As demand for luxury goods began to rebound from 2020 lows, Tapestry Inc. (TPR, Financial) reported strong third-quarter 2021 results before the opening bell on Thursday.
The New York-based fashion house, which owns the Coach, Kate Spade and Stuart Weitzman brands, posted net income of $91.7 million for the three months ended March 27, a significant improvement from the $677.1 million loss it recorded a year ago. Adjusted earnings of 51 cents per share topped Refinitiv analysts' estimates of 31 cents.
Revenue grew 19% from the prior-year quarter to $1.27 billion, squashing projections of $1.22 billion.
While its overall revenue remains below 2019 levels, Tapestry CEO Joanne Crevoiserat said the results "significantly outpaced expectations" as the company saw strong online sales and heightened demand for its purses, shoes and other accessories.
"This performance is a testament to our talented teams around the world, whose creativity, agility, and resilience have enabled us to successfully navigate a challenging backdrop and deliver for our customers, while positioning Tapestry to emerge from the pandemic stronger," she said.
In North America, the company highlighted that sales returned to pre-pandemic levels with a mid-teens increase, while revenue in China grew a whopping 175% from the prior-year quarter and 40% compared to the same period in 2019.
By brand, Coach witnessed a 25% revenue increase during the quarter to $964 million as North American sales returned to levels seen before the Covid-19 pandemic hit, but they were flat compared to the same period in 2019. Kate Spade also posted a 1% increase to $252 million, though sales were down 10% compared to two years ago. Stuart Weitzman recorded 13% sales growth from a year ago to $57 million. On a two-year basis, it saw sales decline 33%.
While Tapestry is still hesitant to issue detailed guidance for the full year, it now anticipates revenue to increase at a mid-teens rate based on its recent performance and expected trends coming out of the pandemic.
"Building on this momentum, we are increasingly optimistic about our ability to generate sustainable top and bottom-line growth," Crevoiserat said. "Looking forward, 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."
Despite the impressive progress, shares of Tapestry declined 4.5% following the announcement to $46.23. GuruFocus estimates the stock has climbed nearly 50% year to date.
Disclosure: No positions.
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