Tapestry Tops Q1 Expectations as CEO Joanne Crevoiserat Touts  ‘Position of Strength’

by · WWD
Tapestry is working to turn around the Kate Spade business.Courtesy

Tapestry Inc. topped expectations in its fiscal first quarter and is keeping its eye on the horizon now that its $8.5 billion deal to buy Capri Holdings has been blocked. 

The company’s net income slipped to $186.6 million, or 79 cents a diluted share, from $195 million, or 84 cents a year earlier. However, the bottom line was held down by $31 million paid for interest expense, most of that supporting debt that Tapestry took on to buy Capri.

The Federal Trade Commission sued to stop the deal in April, arguing that bringing together Tapestry’s Coach and Kate Spade brands with Capri’s Michael Kors would create an accessible luxury giant with too much sway in the market. A federal judge bought that argument and stopped the deal with a preliminary injunction last month that is seen as ultimately ending the transaction all together. 

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Tapestry’s adjusted earnings per share tallied $1.02 — 7 cents ahead of the 95 cents analysts projected, according to Yahoo Finance.

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Investors approved and sent shares of the company up 5.5 percent to $52.50 in premarket trading on Wednesday.

“Our first-quarter results outperformed expectations, showcasing the brand magic and operational excellence that fuel our strategic growth agenda,” said Joanne Crevoiserat, chief executive officer of Tapestry, in a statement. 

“We remain in a position of strength, with distinctive brands, an agile platform and robust cash flow that provide us with strategic and financial flexibility to deliver accelerated organic growth and enhanced value creation in fiscal year 2025 and for years to come,” she said. 

Sales for the quarter ended Sept. 28 were roughly on par with a year earlier at $1.51 billion and were ahead of the $1.47 billion analysts forecast.

Coach, the company’s largest brand, grew revenues 1 percent to $1.2 billion. 

Kate Spade, which is in the midst of a turnaround and is now led by L’Oréal veteran Eva Erdmann, saw revenues fall 7 percent to $283.2 million. And Stuart Weitzman, which sources have said could be spun off, pushed sales up 2 percent to $53.7 million. 

For the full fiscal year, Tapestry is feeling slightly more bullish than it was a few months ago. 

Earnings diluted share are now expected to total $4.50 to $4.55, a nudge up from the $4.45 to $4.50 previously forecast. 

And annual revenues are slated for a 1 percent to 2 percent increase in constant currencies, where the company had been looking for growth of approximately 1 percent.