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Kate Spade purchase helps growth at Tapestry

Net sales at fashion group Tapestry Inc jumped 31% on a reported basis, to $5.88bn (£4.62bn) in the 52-week period to 30 June, compared with $4.49bn (£3.53bn) in the previous year.

Gross profit rose to $3.85bn (£3.02bn) on a reported basis. Gross margin was 65.5%, compared with 68.6% for the previous year.

Tapestry owns luxury clothing and accessories label Coach and footwear brand Stuart Weitzman. This year’s results also include the contribution of womenswear and accessories label Kate Spade New York, which Tapestry bought on 11 July 2017.

It expects revenues for the upcoming fiscal year to increase to $6.1-$6.2bn (£4.8-£4.88bn), and predicts that the rate of operating income growth will exceed the revenue growth rate. 

Luxury label Coach achieved year-on-year net sales growth of 3% on a reported basis, rising to $4.22bn (£3.32bn), compared with $4.11bn (£3.23bn). Global like-for-like store sales grew by more than 1%.

Tapestry Inc chief executive Victor Luis said that growth from Coach was “led by outperformance in North America and driven by fashion innovation across materials and price points.” He added that controlled expenses led to ”operating income growth and operating margin expansion for the [fourth] quarter and year”.

Net sales for the year at Kate Spade reached $1.28bn “reflecting, in part, the strategic pullback in wholesale disposition and online flash sales”. Global like-for-like store and ecommerce sales declined by 7%, including a negative impact of nearly 500 basis points from a drop in global ecommerce.

For the fourth quarter, Kate Spade net sales were $312m (£245m), and gross profit was $205m (£161m) on a reported basis. Luis said fourth-quarter results “exceeded expectations from both a top and bottom-line perspective, with both sales and operating margin increasing from reported prior year results”. 

At Stuart Weitzman, net sales were reported at $374m, unchanged from the previous year. Gross margin fell to 56.5% from 60.5%. Luis reported that results were hindered by development and delivery delays, “which pressured sales and margins.”

Luis said: “Our strong fourth-quarter results capped an excellent FY18 performance for Tapestry, which demonstrated the power of our multi-brand model. We achieved our annual sales and operating income guidance, driving significant growth while earnings per share outpaced our forecast. It was also a year of many milestones, as we completed the acquisition of Kate Spade and evolved into a true House of Brands, establishing Tapestry as our new corporate identity.

“We strengthened our executive and creative leadership across our brands, with a clear focus on executing our strategic vision. In addition, we expanded our board with the appointment of new directors who bring fresh perspectives and extensive and relevant business experience.

“Finally, we announced several important business development initiatives during the year, which allow each of our brands to assume greater direct control over their international distribution and, in keeping with our strategic priority, maximise the opportunity with Chinese consumers globally across our portfolio. To this end, we’re excited to announce that we’ve entered into purchase agreements to acquire Kate Spade’s operations in Singapore, Malaysia and Australia as well as Stuart Weitzman’s business in Southern China.”

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