• Home
  • News
  • Business
  • Tapestry 's first quarter net sales increase 24 percent

Tapestry 's first quarter net sales increase 24 percent

By Prachi Singh

loading...

Scroll down to read more

Business

Tapestry’s first quarter net sales for the period ended September 30, 2017 totalled 1.29 billion dollars, an increase of 24 percent or 25 percent on a constant currency basis. Gross profit totalled 764 million dollars on a reported basis, while gross margin for the quarter was 59.3 percent on a reported basis compared to 68.9 percent in the prior year. On a non-GAAP basis, gross profit totalled 853 million dollars, while gross margin was 66.2 percent as compared to 68.9 percent in the prior year.

“While our Coach comparable store sales were impacted by both expected calendar shifts and inventory challenges as well as the effects of the unanticipated natural disasters – we have returned to growth thus far in the second quarter and are well positioned for holiday. Importantly, we remain on track to achieve the annual guidance we set out for Tapestry in August,” said Victor Luis, Chief Executive Officer of Tapestry in a media statement.

First quarter result highlights of Tapestry

Operating income for the quarter was a loss of 22 million dollars on a reported basis, while operating margin was negative 1.7 percent versus 16 percent in the prior year. On a non-GAAP basis, operating income was 169 million dollars, a decrease of 4 percent versus prior year, consistent with guidance while operating margin was 13.1 percent versus 17 percent in last year’s first quarter.

Net income was a loss of 18 million dollars on a reported basis, with earnings per diluted share of negative 0.06 dollar compared to reported net income of 117 million dollars with earnings per diluted share of 0.42 dollar in the prior year period. On a non-GAAP basis, net income for the quarter totalled 120 million dollars, with earnings per diluted share of 0.42 dollar compared to 126 million dollars with earnings per diluted share of 0.45 dollar in the prior year period.

Coach brand first quarter net sales decline 3 percent

Net sales for Coach were 924 million dollars, a decrease of 3 percent. On a constant currency basis, sales declined 2 percent. Global comparable store sales declined 2 percent, including a benefit of approximately 100 basis points driven by an increase in global e-commerce. The company said, results include the negative impact associated with the shift in timing of the Chinese Mid-Autumn festival into October, exacerbated by the impact of inventory mix issues as well as natural disasters occurring in the quarter, notably hurricanes in North America and typhoons in Asia.

Gross profit for Coach totalled 632 million dollars on a reported and non-GAAP basis. Gross margin for the quarter was 68.4 percent, including approximately 70 basis points of pressure from currency. This compared to gross margin of 69.8 percent in the prior year period on both a reported and non-GAAP basis. Operating income was 198 million dollars, while operating margin was 21.5 percent versus 24.4 percent in the prior year, both on a reported and non-GAAP basis.

The company said, net sales for Kate Spade were 269 million dollars, reflecting, in part, the strategic pullback in wholesale disposition and online flash. Global comparable store sales declined 9 percent, including the negative impact of approximately 600 basis points basis points from a decline in global e-commerce, as projected.

Gross profit for Kate Spade were 76 million dollars on a reported basis, while gross margin for the period was 28.4 percent. On a non-GAAP basis, gross profit was 165 million dollars, while gross margin was 61.3 percent. Operating income for Kate Spade was a loss of 135 million dollars on a reported basis, representing an operating margin of negative 50.2 percent. On a non-GAAP basis, operating income was 22 million dollars, while operating margin was 8 percent.

Stuart Weitzman net sales increase 10 percent in Q1

Net sales for Stuart Weitzman were 96 million dollars for the first fiscal quarter, an increase of 10 percent. Gross profit for Stuart Weitzman totalled 56 million dollars on a reported basis and non-GAAP basis, while gross margin for the quarter was 58.1 percent. This compared to prior year gross margin of 58.4 percent and 58.9 percent on a reported and non-GAAP basis, respectively.

Operating income was 8 million dollars on a reported basis, while operating margin was 8.7 percent versus 4.4 percent in the prior year. On a non-GAAP basis, operating income was 9 million dollars or 9.6 percent of sales versus 6 percent in the prior year.

Tapestry expects 30 percent rise in FY2018 revenues

The company continues to expect revenues for fiscal 2018 to increase about 30 percent versus fiscal 2017, to 5.8 to 5.9 billion dollars, with low-single digit organic growth and the acquisition of Kate Spade adding over 1.2 billion in revenue dollars.

In addition, the company continues to project operating income growth of 22 percent to 25 percent versus fiscal 2017 driven by mid-single-digit organic growth, the acquisition of Kate Spade, and estimated synergies of 30 to 35 million dollars. These synergies are expected to offset in part the reduction in profitability from the strategic and deliberate pullback of Kate Spade wholesale disposition and online flash sales channels. Taken together, the Kate Spade business and resulting synergies are expected to contribute approximately 130 to 140 million dollars to operating income.

Overall, the company continues to project earnings per diluted share in the range of 2.35-2.40 dollars, an increase of about 10 percent to 12 percent for the year, including low-to-mid-single digit accretion from the acquisition of Kate Spade.

“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,” added Luis.

Picture:Stuart Weitzman

Tapestry