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.”
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.”