In a recent update, Tapestry Inc, the parent company of renowned luxury brands Coach and Kate Spade, announced a revision to its forecast for full-year adjusted profit. This adjustment was attributed to a decrease in tourist spending and a sluggish global economy, impacting the fashion house’s financial performance. Consequently, Tapestry saw a significant 12 percent decline in its shares, which plummeted to $34.53 during early trading.
While Coach managed to report a modest 2 percent increase in sales, reaching a total of $1.25 billion, Kate Spade experienced a slight dip with a 1.6 percent decrease in sales, totaling $428 million. These underwhelming results prompted Tapestry to lower its full-year adjusted earnings guidance to a range of $2.55-$2.60 per share, down from the initial projection of $2.75-$2.80 per share. Excluding extraordinary items, the company recorded a second-quarter profit of $1.07 per share, falling short of analysts’ expectations of $1.11 per share.
CEO Victor Luis emphasized that the updated forecast was a result of the company’s second-quarter outcomes and the unpredictable global landscape. Despite a surge in net income for the second quarter, rising to $254.8 million, or 88 cents per share, from $63.2 million, or 22 cents per share, in the same period the previous year, the net sales figures did not meet the average analyst estimate of $1.86 billion, only reaching $1.80 billion.
Tapestry acknowledged the escalating uncertainties surrounding the global economy and geopolitical tensions as key factors affecting their performance. Particularly, the decline in tourism activity has impacted Tapestry, with reduced spending from Chinese tourists, who were previously significant revenue sources for Coach and Kate Spade. In response to changing consumer behavior, Chinese customers are now opting to buy Tapestry products locally within China.
In light of these challenges, Tapestry disclosed plans to continue investing in the Chinese market, aligning with the government’s initiatives to stimulate domestic spending. Despite the setbacks, the company remains positive about its future strategies and is actively adapting to the evolving fashion industry landscape.
For more information on Tapestry Inc and its luxury brands, visit the official website here. Additionally, to stay updated on industry news and trends, check out Business of Fashion.
