Coach & Kate Spade Power Tapestry as Stuart Weitzman Shoulders Production Challenges

One year into its major push to become an American luxury conglomerate, things appear to be moving in the right direction at Tapestry, which today posted first-quarter results that topped expectations across the board.

The firm — parent of Coach, Kate Spade and Stuart Weitzman — said its Q1 sales advanced 7 percent to $1.38 billion, driven mostly by the flagship Coach brand but also helped by Kate Spade, which it acquired in 2017. (Analysts had expected sales of $1.36 billion.)

“Results were driven by continued growth at Coach, where global comparable store sales rose 4 percent, led by outperformance in digital, and reflected our compelling offering across categories and channels,” said Tapestry CEO Victor Luis. “Kate Spade contributed to our overall performance, as we made continued progress on our integration efforts, including the realization of synergies and the execution of strategic initiatives.”

Trends at Stuart Weitzman, improved from the prior quarter, according to Luis, but results continued to be negatively impacted by development and delivery delays, which pressured sales and margins.

“Production levels and shipments have now stabilized, reflecting the investment in talent and processes, as well as added manufacturing capacity. As a result, we remain on track to achieve profitable sales growth in the holiday quarter,” Luis added.

Overall, the company reversed the prior year’s losses, posting profits of $122 million, or 42 cents per diluted share. Adjusted profits were $142 million, or 48 cents per share, topping analysts’ bets for 45 cents per share.

By brand, net sales at Coach rose 4 percent to $961 million, Kate Spade’s sales surged 21 percent to $325 million, and Stuart Weitzman fell 1 percent to $95 million.

“Our first-quarter performance and progress on our strategic priorities to date give us confidence in our ability to achieve the goals we’ve set out for fiscal 2019,” said Luis. “We continue to expect to deliver strong revenue and operating income growth, while making investments to support our long-term vision and drive a return to both double-digit operating income and earnings-per-share growth in fiscal 2020.”

To that end, the firm lifted its profit outlook for the fiscal year and now projects earnings per diluted share in the range of $2.75 to $2.80, compared with the previous range of $2.70 to $2.80. It continues to expect revenues to increase at a mid-single-digit rate to $6.1 billion to $6.2 billion.

As of 9:10 a.m. ET, Tapestry shares had climbed more than 4 percent to $42.50 in premarket trading.

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