By Anuja Bharat Mistry
Aug 13 (Reuters) – Tapestry forecast sluggish annual revenue growth on Thursday, overshadowing its better-than-expected quarterly profit, as weakness at Kate Spade and cautious spending in North America fueled concerns about momentum beyond its Coach brand.
Shares of the company, which have risen roughly 20% this year, were down about 16% in early trading.
The company has long struggled to revive sales at Kate Spade. The brand named Scottish fashion designer Jonathan Saunders as its creative director last month, as part of a turnaround plan that includes improvements in product design and visual identity.
Sales at the brand in the quarter fell 7% on a constant currency basis, while those at Coach rose 14% from a year ago.
“Investors would like to see a faster turnaround at Kate Spade to bolster the financials in the near term and also show that Tapestry is a company with multiple levers for growth,” GlobalData Managing Director Neil Saunders said.
Meanwhile, Coach has been winning over younger shoppers through its reduced but targeted promotional campaigns that have helped it gain market share. Newer collections such as Tabby and Belted Ergo shoulder bags have also helped drive growth.
With Kate Spade struggling, investors are more focused on Coach and are a little disappointed with the forecasts, Saunders said.
Tapestry’s North America revenue rose 7% on a constant-currency basis, compared with 8% growth a year earlier and about 20% in the prior quarter, reflecting a broader slowdown in spending amid growing macroeconomic uncertainty.
Revenue from China jumped 28% and Europe rose 19% compared with a year ago.
The company forecast annual revenue in the range of $8.4 billion to $8.5 billion, with the midpoint slightly below estimates of $8.46 billion, according to data compiled by LSEG.
The company expects earnings per share for the year ending June 2027 to be in the range of $7.80 to $7.90, with the midpoint above analysts’ estimates of $7.84 per share.
Tapestry’s fourth-quarter adjusted profit of $1.32 per share topped estimates of $1.28 per share.
Quarterly sales rose 8.9% to $1.88 billion from a year earlier, in line with analysts’ estimates.
(Reporting by Anuja Bharat Mistry and Shania S Thomas in Bengaluru; Editing by Leroy Leo)
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