Tapestry Inc., the parent company of high-end fashion labels Coach, Kate Spade, and Stuart Weitzman, recently announced its fiscal fourth-quarter results, which surpassed analysts’ expectations. The luxury fashion conglomerate reported adjusted earnings of $0.92 per share for the quarter ended June 29, a slight drop from $0.95 year-over-year, yet notably higher than the Capital IQ consensus estimate of $0.88.
The company’s revenue was recorded at $1.59 billion, down 2% from the previous year, but still exceeding market predictions of $1.57 billion. In a statement, Tapestry’s Chief Executive Joanne Crevoiserat expressed optimism, stating, "Our fourth-quarter results exceeded expectations, capping a successful year.
We meaningfully advanced our strategic agenda in fiscal year 2024, delivering strong financial results against a dynamic backdrop." Diving deeper into brand performance, Coach achieved steady revenue figures at approximately $1.25 billion. Conversely, both Kate Spade and Stuart Weitzman experienced declines, with sales for Kate Spade dropping 6% to $290.1 million and Stuart Weitzman experiencing a decrease from $62.6 million to $50.6 million in the same quarter last year, according to Tapestry's earnings report. Regionally, sales in North America saw a slight dip of 1%, attributed to a "challenging consumer backdrop," as noted by Chief Financial Officer Scott Roe during an earnings call.
Meanwhile, Tapestry's performance in China reflected a 10% decline at constant currencies, following a staggering 50% growth last year. This scenario signifies the company’s struggle to maintain momentum in challenging economic conditions. On a more positive note, European sales soared by 26%, benefitting from increased spending from both local shoppers and tourists. Looking ahead to fiscal year 2025, Tapestry projects adjusted earnings per share (EPS) to fall within the range of $4.45 to $4.50, indicating mid-single-digit growth year-over-year.
This guidance accommodates an anticipated negative impact of $0.35 due to the suspension of share repurchases as the company moves forward with its proposed acquisition of Capri Holdings, the parent company of Michael Kors (CPRI). Additionally, Tapestry foresees a foreign-exchange headwind of $0.20, with the market estimating a normalized EPS of $4.49 for the upcoming year. The expected adjusted revenue for the ongoing fiscal year stands at approximately $6.7 billion, experiencing roughly 50 basis points of currency pressure.
This projection reflects progress compared to fiscal 2024’s reported top-line revenue of $6.67 billion. Roe elaborated on the company’s cautious outlook, sharing, "We've taken a prudent approach to our outlook, balancing the realities of the external environment with the opportunities we see for our business.
We expect constant currency sales to remain flat during the first half of the year, with modest growth anticipated in the latter half." Tapestry has stated its commitment to expedite the acquisition process of Capri within the calendar year 2024. This comes at a time when the Federal Trade Commission has initiated legal action to obstruct the $8.5 billion transaction, which was originally agreed upon last year.
Evercore ISI, an investment banking advisory firm, indicated that the Capri acquisition would serve as a significant near-term catalyst for Tapestry’s stock performance. They remarked on the mixed signals following recent updates regarding the acquisition's feasibility and noted that Capri's market trends appear to be declining significantly.
The firm expressed concerns about potential uncertainties surrounding the closing of the deal, which may occur with some modifications, if at all..