Accessories business Tapestry moved to a profit in its first-quarter thanks to gross margin expansion and continued growth at the Coach brand.
In the three months ended 29 September, earnings amounted to US$122.3m, on a reported basis, from a loss of $17.7m in the year prior. During the quarter, the company incurred pre-tax charges associated with integration and acquisition activities and Tapestry’s ERP implementation efforts.
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Gross margin for the period widened to 67.7% from 59.2% in the prior year. Net sales, meanwhile, were up 7% on a reported and constant currency basis to $1.38bn from $1.29bn.
“First-quarter performance was consistent with our expectations as we achieved strong increases in sales and operating income, while earnings per share gains were further enhanced by a favourable tax rate,” said CEO Victor Luis. “Results were driven by continued growth at Coach, led by outperformance in digital, and reflected our compelling offering across categories and channels.”
Net sales for Coach were up 4% to $961m, while global comparable store sales also increased 4%. Kate Spade sales climbed 21% to $325m, with global comparable store sales down 5%. Stuart Weitzman, meanwhile saw a sales decline of 1% to $95m.
The company said it continues to expect revenues for fiscal 2019 to increase at a mid-single-digit rate from fiscal 2018 to $6.1-$6.2bn. Tapestry is also maintaining its guidance for the operating income growth rate to exceed the revenue growth rate, reflecting the organic growth of the business, the realisation of incremental synergies from the Kate Spade acquisition, as well as the impact of distributor consolidations and buybacks and systems investments.
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By GlobalData“Overall, this is a strong set of numbers from a house of brands that is executing well,” noted Neil Saunders, managing director of GlobalData Retail. “This may well give Tapestry the confidence to make further acquisitions over the next calendar year.”
