Key Investor Takeaways from Tapestry’s 1Q18 Earnings

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Part 2
Key Investor Takeaways from Tapestry’s 1Q18 Earnings PART 2 OF 4

Lower Coach Brand Sales Drive Tapestry’s 1Q18 Top-Line Miss

Tapestry’s 1Q18 top line misses expectations

Tapestry (TPR), formerly known as Coach, reported its first-quarter results on November 7. The company’s revenue rose 24% YoY or year-over-year to $1.29 billion. This improvement was mainly due to the integration of Kate Spade into the company’s business. Sales from Tapestry’s Coach brand, however, fell 3% YoY during the quarter. The company missed consensus expectations by $10 million.

Lower Coach Brand Sales Drive Tapestry’s 1Q18 Top-Line Miss

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What drove down Coach’s 1Q18 sales?

Coach brand sales were negatively impacted by natural disasters (hurricanes in North America and typhoons in Asia), inventory mix challenges, China’s calendar shift, and a stronger U.S. dollar during the quarter.

Coach’s North American sales fell modestly while growth in the international business remained flat on a reported basis. On a currency-neutral basis, international sales improved slightly, driven mainly by strength in Europe, Greater China, and Japan.

Global coach comparable-store sales fell 2% during the quarter, driven by a similar fall in North American comps. Europe and Mainland China, however, continued to post positive sales comps.

Kate Spade adds $269 million to Tapestry’s top line

Kate Spade sales totaled $269 million for the quarter. Compared with the pre-acquisition period, sales were down 4% YoY, reflecting Tapestry’s strategic decision of reducing wholesale disposition and flash sales for the brand.

Kate Spade’s global comparable store sales fell 9%, impacted mainly by the planned reduction in promotional sales online.

Stuart Weitzman posts 10% growth in sales

Stuart Weitzman’s 1Q18 net sales totaled $96 million, compared to $88 million in 1Q17. This 10% increase was driven by growth in wholesale channel sales and total direct sales.

Investors looking to invest in TPR through ETFs can choose to invest in the WisdomTree Dividend Ex-Financials Fund (DTN). Tapestry has a weight of approximately 1.1% in DTN.

Read the next part of this series for a view of the company’s margins and profitability in 1Q18.


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