Tapestry Inc. posted an earnings and sales beat for the second quarter as its turnaround plan continues to take hold under new CEO Joanne Crevoiserat.
For the second quarter, the fashion group logged profits of $323 million, or adjusted earnings per share of $1.15, compared with the prior year’s $304 million, or earnings per share of $1.10. Analysts had predicted earnings of $1.01 per share. Revenues declined 7% to $1.69 billion but still topped Wall Street’s forecasts of $1.63 billion.
“Our results significantly outpaced expectations driven by the successful execution of our acceleration program. Our sharpened focus on the consumer fueled new customer acquisition across all brands with notable sales gains in digital and China,” said CEO Joanne Crevoiserat, who was permanently named to the top post in late October following the resignation of Jide Zeitlin in the summer.
She added, “Further, we delivered this profit growth in the face of unprecedented COVID-related external headwinds, including pressured bricks-and-mortar traffic, store closures and capacity limits, as well as higher freight costs and shipping constraints.”
The New York-based company reported “significant” sequential improvement in revenue trends across all of its brands — led by its performance in North America, while Mainland China saw growth of more than 30% year over year. Its e-commerce business, which saw triple-digit gains, represented approximately a third of its global sales and nearly half of its revenues in its home continent.
By brand, sales at Coach totaled $1.23 billion for the three months ended Dec. 26 — a 4% drop from the prior year period — and its adjusted operating income was $418 million. Kate Spade recorded a 13% decrease to $376 million in sales, with adjusted operating income of $61 million, while Stuart Weitzman’s sales tumbled 27% to $85 million, with adjusted operating income of $10 million.
Tapestry also noted $22 million of pre-tax charges, primarily associated with fees incurred as a result of the execution of the its strategic initiatives, as well as actions to streamline its workforce, including severance pay. Back in April, the company announced the layoffs of roughly 2,100 part-time store associates across its labels as it faced pressures stemming from the coronavirus health crisis.
As it enters the second half of our fiscal year, Crevoiserat shared that the fashion conglomerate is “optimistic” despite the uncertain backdrop. The company expects revenues for the fiscal year to increase at a high-single digit rate on a 52-week basis and in the area of 10% on 53-week basis.
“We are listening closely to consumers and responding in real-time to changes in their values, shopping behaviors and brand engagement. We are leaning into the competitive advantages of our platform, bringing innovation to both product and how we connect with customers,” she said. “As a result, we are driving demand for our categories and stretching what’s possible for our brands. Looking forward, I am confident that Tapestry will emerge from the pandemic stronger, well-positioned to both capture market share at higher levels of profitability and fully unlock the flywheel of sustainable, long-term growth.”