© Reuters
Investing.com — Shares in Tapestry (NYSE:) rose in early U.S. trading on Thursday after the luxury retailer reported better-than-anticipated earnings in its fiscal first quarter despite lowering its revenue growth forecast.
The owner of luxury brands Kate Spade and Coach posted income per share of $0.93 on a non-GAAP basis in the three months ended on Sept. 30, an 18% increase compared to the prior year and topping expectations of $0.90. Diluted earnings per share came in at $0.84.
In a statement, Chief Executive Officer Joanne Crevoiserat said profits during the period were driven by “significant” gross margin expansion. Gross margin jumped by 250 basis points thanks to higher full-price sales of Tapestry’s boots and bags, as well as cooling freight expenses.
Crevoiserat noted that the company remains “confident” in its ability to “achieve organic top and bottom-line gains, supported by our data-driven, direct-to-consumer operating model that enables speed and agility.”
Net sales registered $1.51B, an increase of 3% compared to the prior year but below Bloomberg consensus forecasts of $1.54B. Slipping returns at Tapestry’s Kate Spade and Stuart Weitzman labels offset resilience at its key Coach division, while the firm said the demand environment in North America was “difficult.”
Tapestry flagged that it now projects revenue growth in its 2024 fiscal year of between 2% to 3% annually to approximately $6.7 billion, excluding foreign exchange-related headwinds. The firm, which previously guided for an uptick of 3% to 4%, has warned that full-year profit and sales could be hit by elevated inflation denting demand from consumers for high-end goods.
The revised outlook leaves out revenue and costs related to Tapestry’s proposed $8.5B acquisition of rival and Versace-parent Capri Holdings (NYSE:), which is expected to close next year. The tie-up aims to create a fashion giant able to compete with larger peers like LVMH.
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