Tapestry Shares Plummet 15% as Kate Spade’s Struggles Lead to Weak Annual Sales Forecast.
Tapestry’s recent forecast signals a challenging outlook for future revenue growth, despite reporting a fourth-quarter adjusted profit that exceeded expectations. The company anticipates annual revenue growth in the range of $8.4 billion to $8.5 billion, with the midpoint falling slightly short of analyst estimates at $8.46 billion. This cautious guidance is underscored by a pronounced weakness in its Kate Spade division, which continues to grapple with declining sales, reflecting a long-standing struggle for revitalization. Conversely, the Coach brand has experienced robust performance, achieving a 14% increase in sales, indicating a discerning division of performance within the portfolio.
The market’s immediate response was notably negative, with Tapestry shares declining as much as 16.9% during morning trading, reaching the lowest levels observed in over six months. Investors are primarily focused on the turnaround strategies being implemented at Kate Spade, particularly following the appointment of Scottish fashion designer Jonathan Saunders as creative director. However, stagnant performance from this brand may hinder Tapestry’s ability to leverage its full growth potential. Analysts express a need for tangible results from these initiatives to reassure stakeholders of the company’s multifaceted growth opportunities.
Moreover, while revenue from North America showed a modest 7% growth on a constant-currency basis—declining from 8% growth observed the previous year—the Asia-Pacific market continues to demonstrate strength, with reported revenue from China rising 28%. European revenue also saw a commendable increase of 19%. These figures highlight the divergent performance across regions amid a backdrop of broader economic uncertainty that is contributing to a pervasive slowdown in consumer spending, particularly in North America.
Despite the overall tempered outlook, the company reported a fourth-quarter adjusted profit of $1.32 per share, surpassing the consensus estimate of $1.28 per share, while quarterly sales climbed to $1.88 billion. Additionally, Tapestry projects earnings per share for the fiscal year ending June 2027 to fall within the range of $7.80 to $7.90, indicating slight optimism as the midpoint aligns above analyst expectations of $7.84. However, the anticipated lukewarm revenue forecasts may dim investor sentiment, necessitating renewed focus on strategic initiatives that could bolster growth in the upcoming periods.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)