Tapestry Inc. (TPR, Financial), the parent company of fashion brands Coach, Kate Spade and Stuart Weitzman, reported third-quarter 2018 results before the opening bell on Tuesday.
The New York-based company posted adjusted earnings per share of 54 cents, topping Thomson Reuters’ estimates of 50 cents. Revenue climbed 33% to $1.32 billion, driven, in part, by the acquisition of Kate Spade last July and continued growth at Coach. The company beat revenue expectations of $1.31 billion.
Despite the beat, shares nosedived more than 14% in premarket trading as global same-store sales in the Kate Spade division fell 9%. Analysts had projected a decline of 7%.
Regardless, CEO Victor Luis said the brand “contributed to [Tapestry’s] overall performance, as [the company] made continued progress on [its] integration efforts including the realization of synergies and the execution of strategic initiatives.”
Coach fared better with global same-store sales growth of 3%, which Luis said was “led by outperformance in North America” and reflected its “strong offering.”
Comparable sales figures for the Stuart Weitzman division were not disclosed, but Luis said there was weakness in the business as its results were “negatively impacted by execution issues.” He added these problems are expected to continue through the winter season, but is “confident in [the brand’s] long-term strategic and creative direction.”
For the year, Tapestry expects revenue to increase 30% from 2017, with the Kate Spade acquisition contributing approximately $1.2 billion in sales. Earnings for 2018 are projected to fall between $2.57 and $2.60 per share.
Luis also announced Tapestry has appointed Anna Bakst as CEO and brand president of Kate Spade and Eraldo Poletto as CEO and brand president of Stuart Weitzman.
“With strong and seasoned brand teams in place, Tapestry is well positioned to continue its journey as a global house of brands and to focus on opportunities to drive long-term and sustainable growth,” Luis said.
With a market cap of $13.16 billion, Tapestry was trading around $46.20 on Tuesday morning, down 14.08%. GuruFocus estimates the stock has gained 7% year to date.
Of the gurus invested in Tapestry, Jim Simons (Trades, Portfolio) has the largest stake with 1.9% of outstanding shares. Pioneer Investments (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) established positions in the stock in the fourth quarter of 2017, while John Rogers (Trades, Portfolio) and Robert Olstein (Trades, Portfolio) added to their positions. Jeff Auxier (Trades, Portfolio), John Buckingham (Trades, Portfolio) and Dodge & Cox trimmed their holdings.
Disclosure: No positions.
