Tapestry has reported declines in both sales and profit for the fourth quarter, driven by poor performances at its Kate Spade and Stuart Weitzman brands.
The company’s net sales for the quarter ended June 29 fell 2 per cent to $1.59 billion. However, GlobalData MD Neil Saunders said the decline is a “respectable outcome” in a market where consumer spending has tightened.
“Tapestry’s general exposure to middle-income consumers – where spending has retrenched the most – means that it is more challenged than many luxury players,” he elaborated.
The contraction was mainly due to lower sales at Kate Spade and Stuart Weitzman, while Coach managed to buck the trend with a 0.2 per cent increase.
“In our view, Coach is helped by continued product innovation and newness which is helping to secure some new customers, especially in younger demographics, as well as nudging existing ones into spending,” said Saunders.
He added that as shoppers focus more on value, they want pieces that have longevity, which is precisely what many of Coach’s classic styles deliver.
At Kate Spade, sales dipped 6.3 per cent, which was worse than the third quarter. According to the analyst, customers have drifted away from the brand and consider it more of a nice-to-have than a must-have, and the overall range feels much staler than Coach.
Stuart Weitzman remains the business laggard, with a 19.2 per cent decline. Saunders attributed this to a lackluster assortment and an overall weak awareness of the brand in the market.
On the bottom line, net income fell 28.9 per cent. Some of this was due to the sale drop, while some was down to $30.5 million in interest expenses on financing for the delayed Capri acquisition.
“Given the very poor results of Capri and its brands, we are increasingly concerned about both the price of the deal and the value it will add,” the analyst noted.
For the full year, Tapestry’s sales were flat at $6.67 billion, while net income fell from $936 million to $816 million.
The company expects FY25 revenue to be $6.7 billion, representing a 1 per cent increase on a constant currency basis.
