Coach parent Q2 tops Street; mega-deal on track for 2024 close

Tapestry reported record second-quarter revenue that exceeded its estimates, largely due to a strong performance by its biggest brand, Coach.

The parent company of Coach, Kate Spade and Stuart Weitzman also reported a net interest expense of $49 million, based on debt it incurred from financing for its planned acquisition of Capri Holdings Ltd., which is made up of Michael Kors, Versace and Jimmy Choo. Valued at approximately $8.5 billion, the deal is expected to close later this year.  

“Tapestry continues to work toward receiving required regulatory approvals,” the company stated, adding that it remains confident in the ability to complete the transaction, with a close expected in calendar 2024.

Tapestry’s net income totaled $322 million, with earnings per share of $1.39, for the quarter ended Dec. 30, compared to $330 million, with earnings per share of $1.36, in the year-ago-period. Adjusted net income rose 14.2% to $377 million, with earnings of $1.63 per share, topping the $1.46 analyst had forecast.

Net sales rose 3% to $2.08 billion, compared to $2.03 billion in the prior year period. By brand, Coach sales increased 6% to $1. 542 billion, while Kate Spade sales fell 6% to $460.4 million. Sales at Stuart Weitzman fell 4% to $82.2 million. 

As of fiscal year 2023, Coach had 939 directly-operated stores across the globe, with direct-to-consumer accounting for 89% of its revenue. Kate Spade’s store count stood at 397 in some 40 countries, while Stuart Weitzman operated 93 stores in 40-plus countries.

Tapestry noted that it drove customer engagement during the quarter, acquiring approximately 2.5 million new customers in North America alone, of which about half were Gen Z and Millennials. Also during the quarter, the company opened a multi-fulfillment center in Las Vegas, strengthening its omnichannel capabilities. 

“Our second quarter results exceeded expectations, highlighting the power of brand building and disciplined execution,” said CEO Joanne Crevoiserat. "During the key holiday season, our passionate teams delivered for our customers, fueling brand magic through innovative product, engaging storytelling, and operational excellence. Importantly, we drove record revenue and EPS, while advancing our strategic agenda.”

Based on its results, Tapestry upped its full-year earnings outlook. The retailer now expects earnings per share of $4.20 to $4.25, compared to its previous estimate of $4.10 to $4.15.  Revenue is expected to rise 1% to approximately $6.7 billion.