Coach parent Q4 earnings, revenue miss amid softer U.S. demand

Tapestry reported weaker-than-expected fourth-quarter earnings and revenue days after it announced a big acquisition. 

The parent company of Coach, Kate Spade and Stuart Weitzman reported its fourth-quarter and full-year results after announcing last week that it would acquire Michale Kors parent Capri Holdings Inc. for $8.5 billion. Capri also owns Versace and Jimmy Choo. 

Tapestry posted net income of $224 million, or $0.95 a share, for the quarter ended July 1, up from $189 million, or $0.75 a share, in the year-ago period.  Analysts had expected earnings per share of $0.97.

Sales fell to $1.619 billion from $1.625 billion, missing estimates of $1.653 billion.  By brand, sales at Coach rose 3% to $1.2 billion, while sales at Kate Spade fell 10% to $309.4 billion.  Sales at Stuart Weitzman fell 13%. Digital sales represented about 30% of revenue.

The company noted that there has been a “sequential improvement” in revenue trends quarter-to-date in the first quarter its new fiscal year, with sales in-line with prior year.

For the full year, net sales totaled $6.66 billion compared to $6.68 billion in the prior year. Excluding a 330 basis point headwind from currency due to the appreciation of the U.S. dollar, revenue increased 3% versus last year.  Sales at Coach rose 1% for the year, to $4.9 billion. 

Net income for the full year was $936 million, with earnings per diluted share of $3.88. This compared to reported net income of $856 million and earnings per diluted share of $3.17 in the prior year. 

Direct-to-consumer revenue was up 3% for the year on a constant currency basis, led by a mid-single-digit increase in stores.

 “We achieved record EPS this fiscal year, reinforcing the power of brand building, consumer-centric strategies, and disciplined execution,” said CEO Joanne Crevoiserat in a statement. “Building on our strong foundation, we are focused on the future. We remain steadfast in our commitment to deliver revenue and profit gains across our current portfolio where our runway is significant.”

In her statement, Crevoiserat said that Tapestry’s acquisition of Capri would establish a new “powerful global house of luxury and fashion brands that expands our portfolio reach across consumer segments, geographies, and product categories.”

“Importantly, the acquisition is expected to be immediately accretive to adjusted earnings and support enhanced cash flow and financial returns,” she added. “By bringing together six iconic brands with a heritage in design and craftsmanship, and leveraging our modern consumer engagement platform, we will drive greater innovation, consumer connectivity, and cultural relevance, creating superior value for our consumers, employees, communities, and shareholders around the world.”

Tapestry now expects  fiscal 2024 earnings per share of $4.10 to $4.15 and for revenue to approach $6.9 billion. 

As of July 1, Tapestry’s portfolio included 330 Coach stores in North America and 609 international locations; 205  Kate Spade stores in North America and 609 international locations; and 36 Stuart Weitzman stores in North America and 57 international locations.