Shares for Tapestry Inc. are up in the high single digits in Thursday morning trading after the retailer handily topped fourth-quarter estimates.
The upscale fashion company — parent to Coach, Kate Spade and Stuart Weitzman — logged a loss of $70 million, with an adjusted loss of 25 cents per share, compared with the prior year’s income of $175 million and earnings of 61 cents per share. Revenues for the three months ended June 27 were $715 million, more than 52% down from last year’s $1.51 billion.
However, analysts — who lowered projections to accommodate the impact of the coronavirus outbreak on business — forecasted a loss of 56 cents per share and revenues of $663.35 million. As of 8:30 a.m. ET, its stock was up 7.5% to $16.70.
“Our fourth-quarter results reflected our effective and values-led approach to navigating the COVID-19 pandemic,” interim CEO Joanne Crevoiserat said in a statement. “This performance exceeded internal expectations, demonstrating the power of our unique brands and the decisive actions taken to adapt our business to the rapidly evolving environment and enhance financial flexibility.”
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Tapestry attributed the results to a surge in e-commerce orders, with digital sales rising in the triple digits, as many shoppers remained indoors due to government-mandated restrictions. It also saw a return to positive year-over-year sales growth in Mainland China as the retail group reopened the “vast majority” of its directly operated stores globally by the end of the quarter.
Leading brand Coach posted a 53% drop in revenues to $517 million. Sales at Kate Spade also fell 50% to $164 million, while Stuart Weitzman recorded an even larger decline of 61% to $33 million. However, as part of the company’s turnaround plan, Tapestry aims to improve the omnichannel experience at Coach, as well as return Kate Spade to a “position of strength” and restore profitability at Stuart Weitzman by focusing on “markets and channels of greatest opportunity.” It expects to reduce expenses by roughly $300 million, including an anticipated $200 million for the next fiscal year.
Amid pandemic-related challenges, Tapestry also has faced a shakeup in the C-suite. In mid-July, former CEO Jide Zeitlin resigned from his post after a report revealed that the board opened an investigation into his personal conduct. The probe was centered on a woman’s allegations that Zeitlin had posed as a photographer to lure her into a romantic relationship in 2007. Crevoiserat will serve in the position until the company finds a permanent successor.
For the full year, revenues at Tapestry dipped nearly 18% to $4.96 billion. Profits for the year were $271 million, with adjusted earnings of 97 cents, versus the previous year’s income of $749 million and earnings of $2.57. It ended the year with $1.4 billion in cash and short-term investments, including $700 million in its revolver.
“While the backdrop remains volatile, it has not changed our long-term objectives. Rather, it has been a catalyst to accelerate our strategic agenda,” Crevoiserat said. “Through our ‘Acceleration Program,’ we are transforming into a world-class consumer-centric organization that is more agile and data-driven with a digital-first mindset. We believe these initiatives will create stronger connections with our customers, fueling accelerated growth and profitability for Tapestry and each of our brands.”