021 operating income and earnings per diluted to share to increase versus fiscal year 2019 on a 52 and 53-week basis. The company also notes that fiscal 2021 includes a 53rd week in its fourth fiscal quarter.