Tapestry Q2 revenues jump 35 percent

For the second quarter of fiscal 2018, net sales at Tapestry totalled 1.79 billion dollars compared to 1.32 billion dollars in the prior year, an increase of 35 percent on both a reported and constant currency basis. Gross profit for the period was 1.18 billion dollars on a reported basis, while gross margin was 66 percent on a reported basis compared to 68.6 percent in the prior year. On a non-GAAP basis, gross profit totalled 1.20 billion dollars, while gross margin was 67 percent compared to 68.6 percent in the prior year.

Commenting on the second quarter results, Victor Luis, Chief Executive Officer of Tapestry, Inc., said in a statement, “Our second quarter performance exceeded our expectations, driven by a return to growth for Coach, sales gains at Stuart Weitzman and the contribution of Kate Spade as we continued to make progress on the brand’s integration. We have been especially pleased with the key appointments announced during the second quarter, including strengthening our Coach leadership team with the additions of Laura Dubin-Wander as President, North America and Fredrick Malm as President, Europe & International Wholesale. At Kate Spade, we were delighted to name Nicola Glass as the brand’s new Creative Director.”

Review of Tapestry’s second quarter results

Net income for the quarter was 63 million dollars on a reported basis, with earnings per diluted share of 0.22 dollars compared to 200 million dollars with earnings per diluted share of 0.71 dollar in the prior year period. On a non-GAAP basis, net income for the quarter totalled 306 million dollars, with earnings per diluted share of 1.07 dollars compared to 211 million dollars with earnings per diluted share of 0.75 dollar in the prior year period.

Net sales for Coach brand totalled 1.23 billion dollars, an increase of 2 percent on a reported and constant currency basis. Global comparable store sales rose 3 percent, including a benefit of approximately 100 basis points driven by an increase in global ecommerce. Gross profit for Coach totalled 846 million dollars on a reported and non-GAAP basis and gross margin was 68.8 percent, including approximately 10 basis points of pressure from currency. This compared to gross margin of 69 percent in the prior year period on both a reported and non-GAAP basis.

Net sales for Kate Spade totalled 435 million dollars, while global comparable store sales declined 7 percent, including the negative impact of approximately 400 basis points from a decline in global ecommerce. Gross profit for Kate Spade totalled 258 million dollars on a reported basis, while gross margin for the period was 59.4 percent. On a non-GAAP basis, gross profit was 275 million dollars, while gross margin was 63.3 percent.

Net sales for Stuart Weitzman were 121 million dollars, an increase of 2 percent. Gross profit totalled 73 million dollars on a reported basis, while gross margin for the quarter was 60.8 percent on a reported basis compared to 64.3 percent in the prior year. On a non-GAAP basis, gross profit totalled 75 million dollars, while gross margin was 61.9 percent as compared to 64.4 percent in the prior year.

FY18 revenues expected to increase 30 percent

Tapestry 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 dollars in revenue. In addition, the company continues to project operating income growth of 22 percent to 25 percent driven by mid-single-digit organic growth, the acquisition of Kate Spade, and estimated synergies of 30 to 35 million dollars.

Overall, the company now projects earnings per diluted share in the range of 2.52 dollars-2.60 dollars, an increase of about 17 percent to 21 percent for the year, including mid-to-high single digit accretion from the acquisition of Kate Spade.

Picture credit:Tapestry Inc