Tapestry Stock Soars as Q2 Earnings Top Estimates and the Outlook Brightens

Evan Clark
·3-min read

Tapestry Inc. beat its fiscal second-quarter earnings estimates and raised its outlook for the year, pushing shares of the company up 12.4 percent to $82.51 in premarket trading on Thursday.

While net income slipped to 3.7 percent to $310.4 million, or $1.38 a diluted share, adjusted earnings per share came in at $2 — 25 cents ahead of the $1.75 analysts forecast, according to Yahoo Finance.

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And revenues for the three months ended Dec. 28 rose 5 percent to $2.2 billion, ahead of the $2.11 billion analysts projected.

The top-line growth was led by Coach, which pushed sales up 11 percent to $1.7 billion. Offsetting that increase were both Kate Spade, which was down 10 percent to $416.4 million, and Stuart Weitzman, off 15 percent to $69.7 million.

BMO analyst Simeon Siegel called it “a strong top- and bottom-line beat.”

“We believe Tapestry is a well-owned stock — for a reason,” he said.

Sales in the U.S., the company’s home base and biggest market, grew 4 percent to $1.5 billion. Outside of Japan, which saw sales slip 5 percent, the company posted gains around the world.

“During the important holiday season, we meaningfully advanced our growth agenda, bringing innovation and craftsmanship to consumers around the world,” said Joanne Crevoiserat, chief executive officer, in a statement. “Our success is clearly reflected in the accelerated top- and bottom-line gains we achieved, resulting in record quarterly revenue and adjusted earnings per share. Further, we raised our outlook for the year, harnessing our position of strength to deliver superior results, while making strategic investments to extend our competitive advantages and power durable growth. We remain confident in Tapestry’s bright future and the compelling opportunity for continued, significant value creation.”

For the full year, Tapestry is now expecting earnings per share to grow by 13 percent to 14 percent to a range of $4.85 to $4.90, up significantly from the $4.50 to the $4.55 previously forecast.

Most of that increase, 17 cents worth, came from outperformance in the business, but another 10 cents from share repurchases while 8 cents came from a tax benefit.

This fiscal year, Tapestry expects to spend $2 billion in total to buy back stock and pay dividends to shareholders.

The company had been planning to give shareholders something different, but its $8.5 billion deal to buy Michael Kors parent Capri Holdings was held up by antitrust regulators and ultimately dropped in November.

Still the deal left both companies changed. Capri is now struggling to turnaround Michael Kors on its own and is said to be selling off its Versace and Jimmy Choo businesses.

And Tapestry has sworn off any other acquisitions until it turns around the Kate Spade business, although sources have said that Stuart Weitzman could be sold.

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