Tapestry, Inc. (formerly known as Coach Inc.) reported first quarter results for the period ended Sept. 30, 2017. Quarterly global comparable store sales declined 2% for Coach, impacted impacted by both expected calendar shifts and inventory challenges along with unanticipated natural disasters. Recorded charges of approximately $188 million, which relate to purchase and integration of Kate Spade, in quarter on a reported basis.
Net sales for Coach totaled $924 million for the first fiscal quarter as compared to $950 million in the prior year, a decrease of 3%.
Net sales for Kate Spade totaled $269 million, reflecting, in part, the strategic pullback in wholesale disposition and online flash.
Net sales for Stuart Weitzman totaled $96 million for the first fiscal quarter compared to $88 million reported in the same period of the prior year, an increase of 10%.
“After only a few months since the close of the Kate Spade acquisition, we’re even more excited about the opportunities for the brand, both in terms of revenue growth, driven by distribution and productivity, and profitability improvements, as we leverage our scale across our supply chain, global business development organization and other corporate functions,” said Tapestry president Victor Luis. “Importantly, we now expect to achieve run-rate synergies of ~$100 to $115 million in fiscal 2019 versus our previous guidance of $50 million.”
Tapestry expects fiscal 2018 revenue to increase approximately 30% year over year to $5.8–$5.9 billion, with low-single digit organic growth and Kate Spade acquisition adding more than $1.2 billion in revenue. The company continues to envision earnings in the range of $2.35–$2.40 per share, reflecting an increase of approximately 10–12%, comprising low-to-mid-single digit accretion from the Kate Spade buyout.
Mr. Luis added, “As we look forward to holiday and beyond, we are well positioned to drive positive comparable store sales for Coach driven by compelling product, our differentiated modern luxury store experience and bold marketing campaigns. For Stuart Weitzman, we are excited to show Giovanni Morelli’s first collection to the trade in the upcoming weeks and to continue the brand’s successful international distribution roll out. And for Kate Spade, our priority is integration and building the foundation for growth in FY19 and beyond.”
“Overall, we remain focused on creating desire for our brands through innovation and reinforcing the emotional bonds with our customers across geographies. We are confident in the opportunities for Tapestry as a whole and for each of our brands individually within the attractive and growing $80 billion global market for premium handbags and accessories, footwear and outerwear,” Mr. Luis concluded.
Fiscal Year 2018 Outlook
Tapestry expects revenues for fiscal 2018 to increase about 30% versus fiscal 2017, to $5.8 to $5.9 billion, with low-single digit organic growth and the acquisition of Kate Spade adding over $1.2 billion in revenue. It also projects operating income growth of 22% to 25% versus fiscal 2017 driven by mid-single-digit organic growth, the acquisition of Kate Spade, and estimated synergies of $30 to $35 million.