Losses mounted in the third quarter at Tapestry Inc. as the coronavirus pandemic shuttered most of its stores around the world.
The New York-based fashion group logged a net loss of $76 million, or a 27-cent loss per diluted share, compared with last year’s earnings per diluted share of 42 cents on profits of $122 million. Revenues, on the other hand, plunged 19.5% to $1.07 billion. Analysts had forecasted a net loss of 11 cents a share with sales of $1.03 billion.
For the three-month period ended March 28, its top brand Coach saw sales drop 20% to $772 million. Revenues at Kate Spade dropped 11% to $250 million, while Stuart Weitzman plummeted 40% to $51 million.
In a statement, chairman and CEO Jide Zeitlin said, “We entered the calendar year with strong underlying momentum. As the novel coronavirus expanded across the globe, our results materially weakened.”
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During the quarter, 90% of Tapestry’s stores were either shut down or operating on reduced hours. In China, where the COVID-19 outbreak originated, many of its outposts had reopened by the end of March, but foot traffic “remained muted.”
Coach, Kate Spade and Stuart Weitzman locations in North America and Europe are still closed. However, starting May 1, in accordance with state and local guidelines, the company plans to reopen roughly 40 stores across North America — only for contactless curbside or storefront pickup. In Europe, it has reopened five outposts in Germany and Austria.
In an effort to free up its cash flow, Tapestry drew down $700 million of its $900 million revolving credit facility in late March. It has also suspended it share repurchase program and quarterly cash dividend, as well as reflowing late spring and early summer merchandise and cancelling inventory receipts upcoming collections, which is expected to bring in more than $500 million of working capital savings.
What’s more, the company has announced that it would delay or cancel new store openings, while throwing its resources behind “high-return” projects, notably in digital.
“The impact of the COVID-19 pandemic transcends near-term results. Consumer behaviors are changing, and secular trends are accelerating,” added Zeitlin. “In this environment, we are planning conservatively while acting decisively to transform the way we operate and engage with our customers. The saliency of our brands plus the strong financial position of our company will enable us to successfully manage through this crisis, as we become a more consumer-centric, data-driven and agile organization.”