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Tapestry Stock Fell Due to Dismal Q2 Results

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Tapestry’s second-quarter results

Tapestry (TPR) stock has fallen 16.6% as of 9:57 AM EST on February 7. The company lagged analysts’ expectations for the second quarter of fiscal 2019, which ended on December 29. Tapestry’s second-quarter sales rose 0.9% to $1.80 billion and missed analysts’ estimate of $1.86 billion. The company blamed the volatile macroeconomic environment and geopolitical tensions for its weaker performance.

Tapestry’s Coach brand sales increased 1.6% to $1.25 billion due to strength in e-commerce channels and international markets. The company’s Stuart Weitzman brand returned to growth in the second quarter. The brand faced development and distribution roadblocks in previous quarters. Stuart Weitzman sales rose 2.6% to ~$124 million in the second quarter.

However, the Kate Spade brand disappointed with a 1.5% decline in its sales to $428.4 million. The brand’s same-store sales declined 11% due to a lack of new merchandise.

Tapestry’s second-quarter adjusted EPS was flat on a year-over-year basis at $1.07. The adjusted EPS lagged analysts’ expectation of $1.11.

Capri Holdings (CPRI) delivered an adjusted EPS of $1.76 in the third quarter, which ended on December 29. The adjusted EPS exceeded analysts’ expectation of $1.58. However, weakness in the company’s Michael Kors brand had a negative impact on its top-line growth.

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Revised outlook

Following Tapestry’s second-quarter performance, the company revised its guidance to reflect the challenging market. The company expects its fiscal 2019 revenues to rise at a low to mid-single-digit rate compared to the previously issued outlook of a mid-single-digit growth rate. Tapestry expects its fiscal 2019 adjusted EPS to be $2.55–$2.60. Previously, the company expected the EPS to be $2.75–$2.80.

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