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Tapestry Q1 Sales Up on Product, Multi-Brand Synergies

Tapestry celebrates one year as a multi-brand company with a commitment to innovation, supply chain upgrades and a focus on expansion for Kate Spade and Stuart Weitzman.

In a nutshell: The Coach brand continues to focus on newness as a key driver. “We understand that innovation is what drives velocity of purchasing in our key categories and having a nimble, flexible supply chain, which we leverage across brands, enables us to deliver a higher level of innovation with increased frequency,” said Tapestry CEO Victor Luis during the company’s earnings call on Tuesday.

Kate Spade is becoming more integrated into the Tapestry infrastructure, particularly in the areas of business development and store construction. Further, the company is refining the branding and focused on improving product quality and materials.

Tapestry has set improving the Stuart Weitzman product development process and supply chain as a priority after missteps derailed sales in previous seasons. It is also expanding product categories like handbags and leather goods and looking to China for growth.

The company reaffirmed its outlook for a mid-single digit increase in revenue over FY 2018 to $6.1 to $6.2 billion. Tapestry raised its full-year guidance for earnings per share, pegging it at $2.75 to $2.80, up from $2.70 to $2.80.

Sales: Tapestry reported net sales up 7 percent from $1.29 billion during Q1 last year, to $1.38 billion this quarter.

Coach sales increased 4 percent, to $961 million, with global comp sales gaining at the same rate. Coach sales were driven by strong performances in sport and casual footwear, especially sneakers. The brand’s Signature collection of logo-driven products also fared well.

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North American wholesale shipments grew “significantly” on footwear demand while promotions “sharply” declined. Coach reported its department store partners did particularly well with its core bags and accessories.

Reported net sales for Kate Spade were up 21 percent to $325 million, compared to the portion of the prior year period that took place after the July 11 acquisition. Though e-commerce sales were up, comp store sales declined 5 percent. Bright spots included the performance of the buy-now capsule presented during the spring runway show, which reflected the elevated direction the brand is headed in.

Stuart Weitzman saw a 1 percent decline in net sales to $95 million during the quarter, hampered by “development and production delays,” which the company said it has taken steps to rectify. “Importantly, production levels and shipments have now stabilized, reflecting the investment in talent and processes we have made as well as the added manufacturing capacity,” Luis said.

Earnings: Tapestry’s net income for the quarter reached $122 million, or 42 cents per diluted share, compared to a net loss of $18 million, or a loss per diluted share of 6 cents. The company attributed the improvement in earnings per share in part to a favorable tax rate.

CEO’s Take: “At the one year anniversary of establishing Tapestry as our new corporate identity, our results continue to reflect the benefits of our diversified multi-brand mode,” Luis stated. “We’ve also continued to make progress on building a scalable shared services model, including investments in systems and infrastructure to support our current and future growth initiatives.”