Tapestry Tops First-quarter Profit Expectations

Tapestry Inc. topped fiscal first-quarter expectations and said it was on track to complete its takeover of Capri Holdings next year, forging an American fashion giant with more than $12 billion in sales. 

That deal will bring together Tapestry’s Coach, Kate Spade and Stuart Weitzman brands with Capri’s Michael Kors, Versace and Jimmy Choo and entirely reshape the company’s finances when it closes. 

But the meantime, the company is plugging away.

First-quarter profits slipped modestly to $195 million from $195.3 million a year earlier — although earnings per diluted share increased to 84 cents from 79 cents given a change in the number of shares outstanding.

Adjusted EPS came in at 93 cents, beating the 90 cent profit analysts projected, according to FactSet.

Sales for the three months ended Step. 30 increased 0.4 percent to $1.513 billion from $1.507 billion. Analysts were looking for something more from sales and projected a top line of $1.535 billion.

North American revenues were roughly flat, while international sales grew 7 percent in constant currencies, with gains of 12 percent in Japan and 9 percent in Greater China.

Despite the weaker performance in North America — where more customers are feeling squeezed and fashion brands across the spectrum are struggling — Tapestry added roughly 1.2 million new customers in the market, half of which were Gen Zers or Millennials. 

Joanne Crevoiserat, chief executive officer of Tapestry, said: “We achieved record first quarter revenue and EPS as we continued to successfully advance our strategic growth agenda against a dynamic external backdrop. Our strong and consistent results demonstrate the power of brand building and customer centricity, underpinned by the creativity of our talented global teams and disciplined execution. During the quarter, we drove revenue gains at constant currency, significant gross margin expansion and high-teens adjusted EPS growth. Importantly, we continued to invest in our brands and consumer engagement platform, reinforcing our commitment to driving innovation and cultivating lasting relationships with customers around the world.”

For the full fiscal year, the company pulled back its revenue outlook some and is now looking for a top line of $6.7 billion, down from the $6.9 billion projected in August. The EPS outlook held steady at $4.10 to $4.15.

But by the time those numbers are realized, Capri, which reports results after the market Thursday, should also be in the mix.

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