Kate Spade bags on sale at Macy’s in New York.
Scott Mlyn | CNBC
The owner of the Kate Spade and Coach handbag brands on Tuesday reported quarterly earnings that beat Street estimates, but sales missed expectations due to weakness at Kate Spade.
Tapestry also gave a fresh outlook for fiscal 2020. The company said it expects sales to rise in the low single digits, while earnings per share are forecast to be about flat compared with the prior year.
Its shares shot up more than 6% in premarket trading on the news. The stock was last up about 3%, having fallen more than 21% this year since Monday’s market close.
Here’s how Tapestry performed for its fiscal first quarter compared to what analysts were expecting, based on Refinitiv data:
- Earnings per share: 40 cents, vs. 37 cents expected
- Revenue: $1.358 billion, vs. $1.371 billion expected
Net income fell to $20 million, or 7 cents per share, during the period ended Sept. 28, from $122.3 million, or 42 cents a share, a year ago. Excluding one-time items, Tapestry earned 40 cents per share, 3 cents a share ahead of analysts’ forecast.
Net sales fell to $1.36 billion from $1.38 billion a year ago, missing expectations for $1.37 billion.
Tapestry in September replaced CEO Victor Luis with Chairman Jide Zeitlin. Zeitlin said in a statement Tuesday that Kate Spade’s decline was “in line with expectations, reflecting the product and merchandising challenges … previously identified.”
Zeitlin had told CNBC when the transition was announced that one of his primary initiatives as CEO is to work on “core growth drivers,” one of those being Kate Spade. He has said Kate Spade remains a $2 billion or larger opportunity for Tapestry.
During the quarter, global same-store sales at Kate Spade dropped 16%, while they were up 1% at Coach.
Tapestry has been hurt as its brands, including Kate Spade, appear in excess at off-price shops, thus discouraging consumers to buy those same goods at full price. Tapestry also owns Stuart Weitzman.
Tapestry has a market cap of about $7.6 billion, compared to Michael Kors’ owner Capri Holdings‘ $5 billion.