Tapestry Inc. — in the midst of a fight with the Federal Trade Commission to keep its $8.5 billion deal to buy Capri Holdings — topped Wall Street’s estimates in a fiscal fourth quarter that illustrated how the parent of Coach, Kate Spade and Stuart Weitzman could benefit from the deal.
Net income for the quarter fell 28.9 percent to $159.3 million, or 68 cents a share, from $224.1 million, or 95 cents, a year earlier. However, adjusted earnings of 92 cents a share came in better than the 88 cents analysts projected, according to Yahoo Finance.
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Investors liked what they saw and traded shares of Tapestry up 5.4 percent to $40.01 in premarket trading on Thursday.
Tapestry’s revenues for the quarter ended June 29 slipped 2 percent to $1.59 billion — better than the $1.57 billion analysts forecast — with Coach holding steady as the company’s other brands saw declines.
Coach sales were flat at $1.3 billion while Kate Spade fell 6 percent to $290.1 million and Stuart Weitzman was off 19 percent to $50.6 million.
Joanne Crevoiserat, chief executive officer of Tapestry, said in a statement that the fourth quarter capped “a successful year” against a “dynamic backdrop.”
“From this position of strength, we have a bold vision for the future and a steadfast commitment to drive growth and shareholder value for years to come,” Crevoiserat said.
Part of the rationale behind the Capri deal, which would bring on board Michael Kors, Versace and Jimmy Choo, is to tap into that company’s international business and expertise. Capri’s business, however, is currently struggling to gain traction.
As it stands, Tapestry’s business is concentrated in both Coach and North America.
During the quarter, sales in North America declined 1 percent to $1 billion, while Greater China fell 13 percent to $232.4 million and Japan decreased by 9 percent to $127.4 million, in keeping with trends seen by other higher-end brands. Offsetting some of those declines was a 26 percent rise in European sales, to $92.3 million.
For the full year, Tapestry’s sales were flat at $6.7 billion, with a 3 percent increase in the Coach business overshadowing declines at the other brands.
Inventories at the end of the fourth quarter were down 10 percent from a year earlier, which the company said reflected “strong inventory control as well as a shift in receipt timing into the fiscal first quarter.”
This year, Tapestry is expecting its sales to be about flat at $6.7 billion with earnings per share of $4.45 to $4.50 representing midsingle digit growth.
