Tapestry (TPR +5%) is experiencing a positive surge following its Q4 (June) earnings report. Known for its luxury accessories, Tapestry's flagship brand is Coach, alongside other luxury brands like Kate Spade and Stuart Weitzman.
- Upside EPS reported, albeit smaller than the last two quarters. Revenue dropped 1.8% year-over-year to $1.59 billion, aligning with expectations. Tapestry lowered its FY25 EPS guidance due to the suspension of share repurchase activity amid the proposed acquisition of Capri Holdings (CPRI, Financial) and an estimated $0.20 currency headwind.
- North America accounts for 65% of FY24 revenue. Despite this, Tapestry is significantly impacted by FX due to its 35% international sales. On a constant currency basis, Tapestry would have shown +1% revenue growth.
- Q4 sales were driven by international growth, with notable increases: +26% constant currency (CC) in Europe, +12% CC in Other Asia (including Malaysia, Australia, and Korea), and +2% CC in Japan.
- The recovery in China has been slower than expected, with Q4 sales declining -10% CC. China is Tapestry's second-largest market, comprising 15% of FY24 revenue. Revenue in Greater China declined as expected, following a 50% growth in the previous year. North American sales also fell by 1% due to a challenging consumer environment.
- An update on the acquisition of Capri Holdings, which owns Versace, Jimmy Choo, and Michael Kors: The FTC filed a lawsuit in April 2024 to block the acquisition. Tapestry aims to close the deal within the 2024 calendar year.
Investor sentiment appears positive as Tapestry closed out FY24. While not an extraordinary quarter, the company showed strong sales growth outside of North America and China. Given the macroeconomic challenges, these results have been well-received by investors.
