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Tapestry’s first-quarter 2024 revenues remained flat year-on-year at $1.5 billion, the company said on Thursday, missing expectations. Stocks dipped during pre-market trading after Tapestry adjusted its full-year sales outlook downward by approximately $175 million, but rebounded after markets opened.
The company’s outlook doesn’t take into account the Capri merger, which is on track to close in 2024. It’s now tied up in FTC approvals, having received a second request this week. “Through the planned acquisition of Capri Holdings, we see a significant opportunity to accelerate our strategies while driving accretion to our strong stand alone financial plan,” CEO Joanne Crevoiserat told investors.
It’ll establish what she calls “a new powerful global house of luxury and fashion brands”. She also said that Capri’s portfolio would benefit from Tapestry’s platform and disciplined operations (inventory management, for instance). CFO Scott Roe said: “We remain confident in our ability to complete the transaction with a close anticipated in calendar 2024.”
Integration planning efforts are in full swing, Crevoiserat said, speaking to the company’s confidence in the transaction. Adding that: “We are laser-focused on our existing brands and our business and remain confident in the runway ahead.”
For the quarter, by brand, Coach was Tapestry’s strongest performer, with revenues up 3 per cent year-on-year at $1.16 billion. Crevoiserat highlighted the role of Coach’s leather goods in this growth. The Tabby bag in particular outperformed expectations, almost doubling the year prior’s performance. “Tabby remains an important volume and recruitment driver for the brand, and we see even further runway ahead,” Crevoiserat said.
The CEO also flagged Coachtopia momentum. “We expanded our reach in North America while launching in Japan with additional international opportunities in the pipeline,” she said, noting that, while a small portion of the business, they’re excited by the attention it has received from younger consumers. Coach president and CEO Todd Khan also cited the “white space” between where Tapestry’s brands sit relative to traditional European luxury brands as a strength amidst the choppy environment.
Tapestry’s two smaller brands fared worse. Kate Spade revenues were down 6 per cent year-on-year to $303.2 million, and Stuart Weitzman revenues were down 19 per cent to $52.6 million.
By region, China saw the most growth, with revenues up 9 per cent for the quarter — above peak 2021 levels. Roe credited this in part to an uptick from tourists from mainland China in Japan, Hong Kong, Macau and Southeast Asia (and, to a lesser extent, Europe). “While these trends have been encouraging, sales to Chinese tourists globally remain below pre-pandemic levels, representing further opportunity ahead,” he said. Japan, meanwhile, saw 12 per cent growth. In other Asia, revenue remained roughly flat to the year prior.
North America was flat. Roe flagged broader wholesale market pressure as weighing on US performance, echoing Ralph Lauren’s earnings yesterday. Across channels, the aspirational consumer is under more pressure, Crevoiserat flagged, which, she said, is a continuation of Q4 trends. Europe revenues were down 1 per cent.
The topline reduction for the rest of the year includes roughly $100 million of foreign exchange pressure on a year-on-year basis and approximately $75 million related to a more cautious outlook in Asia and North America given the difficult demand backdrop, Roe told investors.
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