Coach owner Tapestry sales in North America return to pre-pandemic levels, retailer swings to profit

Coach owner Tapestry said Thursday that its fiscal third-quarter sales in North America returned to pre-pandemic levels, as demand for luxury goods rebounds. Read more...

Customers walk past a Coach store at Shanghai New World Daimaru department store on August 12, 2019 in Shanghai, China.

VCG | Visual China Group | Getty Images

Coach owner Tapestry said Thursday that its fiscal third-quarter sales in North America returned to pre-pandemic levels, as demand for luxury goods rebounds from 2020 lows.

Chief Executive Joanne Crevoiserat said the latest results “significantly outpaced expectations,” boosted by Tapestry’s online business and heightened demand for its purses, shoes and other accessories in Asia.

Its overall revenue remains below 2019 levels, however. And according to BMO Capital Markets analyst Simeon Siegel, that puts Tapestry below a median of retailers who have reported their quarterly results, thus far.

Tapestry’s stock was falling around 3% in early trading.

Here’s how the company did for the quarter ended March 27, compared with what analysts were anticipating, based on a polling by Refinitiv:

  • Earnings per share: 51 cents adjusted vs. 31 cents expected
  • Revenue: $1.27 billion vs. $1.22 billion expected

Tapestry’s net income for the fiscal third quarter climbed to $91.7 million, or 32 cents per share, compared with a net loss of $677.1 million, or $2.45 per share, a year earlier. Excluding one-time charges, Tapestry earned 51 cents per share, better than the 31 cents that analysts had forecast, using Refinitiv.

Net sales rose 19% to $1.27 billion from $1.07 billion a year earlier, beating analysts’ estimates of $1.22 billion.

Management said during a post-earnings conference call that digital sales were up triple digits, representing 30% of total revenue. Tapestry noted it gained 400,000 new customers online during the quarter.

The average unit retail prices for its bags jumped 25%, helping it swing to a profit.

The high-end handbag maker that also owns Kate Spade reported a triple-digit revenue increase in Mainland China compared with 2020 levels, and 40% growth compared with 2019.

Sales at the Coach banner were up 25% compared with 2020 levels, and flat compared with the same period in 2019. Kate Spade grew 1% from 2020, and was down 10% compared with 2019. Sales at Stuart Weitzman were up 13% compared with a year earlier, but on a two-year basis dropped 33%.

The company said it is not providing detailed guidance for fiscal 2021. But assuming a continued recovery in its business coming out of the pandemic, it said it now expects revenue for the fiscal year to increase at a mid-teens rate. Analysts had been looking for year-over-year sales growth of 10%, according to Refinitiv.

The company also continues to see shipping delays due to backlogged ports. It said the lingering impact of the Suez Canal blockage has been higher freight costs, which will hurt its fourth-quarter results.

“While the environment remains volatile, we see encouraging signs of recovery as vaccination efforts progress, resulting in increased consumer confidence, strong demand for our categories, and improving in-store traffic trends,” Crevoiserat said.

Tapestry shares are up about 55% year to date. The company has a market cap of $13.5 billion.

Find the full earnings press release from Tapestry here.

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